Video: Tax Preparer Liability

In this lesson, Nick Palazzolo, CPA, delves into the complexities of tax preparer liability, breaking down the distinctions between negligence, constructive fraud, and fraud within the context of a CPA's professional duties. He elucidates the gradations of liability, from exercising reasonable care to criminal fraud, and their legal implications. Nick clarifies that privity is not a defense to fraud, expanding the realm of potential claimants beyond direct clients. With practical examples, he outlines scenarios where CPAs could be held liable for damages and emphasizes the importance of maintaining professional standards to mitigate risks of liability. Through an engaging example involving an audit report and potential investor, Nick illustrates how due care impacts a CPA's legal responsibility. This exploration into the levels of CPA fault serves to guide careful practice and awareness of legal exposures in the field of accounting.