Failure To Act Within Legal Time Limits
Much of what an accountant does is based upon observing deadlines. For example, if an accountant is not able to file a tax return for an individual or corporate client, he or she is nonetheless required to file a request for an extension, along with an estimated tax payment at least large enough to cover what the tax bill will likely be when the return is finally prepared. Failure to do this results in interest and penalties.
If an account is in charge of filing annual reports on time on behalf of corporate clients, failure to do so may result in the company being put on inactive status or even technically dissolved. Usually these things can be fixed without much damage to the corporation, but not always.
With tax laws changing frequently, errors are made by accountants when timeframe laws are about to change. For example, if the accountant knows that the tax on the sale of investment property is going to go up in the following tax year, it may be necessary for the accountant to advise the client to sell the property before the end of the current year.
When an accountant misses one of these important deadlines, the effect may be minimal or very significant. Proving that the accountant missed the deadline and that he or she violated a standard of practice by doing so is usually easy. The hard part comes in proving how – and how much – the client was damaged.
If a claim is brought against the accountant on the basis that he or she missed the deadline for filing a tax return or an extension, the damages may be easy to prove- right down to the penny. Whatever the government charges as interest and penalties will be an amount that never would have had to be paid at the tax return been filed on time.
You can protect yourself somewhat against obvious tax return mistakes. For most individuals and businesses, tax returns or extensions must be filed by April 15. Even if you are relying on your accountant to contact you and arrange to have your return filed on time, it is prudent to be aware of that date and make sure that you are contacting your accountant to fit is getting close without action having been taken.