SALT Work is Peppered With Liability Risks
Source: Journal of Accountancy
In this article, Deborah Rood warns CPAs about the significant professional liability risks associated with state and local tax (SALT) claims. The complexity of multistate taxation, combined with the likelihood that a client hit with additional taxes will attempt to recover those amounts from the CPA, makes this area particularly dangerous.
Rood offers several examples of CPAs who paid for their SALT mistakes and suggests steps for mitigating the risk, including:
- Informing clients of their options, particularly when it comes to nexus issues with various states, and getting written instructions regarding filing in those states.
- Staying up-to-date with tax law changes.
- Getting second opinions from SALT specialists when appropriate.
- Clearly defining the scope of services in the engagement letter.
- Reviewing all deliverables carefully before submission to clients.
- Issuing separate tax memoranda for each research project, rather than updating previous memoranda.
It's also critical to understand a client's business and to ensure that the client reviews tax documents before they're filed.
For the complete article, read “Risk management: Worth its SALT.”
From Journal of Accountancy, September 1, 2016, www.journalofaccountancy.com/Issues/2016/sep.