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Business Insurance for Tax Preparers and Tax Prep Services

Tax preparer insurance

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Filing a tax return can be a long and complicated process, filled with obscure questions and piles of paperwork. Many people lack the know-how, patience, knowledge, and time to do the work themselves. That’s why special programs and tax preparation services exist. As a tax preparer, your clients depend on you to provide them with reliable advice. Whether they are asking you about which expenses they can write off, or what the rules are for handling multiple sources of income, your judgment can have a significant impact on their bottom line.

As a tax preparer, you’ve probably received training that ranges anywhere from an informal course at a local college to a full accounting degree. Regardless of your background, clients trust you to handle sensitive information. If you have ever made a mistake on someone’s tax return, chances are the customer wasn’t happy. Some dissatisfied customers may go so far as to sue you over the error. The financial impact of a lawsuit can be potentially devastating to your company. That’s why it’s essential to choose the right insurance coverage to protect you from these and other unexpected costs.

You might want to purchase insurance for your tax preparation business if:

What insurance coverage do I need as a tax preparer?

The best insurance policies for a company that specializes in tax preparation often overlap with more general business insurance. Because your business probably works extensively with confidential and sensitive data and can be held responsible for professional errors, you should consider purchasing professional liability insurance and cyber liability insurance. Listed below are the major insurance coverages you should pay attention to.

Professional Liability Insurance or Errors and Omissions (E&O) Insurance

Everybody makes mistakes, but if you work as a tax preparer, those professional mistakes can create serious problems for your customers. Tax preparers are especially vulnerable to lawsuits because the errors they make have the potential to land their client in financial trouble. Professional liability insurance can protect you from a lawsuit, whether or not your company is at fault, if you are accused of making an error in your work. Covered areas for professional liability insurance include negligence, misleading statements, performance, and breach of duty.


General Liability Insurance

General liability insurance can help protect your tax prep service from the financial burden of a lawsuit that is unrelated to your work with taxes. The four types of coverage that are included in general liability insurance are: products & completed operations, property damage, bodily injury, and personal & advertising injury.


Commercial Property Insurance

If there is extensive physical damage to property or equipment that you lease or own, the expense of replacing it can negatively affect your bottom line. Commercial property insurance protects you from these costs. The included damage can happen to a building or item that you rent, lease, own, or have borrowed from someone else. Covered items include, but are not limited to: paintings, furniture, office equipment, and computers.


Cyber Liability Insurance

As a tax preparer, most of your work will be done through a computer, and many of your tax filings are done over a network. That’s why it’s especially important to guard your business against the negative impact of any technological mishaps. Cyber liability insurance can protect you from hacking, viruses, data breaches, and other cyber perils.

Cyber liability insurance also covers the costs of:


Business Owner’s Policy

A business owner’s policy, also known as a “BOP,” can cover risks that are common to all business owners. If you own a small tax preparation service and you work with customers inside of commercial space you rent or own, a business owner’s policy may be a good solution for you. Accidents, however unexpected, can always happen. In this type of plan, general liability, business interruption, and property insurance are bundled together to address your needs as a small business owner. This coverage can protect you from a lawsuit and pay to cover the replacement costs of some types of damage.

Business Interruption Insurance

Business interruption insurance, also known as business income insurance, covers lost income if your business is unable to operate due to damage or destruction to your property. If a problem forces you to temporarily halt operations, you will still be liable for paying employees, landlords, rental fees, and more. Business interruption insurance covers the lost revenue. Business interruption insurance is not sold on a standalone basis, but can be added to your commercial property insurance or business owner’s policy.



Purchasing insurance can protect your tax preparation business from the financial burden of any unexpected lawsuits or property damage. As a business that helps clients file tax returns, you are especially vulnerable to lawsuits over any errors or mistakes one of your employees might make. A faulty tax return can land a client in trouble with the IRS, and if penalties against them are severe enough, they might be driven to seek legal action. Like all small businesses, you can also be sued for an accident that occurs on your property, e.g. a bodily injury lawsuit over a faulty staircase. Therefore, it is wise for you to invest in buying insurance to ensure that your company will continue to thrive.

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