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Tax preparers have the responsibility to ensure that their clients submit the most tax-efficient tax returns possible. Since taxes are quite a complicated field and require a lot of calculations and laws and regulations to consider, mistakes can happen, which can land the tax preparers in hot water with the clients.
Having insurance for tax preparers will protect you and your business in the event of a lawsuit that results from a missed deadline, lost documents, negligence, or professional mistakes. In addition to that, though rare, tax preparers insurance will also protect the employees and the business in case of property damage or accidents in the workplace.
Why Do Tax Preparers Need Insurance?
As a tax preparer, clients entrust you with very sensitive information and a lot of money that could potentially be saved in taxes. Thus, if there appears to be a tax filing error or data breach, you could be held accountable.
Furthermore, when the tax preparer has not kept up with the tax laws and does not follow suit, they could be held liable for the mistakes made, which the client will most definitely notice and as a result - they can file a lawsuit to recoup any losses that they have incurred.
Whatever the case might be, having a tax preparers policy in place will financially shield your business against losses that may arise from claims and lawsuits.
What Types of Insurance Do Tax Preparers Need?
Tax preparers in the United States can take advantage of various different insurance policies. The coverage you get will depend on which state you operate out of, the number of employees you have, the type of clients your company deals with, and more.
For a more detailed breakdown regarding the most recommended tax preparers' insurance policies, continue reading below.
How Much Does Insurance Cost For Tax Preparers?
The premium tax preparers in the United States pay for insurance varies from state to state and from business to business. This is because there are many factors that can cause the final price to fluctuate including the level of cover you take out, the size of your business, the number of employees you have, and more.
But, on average, tax preparers in the U.S. pay around $30 to $40 per month or $360 to $480 annually on professional liability insurance - also known as E&O insurance. This insurance is crucial for tax preparers as it provides financial cover in the event the tax preparer is sued as a result of a professional mistake, negligence, and other similar scenarios.
For less than $30 monthly or $350 per year, tax preparers can opt-in for general liability insurance. This policy covers the tax preparer in the event of any third-party injuries, advertising injuries, or third-party property damage.
Cyber liability insurance costs on average $70 per month or $840 per year for tax preparers. This policy is vital for tax preparers as they deal with a large amount of sensitive information, and if a data breach were to happen, the firm might be sued by its clients.
And lastly, insuring your employees will cost you about $35 per month. Worker’s compensation insurance is vital as it will cover your employee's lost wages, rehabilitation, medical bills, and more in case they get sick or injured at work.
Typical Insurance Claims For Tax Preparers
The most common insurance claims for tax preparers revolve around missed deadlines, errors when filing tax returns, negligence, not keeping up and taking advantage of the latest tax laws, and other professional mistakes.
Tax preparers, like bookkeepers, need to work error-free around the clock as there is no margin for error. A simple mistake can land the tax preparer firm into trouble with the client, who may want to be reimbursed for any money that they have lost.