As millions of Americans prepare their tax returns ahead of the looming April deadline, many accountants will find themselves in high demand.
Alongside traditional risks, rising cybersecurity concerns means those in the profession face a litany of risks and a complex set of insurance needs.
The most common malpractice claims against tax preparers this time of year include improperly prepared tax forms, failure to use and send appropriate forms, failure to take appropriate deductions, failure to detect fraud, late filings, improper tax advice, and payroll errors, John L. Torvi, vice president of marketing & sales at The Herbert H. Landy Insurance Agency, told Insurance Business.
Suits can also be filed as breach of contract, negligence or breach of fiduciary duty, Torvi explained, with other common claims including improper audit advice, 1031 exchange errors and fee-suit counterclaims.
But with accountants handling large amounts of sensitive data, especially over tax season, the growing threat of cybercrime and cybersecurity is having an impact.
“Cybercrime is a highly-sophisticated activity and many businesses are unprepared for an attack,” Torvi said.
“A cyber-breach could result in costs easily reaching the tens or hundreds of thousands of dollars and can include civil penalties, notification costs, credit monitoring, lawsuits, forensics, data restoration, crises response and restoration of reputation,” he explained, adding that common schemes include phishing, hacking, data extortion and social engineering.
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The first step for businesses to tackle the risks is to follow the state-mandated guidelines for data protection, Torvi said.
“Every business should have written procedures for the handling, storage and dissemination of information, and all employees should be regularly trained on it,” he said.
Businesses should also hire computer forensics experts to review IT systems and protocols, Torvi recommended, as well as learning how to send encrypted emails and putting policies in place for the secure use of cell phones, laptops and tablets.
Finally, having insurance specifically for cyber-related risks is growing ever more critical as threats continue to surge.
“Cybercrime insurance is increasingly important, and many policies feature risk prevention tools, information and hotlines to help prevent a cyber-attack,” Torvi added.
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