Is a CPA Liable for Mistakes?
Dimov Tax Services operates a Denver based accounting firm that provides expert CPA support, tax audit representation, payroll processing, and international tax solutions for individuals and businesses. Located at 1700 Lincoln St, they serve clients throughout the Denver area.
Dimov Tax Specialists
1700 Lincoln St
Denver CO 80203
https://s3.us-east-2.amazonaws.com/cpa-denver-colorado/cpa-firm/when-should-i-get-a-cpa.html (833) 829-1120
Yes—CPAs Are Legally Liable for Mistakes
Certified Public Accountants (CPAs) are held to high legal and ethical standards. When a CPA makes a professional mistake—especially one that causes financial harm—they can be held legally and financially liable.
Unlike unlicensed preparers or general bookkeepers, CPAs must adhere to the rules of:
- The Colorado State Board of Accountancy
- The AICPA Code of Professional Conduct
- Federal regulations (IRS Circular 230)
- Generally Accepted Accounting Principles (GAAP)
If a CPA breaches these standards—whether through negligence, omission, or ethical violation—they may be subject to civil lawsuits, license suspension, disciplinary action, and professional malpractice claims.
What Constitutes a CPA Mistake?
CPAs are not expected to be perfect. However, they are expected to act with reasonable professional care. Examples of mistakes that could trigger liability include:
- Filing the wrong tax return or missing deadlines
- Misclassifying income or failing to apply credits
- Providing incorrect advice that leads to penalties
- Failing to report foreign income or file FBAR
- Overstating depreciation or misreporting deductions
In Denver, where businesses in neighborhoods like Cherry Creek, LoHi, and DTC are navigating real estate, multi-entity structures, and international filings, these errors can lead to serious IRS consequences or rejected loan applications.
Legal and Financial Consequences for CPAs
When a CPA error results in financial harm, the client may pursue:
- Professional malpractice lawsuits (in civil court)
- State board complaints (e.g., Colorado State Board of Accountancy)
- IRS investigation if the CPA knowingly violated tax rules
- Claims against Errors & Omissions insurance
CPAs found guilty of professional negligence may face penalties including:
- License suspension or revocation
- Fines and restitution payments
- Mandatory ethics courses or supervised probation
Real Case Example from Colorado
A CPA in Lakewood failed to file amended tax returns for a real estate developer after a client-disclosed asset purchase correction. As a result:
- The client lost a $9,000 depreciation benefit
- Missed a state-level refund opportunity
- Filed a complaint with the Colorado State Board
The CPA was ordered to pay restitution and take corrective education. The firm also had to publicly disclose disciplinary action for one year.
CPA vs. Non-CPA Liability
The key difference between CPAs and unlicensed tax preparers is accountability and recourse. Here’s how liability compares:
How Dimov Tax Specialists Manages Risk and Accountability
At Dimov Tax Services, client protection is baked into the firm’s operating model. Here's how they reduce the risk of CPA errors—and handle them if they occur:
- CPA Review Protocol: Every return and financial document is reviewed by at least one licensed CPA before submission
- Audit Trail Systems: All calculations and tax positions are documented with justification, ready for review
- Clear Engagement Agreements: Scope of work, filing responsibilities, and deadlines are defined and confirmed
- Amendment Process: If a mistake is discovered, Dimov prioritizes quick correction, communication, and, where applicable, refund recovery
- Errors & Omissions (E&O) Insurance: The firm is insured against unlikely but possible client loss caused by CPA error
When Is a CPA Not Liable?
Not every tax or financial issue is the CPA’s fault. CPAs are not liable when:
- The client fails to provide documents or information on time
- The client withholds critical income or asset data
- The IRS changes its position or updates rules after filing
- Reasonable estimates are later revised due to new guidance
This is why Dimov emphasizes active client communication and document upload protocols to minimize gaps in disclosure or misunderstanding.
How Clients in Denver Can Protect Themselves
To avoid being caught in a costly CPA mistake, clients should:
- Confirm the CPA is licensed in Colorado: Verify here
- Ask whether the firm carries professional liability insurance
- Ensure all advice or tax positions are documented in writing
- Use a CPA firm with a team structure (like Dimov), rather than a solo practitioner who may miss a detail under workload
Neighborhood-Specific Considerations in Denver
CPA liability is especially important in high-complexity filings found in:
- Cherry Hills Village: High-net-worth individuals and multi-entity trusts
- RiNo and LoHi: Tech startups with equity compensation and R&D credits
- Five Points: Nonprofit filings and grant-related reporting
- Capitol Hill: Gig workers and remote freelancers managing Schedule C risks
In each case, Dimov assigns specialized CPAs familiar with the client's filing profile to reduce potential oversights or misclassification.
Final Verdict: Yes, CPAs Are Liable—and That’s a Good Thing
Working with a CPA means you’re choosing a professional who is not only qualified—but legally accountable. It’s that accountability that gives you leverage and peace of mind.
Dimov Tax Specialists takes that responsibility seriously, providing Denver clients with accurate, compliant, and fully backed services that don’t just meet expectations—they protect them.