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Posted on: February 12, 2025 by Huntersure
Tax regulations are constantly evolving, and the latest IRS reporting requirement changes are creating new challenges for accounting firms. Increased scrutiny, stricter compliance demands, and evolving tax codes mean accountants face heightened exposure to liability claims. As these risks grow, accountants professional liability insurance becomes more critical than ever in safeguarding firms from potential financial and reputational damage.
Recent IRS reporting updates are designed to enhance transparency and prevent tax underreporting, but they also increase the complexity of compliance for accountants. Below are some of the key changes.
The Internal Revenue Service (IRS) has released Notice 2024-85 PDF, granting transition relief to third-party settlement organizations (TPSOs), including payment apps and online marketplaces, for transactions occurring in 2024 and 2025.
According to the new guidance, TPSOs must report transactions if the total payments exceed $5,000 in 2024, more than $2,500 in 2025, and over $600 beginning in 2026.
The IRS now requires more extensive documentation to support tax deductions and credits, leaving less room for how accountants interpret and apply these claims.
This change places additional pressure on accounting firms to maintain precise records and ensure complete compliance to avoid penalties.
With the IRS ramping up enforcement efforts, the chances of client tax returns being audited have significantly increased.
If discrepancies or errors are identified, accountants may face heightened scrutiny and potential liability claims.
With these changes, accounting professionals must be more diligent than ever in record-keeping, tax preparation, and client communication to avoid compliance missteps.
The more complex the IRS reporting landscape becomes, the higher the liability risks for accountants and tax professionals. Here are some of the most pressing concerns.
With stricter compliance requirements, the margin for error has never been smaller. This makes accountants professional liability insurance essential for mitigating risks and protecting firms from costly claims.
As IRS regulations continue to evolve, having accountants professional liability insurance provides accounting firms with an added layer of security. This coverage helps by:
If a miscalculation or overlooked regulation leads to client losses, accountants professional liability insurance can cover legal defense costs and settlements arising from professional negligence claims. However, it does not cover IRS fines, tax underpayments, or regulatory penalties imposed on clients.
Without the right coverage, accounting firms could face significant legal costs defending against negligence claims, including attorney fees, court costs, and settlements. However, it’s essential for accountants to understand that professional liability insurance does not cover tax penalties imposed on clients or intentional errors.
Defending against liability claims can be time-consuming and damaging to a firm’s reputation. Having the right insurance in place ensures financial stability while managing disputes effectively.
For insurance agents working with accounting firms, now is the time to evaluate whether your clients’ professional liability policies align with today’s regulatory challenges. Here are some key steps to take.
As IRS regulations become more stringent, accounting firms may need to increase their coverage limits to account for heightened exposure to liability claims.
Higher limits provide additional financial protection, ensuring firms can effectively handle potential lawsuits or penalties stemming from reporting errors.
Not all policies explicitly cover tax preparation errors, and some may exclude claims related to misinterpretation of IRS regulations. While professional liability insurance protects accountants from negligence claims, it does not cover client penalties, tax underpayments, or fraudulent activities.
Insurance agents should carefully review policy language to ensure your clients have coverage that accounts for evolving tax laws and reporting requirements.
Encourage accounting firms to establish thorough internal review procedures, including peer review systems, standardized engagement letters, and quality control protocols to catch compliance issues before they escalate. Strong documentation practices can further reduce liability risks.
By proactively assessing coverage needs, insurance agents can help accounting firms stay ahead of potential pitfalls and ensure they have the protection they need.
With IRS reporting requirements becoming more complex, accounting firms must stay proactive in both compliance and risk management. While diligence and up-to-date knowledge of tax law can minimize risks, accountants professional liability insurance remains a vital safeguard against costly claims.
Contact us today to learn how we can help ensure your clients have the right protection in place for the evolving tax landscape.
Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding, and policy issuance and tailored products to meet the needs of your insureds. Give us a call at (855) 585-6255 to learn more.
Posted in: Accountant Professional Liability