Accounting malpractice: what it is, and what to do next.

Accounting malpractice is professional negligence by someone who does accounting or tax work for you. It happens when that work falls below the standard a reasonably careful professional would meet, and the mistake causes a real loss.

It can involve many kinds of professionals. The IRS notes that paid tax return preparers include certified public accountants, enrolled agents, attorneys, “and many others who don’t have a professional credential” (IRS: Choosing a tax professional). Concerns can also involve auditors, bookkeepers, payroll services, and accounting firms.

Accounting malpractice covers mistakes of action, like entering the wrong figures, and mistakes of omission, like missing a filing deadline or failing to tell a client about a problem the professional noticed.

The details differ by state, but accounting malpractice claims usually turn on four questions:

• A professional relationship: Did the accountant agree to do the work, usually in an engagement letter or other agreement, so they owed you a duty of care?
• A breach: Did the work fall below what a reasonably careful professional doing the same kind of work would have done?
• Causation: Did that failure cause the loss, rather than a business decision, a change in the law, or information that was never provided?
• Damages: Was there a real, measurable loss, such as penalties and interest, the cost of correcting the work, or losses to a business? Which losses can be recovered depends on state law.

These cases usually need someone who knows the profession to explain what should have been done. Arizona, for example, requires a person bringing a claim against a licensed professional to certify whether expert opinion testimony is needed and, if it is, to serve a preliminary expert opinion affidavit (A.R.S. § 12-2602). That statute covers people licensed under Title 32 of the Arizona Revised Statutes (A.R.S. § 12-2601), the title that contains Arizona’s accountancy law.

Most concerns fall into a few broad areas:

• Tax preparation errors: mistakes on a return, a missed filing deadline, or a payment the preparer was supposed to send but didn’t.
• Audit and financial statement errors: an audit, review, or set of financial statements that missed or misstated something important.
• Advice, bookkeeping, and payroll errors: tax or business advice that fell short, books kept incorrectly, or payroll taxes that weren’t deposited.

Some concerns cross these lines. A bookkeeping mistake can flow into a tax return, and a tax return can depend on financial statements someone else prepared.

Malpractice isn’t limited to accounting. See types of malpractice for medical, legal, and other professions.

Owing more tax than you hoped isn’t malpractice on its own. A tax bill you would have owed even with perfect work is different from a penalty caused by a missed deadline. Tax positions can also be honestly debatable, and advice can turn out wrong because the law or the facts changed.

Your own role matters too. The IRS says that relying on a tax professional generally isn’t a valid reason for filing or paying late: “You’re generally responsible for complying with tax law even if someone else handles your taxes” (IRS: Penalty relief for reasonable cause). Whether a professional is responsible to you for that loss is a separate question under your state’s law.

You don’t need to sort this out yourself. An attorney, usually working with an independent accountant, decides whether the work fell below professional standards and whether that caused the loss.

The accountant’s own client, whether a person or a business, is usually the one who raises a claim. People who weren’t the client, such as lenders, investors, or buyers who relied on an accountant’s work, face extra hurdles, and states handle them differently.

In Florida, for example, the two-year time limit for professional malpractice “shall be limited to persons in privity with the professional” (Fla. Stat. § 95.11(5)(b)). Illinois law says licensed accountants aren’t liable for civil damages to people who weren’t in privity of contract with them, except for fraud or intentional misrepresentation, or when the accountant knew that a primary intent of the client was for the work to benefit or influence the person bringing the claim (225 ILCS 450/30.1).

Privity generally refers to a direct contractual relationship. If you relied on work done for someone else, tell an attorney licensed in your state, since that detail affects which rules apply.

Every claim has a deadline, and the deadlines for accounting malpractice differ by state and by the kind of claim. Some start when the mistake happened, and others start when it was discovered or should have been.

In Florida, for example, an action for professional malpractice other than medical malpractice must be brought within two years, and that period runs “from the time the cause of action is discovered or should have been discovered with the exercise of due diligence” (Fla. Stat. § 95.11(5)(b)).

For what each state’s statutes say about the time limit and about claims by non-clients, see accounting malpractice laws by state.

IRS notices carry their own due dates, which are separate from any deadline for a legal claim. Only an attorney licensed in your state can tell you which deadlines apply to you and how much time is left.

• The engagement letter or any agreement that says what the accountant was hired to do
• The returns, reports, or financial statements they prepared, and any drafts you were sent
• Workpapers or schedules you were given
• IRS or state notices and letters, with the envelopes if you still have them
• Emails, letters, and texts with the accountant, including what you sent them and when
• Invoices and proof of payment for their services

An accountant’s own workpapers often belong to the accountant. In Florida, the statements, records, schedules, working papers, and memoranda a CPA makes while serving a client remain the CPA’s property, except the reports submitted to the client and records that are part of the client’s records, unless the two agree otherwise (Fla. Stat. § 473.318). Arizona has a similar rule and also requires a registered CPA or firm, on request with reasonable notice, to furnish certain client records and copies of workpapers that contain them (A.R.S. § 32-744). For federal tax matters, attorneys, CPAs, enrolled agents, and others who practice before the IRS must, at a client’s request, promptly return the client’s records needed to meet federal tax obligations (31 C.F.R. § 10.28).

Keep everything you gather. You share it with your own attorney, not with us.

Separate from any legal claim, you can report a professional to the agency that licenses or oversees them. A complaint can lead to discipline, but it isn’t a way to recover your losses.

• State boards of accountancy license and discipline CPAs. In Florida, the Board of Accountancy sits within the Department of Business and Professional Regulation (Fla. Stat. § 473.303), which takes complaints online. The department says it cannot represent you in civil matters to recover fees paid or seek remedies for injuries (Florida DBPR: File a complaint). In Arizona, the Arizona State Board of Accountancy enforces the state’s accountancy law (A.R.S. § 32-702) and may discipline a CPA for “dishonesty, fraud or gross or continuing negligence in the practice of accounting” (A.R.S. § 32-741).
• The IRS takes reports of paid tax preparer misconduct on Form 14157, Return Preparer Complaint. Individual filers whose preparer altered their tax data, misdirected a refund, or filed a Form 1040 series return without their knowledge or consent can also ask the IRS to correct their account with Form 14157-A (IRS: Tax return preparer misconduct).
• IRS penalty relief may be available if you tried to comply but couldn’t because of circumstances beyond your control, and the IRS lists first-time abatement and reasonable cause among its types of relief (IRS: Penalty relief). If you can’t resolve a penalty on your own, the IRS points to the Taxpayer Advocate Service, “an independent organization within IRS.”

MalpracticeAttorneys.com carries the legacy of Howard Neu, who worked as a CPA before he became a lawyer.

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We wrote this page from the primary sources below and checked it against them on September 25, 2026.

• IRS, Choosing a tax professional: types of paid tax return preparers
• IRS, Penalty relief for reasonable cause: reliance on a tax professional
• IRS, Understanding your IRS notice or letter: responding to notices
• IRS, Tax return preparer misconduct: Forms 14157 and 14157-A
• IRS, Penalty relief: types of penalty relief and the Taxpayer Advocate Service
• 31 C.F.R. § 10.28: return of client records
• Fla. Stat. § 95.11(5)(b): professional malpractice time limit and privity
• Fla. Stat. § 473.318: ownership of CPA working papers
• Fla. Stat. § 473.303: Florida Board of Accountancy
• Fla. Stat. § 473.302(2): the Department of Business and Professional Regulation
• Fla. Stat. § 473.316: accountant-client privilege and its exceptions
• Florida DBPR, File a complaint: complaints and what the department cannot do
• A.R.S. § 12-2601: licensed professional definition
• A.R.S. § 12-2602: preliminary expert opinion affidavit
• A.R.S. § 32-702: Arizona State Board of Accountancy
• A.R.S. § 32-741: grounds for CPA discipline
• A.R.S. § 32-744: working papers and client records
• 225 ILCS 450/30.1: accountant liability to people not in privity

We are not attorneys, and this page is not legal advice. Laws change and differ from state to state. If anything here is out of date or wrong, email support@malpracticeattorneys.com with the page name, and we’ll review it and update the page.