Everyone hates tax season, but as a tax preparer it is your big money-maker. So, it’s important to cover your business in all the work you do for clients in filing their annual taxes and the contract you enter. Someone can easily become unhappy with their tax return and you should be covered in case of the slightest oversight so legal fees and your business reputation are covered.
Even the most careful tax preparer can make mistakes. Errors & Omissions (E&O) is a highly-recommended insurance as it protects your business against claims made by your client for when there is a mistake on the taxes that you've done for them. The insurance will cover court costs, attorney fees and settlement up to the limits of the policy.
General Liability is one of the most important coverage for your business. This insurance covers the costs of property damage, bodily injury and advertising mistakes made by your business. It will help cover legal fees, evidence, judgments and settlement costs. Without it, you'll have to pay the cost from your own money which could potentially put your business to bankruptcy.
When your tax preparation mishandles your client's tax and personal information, you will be liable for not just legal fees, but the costs related to the data and/or security breach. With Cyber Liability insurance, the insurance will handle the financial issues, so you can focus more on rebuilding your business, cleaning up your image, and putting the faith back to your customers.
SMB need this insurance to protect your business from unexpected financial loss when your General Liability insurance can't cover the claim. This combines property and general liability along with others to protect your business. Business Owners Policy (BOP) is more cost-effective for your business as you don't have to buy an individual insurance for such coverages.
Workers' Compensation is a state-mandated insurance when your business meets the minimum number of employees. It will provide medical and rehabilitation benefits to your employees when they get sick or injured on the job. It also pays for the employee's lost wages until his/her recovery. Employees then relinquish their rights to sue their employer for negligence.
Every tax preparer needs Professional Liability insurance because it is a complex task they cannot do it on their own. It is your responsibility to give them the most accurate result possible. Professional Liability insurance protects your business and physical assets from claims of wrongful acts committed while performing your duties. It is your safety net when a client claims that you have committed a mistake while doing taxes.
Even the most careful tax preparer can make an error or omission while preparing their client's taxes. There are also state tax laws that change constantly. Your clients rely on you to do your job accurately. Failing to do so will result in a lawsuit that will risk your finances and the future of your business. Without insurance, you'll have to pay your own defense and the cost associated with the judgment against you.
When you are an individual contractor, Workers' Compensation is not required. When you employ a team of tax preparers, this insurance for tax preparers is mandatory but only if you meet your state minimum number of employees. For more information about the state requirements for Workers' Compensation, please visit your state website.
As a tax preparer you must provide work as accurate as possible. When you have made an error or omission on your client's taxes, they may sue. Without Errors & Omissions (E&O) insurance, a lawsuit can put a huge dent in your finances. Some are forced to sell all their business assets just to pay their clients. There is also the cost of the defense and whatever you lose in judgment. Insurance covers out-of-pocket expenses as long as it meets your current limits.
Growing your text preparation business is an exciting step in your entrepreneurship journey. Living out your passion while earning a living is the true American dream, but it can all come crashing down without the right insurance protection in place. If you plan on opening another location you will have to make sure you cover the property from physical damage or theft with a Commercial Property insurance policy, or if you have a Business Owners Policy you can add the new location to it.
A great way to grow your tax preparation business is by offering more services in addition to taxes. Many tax preparers choose to offer bookkeeping, employee payroll services, or HR consulting. If you decide to offer these services then you should have Professional Liability insurance in place. The more professional services you offer, the bigger the risk you face of making an error or omission so Professional Liability is a must.
As you grow you will probably hire employees in which case you will need Workers Compensation insurance. It will provide them with their lost wages and medical expenses for a work-related illness or injury. It also contains Employers’ Liability insurance in case an employee sues you for negligence.
As a tax preparer, you will probably want to know what the insurance policies you need are going to cost. This is not an easy answer. Each insurance policy you need to properly protect your tax preparer business will be rated on different information, but here is a ballpark to get you started.
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