Liabilities and the Tax Practice

Paper Summary:

This paper examines how, with the exception of the medical profession, no other profession has such serious liabilities connected with it as does the establishment of a tax practice. It looks at how the major liabilities come from two sources: the Internal Revenue Service, if the practitioner gives bad or erroneous advice and from the client and details some of them.
Outline
Introduction
Definitions and Limitations
Generally Accepted Codes of Conduct
IRS Standards
Liabilities from Clients
Insuring Against Tax Practice Liability

From the Paper:

"Courts usually find against the preparer or practitioner, and the penalties can also be dual, as in the case of a plaintiff's attorney arguing the preparer penalties are conclusive evidence of tax malpractice and thus were a liability to the client (Merow v. Kox). In other words, if a client lies to the practitioner, and the IRS questions the claim and there is no evidence to back up the deduction, the IRS can levy a penalty on the preparer. Further, if the client then is fined and hires an attorney, that attorney could sue the preparer for negligence, even though he was relying on information provided by the client."

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