‘Address’ the risk of being your client’s mailbox

Written by promotiondept

November 12, 2018

‘Address’ the risk of being your client’s mailbox

Does your firm receive tax notices or other correspondence for clients? After all, what is truly involved? Fording mail every once in a while? Responding to IRS notices that the client is just going to send to the firm anyway? Or is there more? Consider the following scenario:

A firm’s client received numerous notices from both the IRS and state taxing authorities but consistently forded them to the firm late, causing headaches for the firm and penalties for the client. To save everyone time and money, the firm recommended that the client change the address on its tax return to the firm’s address. The client agreed.

Later, the firm received an IRS audit notice requesting additional documenton research and development credits reflected on the client’s tax return. The firm responded directly to the notice without consulting the client but did copy the client on the response. The IRS denied the credit, and the client sued the firm asserting that the firm was not engaged to respond to the notice and should have forded it to the client instead.

Permitting a client to use the firm’s address exposes the firm to other potential risks, including:

While permitting a client to use the firm’s address as its own may appear to be providing good client service, it can, instead, be problemc.

In the previous scenario, the firm should have insisted the client take responsibility for receiving and timely fording correspondence to the firm. Clients that do not accept accountability for simple tasks such as fording notices may present other risks, and the firm should reevaluate the relonship if problems continue.

In the rare circumstance where the decides to accept this type of engagement, consider the following tips for mitigng the risk of a professional liability claim.

Obtain an engagement letter

s may consider a client’s request to use the firm’s address as an extension of existing professional . This is not the case — it is a separate service, and a separate engagement letter should be obtained. Unique engagement letter provisions specific to this service include:

Establish notificon procedures

Failure to timely ford correspondence to the client presents numerous risks to the client and the firm. Establish internal firm procedures to ford correspondence to the client quickly, preferably within 24 hours of receipt by the firm, to help mitigate this risk.

Do not respond to correspondence received — the client is the addressee, not the firm. Even if the firm believes that the client will ly ask the firm to respond, the firm should consider whether it has been formally engaged to do so. If appropriate, the may suggest additional to assist the client with its response, which would necessitate a new engagement letter.

Document the firm’s actions

A firm’s workpapers for this service should include the correspondence received, date received, date and to whom the correspondence is transmitted, and the transmittal method. The firm also should request a written acknowledgement from the client.

Consider registered agent

A registered agent is a third party that is registered in the same state as a entity and maintains a physical locon in the same state in which the entity operates. The registered agent receives official correspondence on behalf of the entity, such as serviceofprocess notices, correspondence from the government, and notices of lawsuits.

While serving as an intermediary between the government and a client , s providing such have been sued. Consider this scenario:

Unbeknownst to the , a client named the firm as its registered agent with the Secretary of State. Some years elapsed, and the client decided to change firms. One day, the original firm received notice of a lawsuit for the nowformer client. In an attempt to reconnect with the client, the firm handdelivered the notice to the former client.

Believing the lawsuit was meritless, the former client did not respond to the complaint until a multimilliondollar default judgment was rendered against it. The former client informed the court that it had not received the original notice, which was its reason for the failure to respond. When this excuse was not accepted by the court, the client brought a claim against the firm alleging it did not fulfill its duties as the registered agent. Because the firm had not documented delivery of the notice to the former client, the firm was forced to defend itself, incurring substantial time and defense costs.

The same risks associated with allowing a client to use the firm’s address to receive correspondence also apply to s serving as a client’s registered agent. If asked to serve in this capa, suggest the client engage a thirdparty registered agent service, many of which have locons throughout the country. These specialized service providers are affordable and may better align with a client’s needs.

Finally, serving as a client’s registered agent may not be covered under a professional liability insurance policy. Before agreeing to serve as a registered agent, review coverage with your professional liability insurance agent or broker. If these are not covered, ask if it is possible to obtain an endorsement to the policy.

A FINAL NOTE

If you discover a client has listed your firm as its registered agent without your authorizon, request in writing that the firm be removed as a registered agent. If the client fails to do so, you may want to reevaluate the client relonship.

Deborah K. Rood (deborah.rood@cna.com) is a risk control consulting director at CNA. 

Continental Casualty Company, one of the CNA insurance companies, is the underwriter of the AI Professional Liability Insurance Program. Aon Insurance , the Nonal Program Administrator for the AI Professional Liability Program, is available at 8002213023 or visit cpai.com.

This article provides informon, rather than advice or opinion. It is accurate to the best of the author’s knowledge as of the article date. This article should not be viewed as a substitute for recommendons of a retained professional. Such consulton is recommended in applying this material in any particular factual situons.

Examples are for illustrve purposes only and not intended to establish any standards of care, serve as legal advice, or acknowledge any given factual situon is covered under any CNA insurance policy. The relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured. All products and may not be available in all states and may be subject to change without notice.


Source

How To Really REALIZE DREAMS COME TRUE?

Happiness is for those who plan well and pursue. A profound among us have been proven those who have true dream to live for likely REALIZED IT. It is just simply the person working toward the DREAM days and night until accomplishment. There is a phrase of efficiency a head of you. Steps and obstacles at first seem tremendous. However, just with some times those difficult steps and challenges are so easy performance for you. There are also plenty of tools including VISUALIZATIONS and helps are around you.

COVID-19 – Effective Tips For You!

COVID-19
HOW TO DEFEAT DEADLY CORONAVIRUS EVERY TIME?

The Greatest Virus Surviving 10 Steps Guide

Free Risks Helps & COVID-19 Solutions

Here Are Great Free Tips For You.

Amazon Best Sellers

How To Really REALIZE DREAMS COME TRUE?

Found great life changing solutions

COVID-19 – Effective Tips For You!

COVID-19
HOW TO DEFEAT DEADLY CORONAVIRUS EVERY TIME?

The Greatest Virus Surviving 10 Steps Guide

Free Risks Helps & COVID-19 Solutions

Here Are Great Free Tips For You.

Amazon Best Sellers

You May Also Like…

0 Comments

Submit a Comment