What's Happening?
CPA firms are preparing for the upcoming tax season, facing various liability challenges due to new regulations and client expectations. Deb Rood, a CPA and risk control director for CNA, highlighted the importance of engagement letters in defending against professional liability claims. The One Big Beautiful Bill Act and recent executive orders, such as the phase-out of paper checks by the IRS, are significant issues for CPA firms. Firms must inform clients about changes like the denial of Employee Retention Tax Credit claims after January 31, 2024, and the transition to electronic payments. Additionally, CPAs should advise clients on expiring clean energy credits and opportunities related to R&E expenses and fixed assets. The lack of engagement letters and missed due dates are common issues leading to tax claims against CPAs.
Why It's Important?
The evolving regulatory landscape poses challenges for CPA firms, impacting their liability and client relationships. The transition to electronic payments and the denial of certain tax credits require proactive communication with clients to avoid potential claims. Engagement letters are crucial in defining the scope of services and protecting firms from litigation. As tax regulations change, CPAs must stay informed and guide clients through new opportunities and deadlines. The emphasis on engagement letters and timely communication can mitigate risks and enhance client trust, ultimately benefiting the firm's reputation and financial stability.
What's Next?
CPA firms are expected to leverage technology to streamline the process of obtaining engagement letters and communicating with clients. As the tax season approaches, firms will need to focus on educating clients about new regulations and deadlines to prevent claims related to missed opportunities or untimely filings. The shift to electronic payments will require firms to assist clients in adapting to new payment methods, ensuring compliance and avoiding penalties. Firms may also explore new service offerings related to analyzing tax provisions, requiring updated engagement letters for expanded services.
