3 ways accounting malpractice can harm clients

Professional malpractice can affect clients in a variety of different industries. Many people are aware of the risks of medical malpractice. People who hire licensed professionals for different services could also experience malpractice.

Accountants need to have sufficient training and must keep their education up to date as financial regulations change. People depend on their accountants to help them make smart money management decisions, file accurate income tax returns, oversee business matters and minimize their tax obligations. Unfortunately, accountants can make mistakes that can result in significant consequences for their clients.

Tax return errors

There are numerous forms of malpractice directly linked to income tax returns. Accountants might fail to submit paperwork to the Internal Revenue Service (IRS) despite having signatures and all of the necessary financial information from their clients. They might make egregious errors on tax returns that other accountants could easily identify and avoid. When tax return errors result in penalties and other losses for clients, they may represent an actionable form of accounting malpractice.

Major payroll errors

Accountants may provide guidance on payroll compliance issues and may oversee payroll administration for businesses in some cases. Errors regarding workers’ wages can have major consequences. Businesses can face wage lawsuits from their employees and possibly also tax penalties. When accounting professionals make mistakes when calculating worker wages, withholding funds for taxes or advising businesses on employment practices, their actions might constitute malpractice.

Fraudulent financial services

Not all forms of malpractice relate to incompetence or negligence. Sometimes, accountants commit malpractice by prioritizing their own enrichment at the expense of clients. They may defraud their clients. For example, they might recommend investments because they receive a kickback from an outside professional or a business. They might even mismanage funds and embezzle from their clients while claiming to provide investment support. Improper investment advice can cost clients thousands and leave them at a significant financial disadvantage.

Pursuing a successful professional malpractice lawsuit against an accountant can help compensate clients harmed by incompetence or unethical behavior. When professional failures cause negative consequences for clients, they may be able to recoup their losses by holding a negligent professional accountable.