Insurance for Tax Preparers

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.

• General Liability has an average price of $350 - this policy is usually rated on your annual sales, so the more you grow the more you will have to pay. Some companies will base it on the number of employees but this is rare.
• Errors & Omissions’ average price is $600 - it is usually based on sales as well but does tend to cost more than General Liability insurance since it is going to pay for losses associated with your profession.
• Workers Compensation has an average price of $400 - this will be based on your annual payroll for your employees. So, the more employees you have, the more you will pay.