Watch Your Step: 10 Big Mistakes Tax Return Preparers Make.

• Author: Dellinger, Kip
• Position: Professional issues

the 10 mistakes discussed here are among those I have observed during my nearly 50 years in tax practice as a CPA, including spending a significant portion in the past 12 years defending CPAs and CPA firms in litigation and regulatory disciplinary matters involving a CPA's appropriate "standard of care" in tax practice

1 Engagement Letters

CPAs and firms are far more likely to secure engagement letters for preparation services than they were just a few years ago. The engagement is a must; any tax malpractice attorney will attest to their importance in setting the understanding with the client and in potentially eliminating misunderstandings, as well as liability if something does go wrong.

However, many CPAs and firms--while adhering to a preparation engagement letter policy fail to obtain engagement letters for tax authority examinations of a client's return or for tax planning or advice engagements. The preparation engagement agreement does not apply to either of those professional services and the absence of an engagement letter can have serious adverse consequences.

More important, the preparation of an amended return is not the supplemental preparation of the original return and not covered contractually by the initial preparation engagement agreement. This, too, can have adverse consequences, such as open-ended liability for the CPA or firm or an assertion that "results" may have been promised.

2 Creeping Conflicts

CPAs and firms often overlook the type of conflicts that can arise years into an otherwise normal engagement. And once caught in the conflicting situation, it becomes difficult to rectify, often results in a necessity to withdraw from serving any of the conflicting parties and is accompanied by possible damages attributable to their need to retain successor CPAs.

Examples of these situations are married clients, partners, family businesses, partnerships, trusts and beneficiaries where perfectly harmonious longstanding relationships gradually deteriorate into acrimonious situations with the CPA "in the middle" and one or more parties contending favoritism. The CPA must be constantly vigilant to identify such situations, and when they begin to arise, either secure conflict waivers or resign from one or more parties which is not always possible to due obligations to a former client.

While not all acrimonious situations create an actual conflict for the CPA, the CPA should be aware of the possibility of an actual conflict at...