{"id":531,"date":"2018-01-25T16:14:15","date_gmt":"2018-01-25T16:14:15","guid":{"rendered":"https:\/\/www.insurancebee.com\/blog\/?p=531"},"modified":"2023-02-08T10:04:32","modified_gmt":"2023-02-08T10:04:32","slug":"prepared-six-figure-lawsuit","status":"publish","type":"post","link":"https:\/\/www.insurancebee.com\/blog\/prepared-six-figure-lawsuit","title":{"rendered":"Are you prepared for a six-figure lawsuit? E&O insurance for tax preparers"},"content":{"rendered":"

\"The<\/strong><\/span><\/span><\/h2>\n

A tax preparer’s tale<\/h2>\n

Last Spring, Jim Johnson was having sleepless nights. <\/span><\/span><\/p>\n

A client had slapped him with a lawsuit and Jim\u2019s defense costs were piling up. He was scared he\u2019d lose all his savings, his business – even his house.<\/span><\/span><\/p>\n

Jim\u2019s story begins in 2008, when he took on a new client, Steve Spender. Just over a year later, Steve got married. He and his wife, Meg, decided to go into business together and opened their first Purser store. <\/span><\/span><\/p>\n

Purser sold scarves, trinkets and yes, – you guessed it \u2013 purses. It did well. So well, that Meg and Steve soon opened another Purser store, and then another. They kept Jim on as tax preparer.<\/span><\/span><\/p>\n

Every year, Steve gave the bank statements to Jim. Jim prepared the returns and filed them. Job done. Everyone was happy\u2026<\/span><\/span><\/p>\n

Until 2012, that is, when the IRS decided to do a routine check.<\/span><\/span><\/p>\n

An auditor turned up at each store, asked for the cash register tapes and compared them to the returns. <\/span><\/span><\/p>\n

Gulp. The figures didn\u2019t match. <\/span><\/span><\/p>\n

And they weren\u2019t out by a fraction. The difference, between the amount of cash taken by the registers and what the returns reported, was a whopping one. <\/span><\/span><\/p>\n

Meg and Steve\u2019s marriage hit a rocky patch and he moved out. And then, just two weeks later, he died in a boating accident, leaving Meg facing a $274,000 tax bill.  <\/span><\/span><\/p>\n

So, what did Meg do?<\/span><\/span><\/p>\n

The sting in the tale<\/h2>\n

She took out a lawsuit against Jim, claiming he was in on the scam. After all, she said, Jim and Steve had history. They\u2019d had a working relationship for years before Meg came on the scene.<\/span><\/span><\/p>\n

Jim started to sweat. He was totally unprepared for a lawsuit. He\u2019d had no idea his clients weren\u2019t depositing all the cash at the bank. Sure, it was Steve who\u2019d always handed over the statements, but\u2026<\/span><\/span><\/p>\n

Panicking, Jim scrabbled around for an attorney. Finally he found one, braced himself and went to court. <\/span><\/span><\/p>\n

Poor Jim. The trial couldn\u2019t have come at a worse time. <\/span><\/span><\/p>\n

As a tax preparer, Spring\u2019s always his busiest season. Under pressure to get his clients\u2019 returns in by April 15, he was already working longer hours. Then, when he finally did get home to bed, exhausted, he couldn\u2019t sleep for worry about the lawsuit. <\/span><\/span><\/p>\n

The trial dragged on. <\/span><\/span><\/p>\n

Eventually, Jim couldn\u2019t take any more. The stress was getting to him and his wallet was emptying fast. He agreed to settle out of court. <\/span><\/span><\/p>\n

But by then he\u2019d already shelled out $150,000 on lawyers\u2019 fees. And on top of that, he had to pay $96,000 in damages before the case was closed.<\/span><\/span><\/p>\n

The moral of the story – or why a tax preparer needs errors and omissions insurance<\/h2>\n

Jim Johnson made a mistake. He relied only on his clients\u2019 bank statements. He should have asked more questions about their cash intake. And insisted on seeing cash register reports. He does now. <\/span><\/span><\/p>\n

But Jim\u2019s biggest mistake was not having Errors and Omissions insurance. <\/span><\/span><\/p>\n

What\u2019s that? It\u2019s the kind of coverage that gives you peace of mind. <\/span><\/span><\/p>\n

Say something goes wrong and a client makes a claim against you. Having Errors and Omissions insurance means you\u2019re not left, like Jim, facing it alone. <\/span><\/span><\/p>\n

Insurers have a dedicated team of litigation experts on hand. They know exactly how to defend you. All you have to do is give them the information they need. <\/span><\/span><\/p>\n

Then there\u2019s the money side of things. <\/span><\/span><\/p>\n

Jim found out the hard way that legal advice costs. A lot. In his case it ran to six figures. As for the damages on top\u2026well, let\u2019s just say it nearly cleaned him out. <\/span><\/span><\/p>\n

E&O insurance could cover the legal expenses of defending a claim against you. And damages – if you\u2019re found liable. Apart from your premium – and the deductible, if applicable – you don\u2019t spend a cent. <\/span><\/span><\/p>\n

And if that\u2019s not enough to convince you, there\u2019s more\u2026<\/span><\/span><\/p>\n

E&O insurance could also cover work you\u2019ve done in the past. So there\u2019s no need to worry if you\u2019re suddenly faced with a client claiming you made an error years ago. <\/span><\/span><\/p>\n

Jim got his fingers burnt. But he learned his lesson and took out E&O coverage through InsuranceBee<\/a>. <\/span><\/span><\/p>\n

Maybe you should think about it too. Because what happened to Jim could happen to you.<\/span><\/span><\/p>\n

We\u2019re all human after all. And no matter how careful we are, mistakes can be made, or details overlooked.<\/span><\/span><\/p>\n

The smallest error could result in a claim against you. Sure, it might turn out to be baseless, but without insurance, it could still wipe you out. <\/span><\/span><\/p>\n

If you\u2019d like to know more, check out InsuranceBee\u2019s E&O policies for tax preparers<\/a>.<\/span><\/span><\/p>\n

The happy ever after<\/h2>\n

As for Jim\u2026<\/span><\/span>Confident we\u2019ve got his back, he now spends his days focussing on his clients.<\/span><\/span><\/p>\n

And at night? He sleeps like a baby. <\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

A tax preparer’s tale Last Spring, Jim Johnson was having sleepless nights. A client had slapped him with a lawsuit and Jim\u2019s defense costs were piling up. He was scared he\u2019d lose all his savings, his business – even his … Read more…<\/a><\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26],"tags":[],"class_list":["post-531","post","type-post","status-publish","format-standard","hentry","category-errors-and-omissions"],"yoast_head":"\r\nThe cost of not having E&O Insurance - a Tax Preparer's tale<\/title>\r\n<meta name=\"description\" content=\"No matter how good you are at crunching the numbers, tax preparers should always have E&O Insurance in place, as this story demonstrates.\" \/>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.insurancebee.com\/blog\/prepared-six-figure-lawsuit\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"The cost of not having E&O Insurance - a Tax Preparer's tale\" \/>\r\n<meta property=\"og:description\" content=\"No matter how good you are at crunching the numbers, tax preparers should always have E&O Insurance in place, as this story demonstrates.\" \/>\r\n<meta property=\"og:url\" content=\"https:\/\/www.insurancebee.com\/blog\/prepared-six-figure-lawsuit\" \/>\r\n<meta property=\"og:site_name\" content=\"InsuranceBee Blog\" \/>\r\n<meta property=\"article:published_time\" content=\"2018-01-25T16:14:15+00:00\" \/>\r\n<meta property=\"article:modified_time\" content=\"2023-02-08T10:04:32+00:00\" \/>\r\n<meta property=\"og:image\" content=\"https:\/\/www.insurancebee.com\/blog\/wp-content\/uploads\/2018\/01\/hands_money-in-till_shutterstock_40240903-1024x683.jpg\" \/>\r\n<meta name=\"author\" content=\"Kate Naqvi\" \/>\r\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Kate Naqvi\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\r\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.insurancebee.com\\\/blog\\\/prepared-six-figure-lawsuit#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.insurancebee.com\\\/blog\\\/prepared-six-figure-lawsuit\"},\"author\":{\"name\":\"Kate Naqvi\",\"@id\":\"https:\\\/\\\/www.insurancebee.com\\\/blog\\\/#\\\/schema\\\/person\\\/25d21b56419ae3d58431b36966e079bf\"},\"headline\":\"Are you prepared for a six-figure lawsuit? 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