This is the archive of CPA Now blogs posted on the PICPA website through April 30, 2025. Want more recent blogs?
Tax Season Prep to Manage Your Liability Risk
Part of preparing for tax season is addressing the potential professional liability risks associated with tax services. There are several steps practitioners can take now while planning for upcoming tax work.
By Deborah K. Rood, CPA
Preparing for an upcoming tax season is important for managing your workload, but also for tackling professional liability risks associated with providing tax services. There are several steps practitioners can take when planning for their upcoming tax work. This blog contains a few of the most noteworthy.
Get Ahead of the Rush
Busy season is, well, busy. A little advance planning and preparation can help mitigate the risk of an error or omission when things really heat up. Consider informing clients through a newsletter of significant changes in tax laws, such as guidance released or enforcement actions taken since last tax season related to the Tax Cuts and Jobs Act, the Coronavirus Aid, Relief, and Economic Securities (CARES) Act, the Families First Coronavirus Response Act, and syndicated conservation easements. Retain a distribution list of such communications, including the dates transmitted, and document that the client was informed of these changes. If organizers fail to adequately address such issues, consider supplementing them with additional questions or specifically address them in documented conversations with clients.
Update Your Project Management System
Be sure to incorporate Paycheck Protection Program (PPP) loan forgiveness application deadlines into your project management system, if applicable. If a client engaged the firm to assist in applying for loan forgiveness, add the date to file the request into the firm’s control log or docket system. If a deadline is missed and proceeds are not forgiven, the client may blame the CPA. Remember to include IRS and state correspondence with due dates and document requests into the control log or docket system. While the IRS has made significant progress opening backlogged mail, as of late November 2020 there were more than 9 million unprocessed tax returns. Obtain powers of attorney so the firm may access the IRS’s e-systems to understand the status of items caught in the backlog. Documentation will be critical, including receiving timely notices from clients and retaining copies of certified mail receipts. If correspondence is lost or misplaced by the IRS, and the CPA does not have appropriate documentation, clients may blame their CPA for adverse consequences. Consider including reminder dates in the control log for follow-up with the client or tax agency.
Address the Indirect Impact of COVID-19
Notify individual and business tax clients with “COVID homes” of potential additional filing obligations and tax effects. For more on what exactly a “COVID home” is and who needs to be notified, read the Risk Alert COVID Homes Create Professional Liability Risk for CPA Firms. Also, consider sending a notification letter to affected individuals. AICPA Tax Section members have access to a sample letter.
Make sure your remote workers have the resources they need to be productive. Yes, technology-related resources are foremost, including adequate internet speeds, but some remote workers may need additional mental and emotional resources. (See Remote Work after the Pandemic and Leading in a Work-From-Home Environment.)
Fortify the firm’s data security protocols too, as remote work is likely to continue into the foreseeable future. Consider establishing a virtual private network (VPN) if one is currently not in place. Remind all firm personnel of existing data security policies, and revisit these policies in the event updates are needed. Establish a secure portal to permit clients to safely transmit information to the firm. Data Security Tips to Help Weather a Pandemic outlines additional considerations and recommendations.
As tax practitioners head into busy season, it is important to plan what you can and make sure that you are set with all you need to know this tax season.
Deborah K. Rood, CPA, is risk control consulting director at CNA Insurance in Chicago. She can be reached at specialtyriskcontrol@cna.com.
Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.
