Insuring your tax preparation practice
Book keepers and tax preparers have access to important client information. In cases such as this you want to ensure your small business is properly insured.
If you’re one of the million-plus people working as a tax preparer, by now you've wrapped up preparing your client’s returns in time to meet this year’s deadline. Hopefully the tax season wrapped up with all satisfied clients. But you may also be thinking about what you’ll do if one of those clients isn't happy with the outcome of your work. As an entrepreneur in the tax preparation field your small business is susceptible to legal risks if you don’t satisfy the needs of your clients. As a professional whose work revolves around accuracy and numbers, you’re probably no fan of risk and like to minimize it. Put these defining factors together and you get one real need for small business insurance.
Your tax preparation or bookkeeping business should consider professional liability insurance and general liability coverage. Professional liability – which is also known as E&O or errors and omissions coverage – protects your business if you’re sued for negligence even if you haven’t made a mistake, while general liability protects against third party claims for bodily injury, associated medical costs and damage to someone else’s property. When might it be beneficial to have professional liability coverage? Let’s say you make a mistake on a client’s return, which costs them thousands of dollars. You offer to correct it and re-file, but they’re angry and decide to sue. Your policy may cover any fines or penalties your client incurs from the IRS due to not initially paying the correct amount in taxes. Your E&O policy would also cover the costs of litigation and settlement, the coverage also steps in to help anytime you’re sued, even if you haven’t made a mistake. General liability insurance offers protection from the types of issues that can arise with any business. In your case, perhaps a client comes to your office, trips over a cord, breaks their arm and decides to sue. Sure, it was an accident and not really your fault, but that’s irrelevant; you’re being sued. Your general liability policy will cover claims like this, up to your policy’s limits of liability. And don’t forget to check out the possibility of a business owner's policy. Also called BOP insurance, this coverage bundles general liability and property insurance into one policy. That simplifies things, as does the typically reduced price that’s less than what the individual coverages cost separately. If you’re a bookkeeper striking out on your own for the first time or a seasoned tax preparer with a healthy client base, make sure your practice is protected from disgruntled clients and legitimate mistakes with the right combination of small business insurance. The contents of this article and the linked materials do not offer legal, business, or insurance advice related to the needs of any specific individual business. Hiscox Small Business Insurance is underwritten by Chicago-based Hiscox Insurance Company Inc., which is rated ‘A’ (Excellent) by A.M. Best Company. Additional information can be found on the Why Choose Hiscox?