One of the most crucial coverages for tax preparers is professional liability insurance. Your company will be accountable for paying your legal defense fees out of pocket if you don’t have it. That is why bookkeepers should obtain professional liability insurance.
What kind of insurance does a bookkeeper need?
For general liability insurance, bookkeepers pay a monthly cost of roughly $30, or $350 annually. This coverage covers third-party injuries, third-party property damage, and advertising injuries for bookkeeping businesses.
For more comprehensive coverage, Insureon’s licensed agents often recommend a business owner’s insurance. A BOP is a policy that combines general liability and property insurance at a discounted rate.
On Insureon’s general liability insurance cost analysis page, you can learn how to save money on your policy, which coverage limits to choose, and more.
Do accountants need professional indemnity insurance?
You don’t need accountants’ insurance if you aren’t a chartered accountant. You do if you have an ACCA, AAT, ICAEW, ICAS, or CIMA license to practice accountancy.
But, as always, there’s a distinction to be made between what’s required and what’s best for your company.
Because anyone can make a mistake, it’s a good idea for accountants to get professional indemnity insurance. It covers your legal expenses as well as any damages if a client thinks your work isn’t adding up.
It also covers things like document or data loss, as well as an unintentional violation of confidentiality.
You’ll also require employer’s liability insurance if you have employees. It’s a legal requirement.
Can bookkeepers be held liable?
Bookkeeper responsibility may be a source of concern for some business owners. Whether you keep your own books or delegate that responsibility to an internal or outsourced bookkeeper, it’s important to understand the obligations that come with the job. After all, safeguarding your most precious assets your staff is vital to the success of your company.
Insufficient Funds
One reason a check may bounce is that the payer lacks a dedicated accountant to maintain track of his or her affairs. Vendors expect to receive their payments on schedule even in this situation. An authorized representative (i.e., one with check-signing authority) is personally liable to the payee unless the representative can prove that the firm did not intend for him or her to assume that duty, according to the Uniform Commercial Code.
What to look out for: To safeguard the bookkeeper from personal liability, need a second signature from a supervisor or corporate authority on each check.
Unpaid Payroll Taxes/Withholdings
One of the IRS’s hot button concerns is worker classification, and the agency is looking for red flags in business tax filings. Who is responsible for missed payroll taxes if a corporation asserts that employees are independent contractors but the IRS later reclassifies those workers as employees? Consider the following scenario: When a corporation is cash-strapped, it pays its vendors first before sending payroll tax withholdings to the IRS. Who is in charge of that decision?
The IRS might make bookkeepers personally accountable for 100% of any trust fund taxes (i.e., employees’ Social Security, Medicare, and withheld income taxes) in any situation if they:
- are “responsible parties” with decision-making authority (in other words, they decide which checks to send out as a check-signer), or
- Even if a business officer told them not to, they refused to pay the taxes.
What to look out for: If at all feasible, avoid designating bookkeepers as approved check signers and instead require checks to be signed by a supervisor or a corporate officer. You may not be able to argue that you have no decision-making authority or that you were unaware that taxes were owed if you are a business owner who does your own bookkeeping. Instead, shield yourself from personal liability by becoming familiar with the role’s dangers.
Data Breaches
Companies that outsource their bookkeeping should be aware of the hazards to their data security. If a security breach affects bookkeepers who store confidential customer information on their networks, the information could be exposed, corrupted, or lost. Breach reporting requirements and other fines for violating state and federal privacy and security standards may be triggered by these attacks.
What to look for: Make sure your bookkeeper has solid data security procedures in place, including a written policy for handling confidential information.
CRI Can Help With Bookkeeping Liability Hazards
Running a prosperous business includes keeping an eye out for anything that could jeopardize your most valuable assets, such as your and your employees’ personal finances. Please contact CRI to learn more about how our client accounting services can assist you in keeping your company on track.
Do all companies need professional indemnity insurance?
In summary, if you perform any kind of service that other individuals or businesses rely on, you could require professional indemnity insurance to protect yourself. In fact, not having Professional Indemnity Insurance might pose a significant danger to your organization.
So, if you’re not sure if you need Professional Indemnity Insurance and your profession is listed above, get a free professional indemnity quotation online. To do so, simply go to our free online insurance pricing tool for a no-obligation, no-cost quote.
How much should I charge as a bookkeeper?
The cost of a bookkeeper varies depending on the size of the company, the industry, and the financial services required. Depending on experience, in-house bookkeepers can charge anywhere from $18 to $23 per hour. Another option is to use an outsourced bookkeeper, with monthly bookkeeping expenses starting at $99 per month.
Cost of an In-House Bookkeeper
In the United States, the average hourly compensation for a bookkeeper is $20, however prices can range from $18 to $23 per hour, depending on education, experience, and extra skill sets. How you determine labor cost depends on whether you require a full-time or part-time staff. When comparing an in-house bookkeeper and a financial management firm, consider employee costs such as benefits, training, and time off.
Some business owners may find that hiring an in-house employee is a good answer, but for many high-volume organizations, the expense of training, wages, and the risk of inaccuracies exceed the benefits of hiring an in-house employee.
Benefits of hiring an outsourced bookkeeper
- Individual experience is often higher than collective experience, which gives business owners more peace of mind.
- Account administration and tracking in one place to aid in the analysis of company insights and areas for development
Do bookkeepers need to be bonded?
Either by their employer or to develop trust with their customers, bookkeepers are frequently obliged to be bonded. These are surety bonds, which are offered by an insurance firm as a guarantee of recompense in the event of a bookkeeper’s dishonesty or wrongdoing. To become bonded as a bookkeeper, you must show that you are fiscally responsible and honest. The type of this proof differs from one insurer to the next. At the very least, bookkeepers must show that they have never been convicted of financial fraud.
Who needs professional indemnity?
As part of their individual industry body’s regulatory obligations, several professions are required to acquire professional indemnity insurance. Even if you are not required to get PI insurance, failing to do so could result in you being liable for thousands of pounds in legal expenses and compensation payments, not to mention lost wages due to time spent defending any charge. If you’re a lawyer, you’ll almost certainly need professional indemnity insurance.
- You give your clients advise or expert services (including consulting or contracting)
- You create designs for your customers (such as working as an architect or design engineer)
- You want to be safe from accusations of faults or neglect in the work you’ve done for your client.
- You’re a contractor, consultant, freelancer, or self-employed professional, and your client has asked you to obtain professional indemnity insurance before beginning a project.
Professional indemnity insurance may be required in the following fields (but is not limited to):
- Marketing consultants, training consultants, and education consultants are examples of management and business consultants.
- IT contractors, consultants, programmers, and developers are all examples of IT professionals.
- Contractors who work in the technical and engineering fields include CAD designers, project engineers, and offshore oil and gas engineers.
- Personal trainers, dancing instructors, and yoga instructors are among the fitness professionals.
What is professional indemnity insurance for accountants?
Professional Indemnity (PI) insurance protects a professional, such as an accountant, attorney, architect, or engineer, against legal obligation to pay damages to those who have lost money as a result of his or his staff’ professional negligence while conducting business.
Do I need insurance as an accountant?
In the case of a lawsuit, accountant professional liability insurance, also known as errors and omissions insurance or professional indemnity insurance, covers accounting firms. This insurance protects the professional, in this case an accountant, from having to pay liability claims arising from their negligence, errors, blunders, or other protected causes.
Accountants today work with a wide range of clients, from individuals to multibillion-dollar corporations. The desire for their services is not only beneficial to individuals or enterprises, but it is also a requirement. It can be difficult, if not impossible, for firms to track the flow of their funds without the help of expert accountants. Because of the high demand for accounting services, insurance companies saw an opportunity to establish an Accountants Insurance coverage.
Can you sue your bookkeeper?
You may be held accountable for damages to victims of fraudulent bookkeeping practices in addition to face criminal prosecution. Investors are frequently the victims of bookkeeping fraud, and they may sue the company and you for misleading reporting. Investors may allege that if they had seen accurate financial accounts, they would not have invested in a company. If you willfully modify the facts of a financial transaction, you can be charged with conspiracy, racketeering, conflict of interest, and embezzlement in addition to concealment or misrepresentation of money.