Avoid Tax-Related Claims with Continued Education

Avoid Tax-Related Claims with Continued Education
January 31, 2017 Pearl Insurance

Avoid Tax-Related Claims with Continued Education

A real-life claim situation.

Countless accountants pursue comprehensive continued education to prevent harmful claims. If you stay current with ever-changing tax laws, you create an extra layer of protection for your career and your firm.

In the following story, you will see how an experienced CPA took on a new client with tax needs he didn’t address. The CPA’s problems were compounded by his vague and outdated sources of continued education. Unfortunately, the CPA’s lack of knowledge led him to ignore changes that should’ve applied to his client.


A CPA worked mostly with small, local businesses, but he acquired a new client who manufactured roofing shingles and sold them in multiple states. The CPA was hired to compile financial statements and prepare taxes.

While preparing the taxes, the CPA treated all sales as if they had occurred within the client’s home state. However, the state law had changed a few years prior to grant a 50% tax credit for sales occurring outside of the home state.

State laws commonly provide favorable tax treatment for sales of tangible goods outside of the home state. This encourages commerce with buyers in other states and promotes job growth. It is also common to find a provision in the law prohibiting tax credits on amended returns.

The client changed CPAs after a few years, and the new accounting professional found the tax credit error while reviewing old tax returns. The error could not be corrected with an amended return, so a claim was made with the errors and omissions carrier of the prior CPA. Reworking the tax returns from prior years and applying the 50% tax credit determined the client had overpaid $750,000 in taxes.

The original CPA missed this change in the tax law, even though he had reviewed prior updates and alerts received over the years. The change in the law for the sale of tangible goods outside of the home state had been addressed in one alert. This alert was written in vague and arguably confusing language, but the CPA didn’t think anything of it, as this change did not apply to anyone in his client base at that time.


Where are you getting your continued education? Are your sources providing comprehensive and understandable information? Have you acquired new clients with tax needs that may differ from your current clients’?

Share your thoughts in the comments below.

This article was produced in conjunction with General Star National Insurance Company, a Berkshire Hathaway Company.