You may have learned the five Ws in school: who, what, where, when, and why. These are essential questions that help writers communicate clearly and completely. When a client has not provided critical information days before a tax filing deadline, a CPA may ask a different “W” question — “What now?” Or perhaps the IRS has not issued authoritative guidance on a new law. A CPA may ask, “What am I supposed to do?”

Incomplete information, whether from clients or tax authorities, can be risky from both a compliance and a professional liability perspective. Consider this scenario: A divorcing couple did not specify their preferred filing status when completing the CPA’s tax organizer. On the date the return was due, the CPA unilaterally proceeded with what they thought was the correct decision and elected married-filing-separately status. After the filing deadline passed, the couple responded that they wanted to file jointly, causing the CPA’s original decision to be incorrect. Facing additional tax liability due to the incorrect filing status, the couple brought a claim against the CPA for failing to advise them of the missing information.

Just like a journalist uses the five Ws to report on a breaking news story, CPAs can leverage the five Ws to respond to incomplete information while mitigating the risk of a professional liability claim.

INCOMPLETE INFORMATION FROM CLIENTS

Who is responsible for what?

When faced with an unresponsive client, or one who is unable or slow to provide information, remind yourself of each party’s actual responsibilities. Clients are responsible for providing complete and accurate information in a timely manner, and the CPA is responsible for using that information to prepare the tax return. Outlining responsibilities in your engagement letter can help ensure that the client understands and accepts their responsibilities.

What information is missing?

CPAs are also responsible for exercising professional judgment when information provided by a client appears to be incorrect, incomplete, or inconsistent — either on its face or on the basis of other facts known to the CPA. Professional liability claims often arise when a CPA fails to respond to these items.

When information is missing, or if questions arise related to information already provided, send a follow-up request to the client. Identify exactly what information is missing or what questions you have and the specific date by which a response is needed. Explain the potential consequences of the client’s failure to respond by the specified date, such as penalties and/or interest for an untimely filing. It may help to include how the missing or questionable information affects the return. For example, is it expected to be material, or will it determine the tax treatment of a material item?

Inquiries should be made in writing and as soon as you become aware of the incomplete information. Prompt, written communication helps limit professional liability risk because it shows that the CPA recognized the issue and responded proactively. If a claim arises and the CPA’s inquiries were not documented, it may be more challenging to demonstrate the client’s responsibility for the late filing.

Where can you use reasonable estimates?

In some instances, tax practitioners may use a reasonable estimate if it is not practical to obtain exact information. However, CPAs run the risk of crossing from professional judgment to professional exposure when they accept unsupported assumptions, ignore facts calling the estimate into question, or prepare the estimate themselves without client input and approval. The AICPA Statements on Standards for Tax Services ¶¶2.4.2 through 2.4.7 can help CPAs differentiate between reliance on reasonable estimates and impermissible guesswork.

Regardless of whether the CPA or the client prepares the estimate, there are key aspects to document in writing. These include why the exact data was unavailable, what methodology was used to develop the estimate, client approval to use the estimate, and the client’s understanding and acceptance of potential consequences.

When is the return due?

If timelines permit, request and obtain the client’s permission to extend the return to allow them more time to supply the missing information or respond to your inquiries. Remember that an extension provides more time to file, not more time to pay, so have the client provide in writing the amount that they want to pay with the extension.

After extending the return, if the client’s information is still incomplete, consider whether a reasonable estimate can be used to file now and amend later or whether you can sign the return with a disclosure.

If the incomplete information cannot be reasonably estimated and is still missing, document in writing to the client:

• What information was requested and is still incomplete;
• The CPA’s attempts to follow up for the information;
• That the incomplete information prevents you from timely filing the return;
• Potential consequences of late filing, late payment, and inaccurate returns; and
• That remaining compliant with tax filings is the client’s responsibility.

If the client insists on filing without the missing information or does not want to make the necessary disclosures, consider withdrawing from the engagement.

INCOMPLETE INFORMATION FROM AUTHORITIES

Who is affected?

When Congress passes a new tax law or a court case sets a new precedent, the first step in response is identifying which clients may be impacted. Proactively communicating changes in tax law, especially when definitive guidance is not yet available, puts clients on notice of issues and opportunities that may later require their involvement on how to proceed. Maintaining a record of who was notified, along with a written record of the communication, helps deflect future questions about whether a client was properly advised.

What will the firm’s approach be?

Next, the firm needs to determine the tax position or positions it is willing to take regarding the issue at hand. Establishing a set “menu” of options helps ensure team members’ professional advice is consistent with both the firm’s risk tolerance as well as each client’s. Some clients may prefer conservative positions, while others may be willing to accept more risk. Clearly outlining available options allows clients to make informed decisions aligned with their own risk preferences.

Where (and how) is the decision-making process documented?

Once the firm establishes the tax position(s) it is comfortable with, present those options to each affected client in writing. A template email or memorandum can help accomplish this efficiently and consistently. The contents might include:

• The available options;
• The potential consequences of each option, including penalties;
• Available opportunities to mitigate risk, such as disclosure in the tax return; and
• A clear reminder that the client is responsible for deciding how to proceed.

It is equally critical to document the client’s final decision in writing. Retain all options presented as well as the client’s chosen course of action in the engagement file.

When can the CPA rely on advice from third parties?

In complex or uncertain situations, the CPA or the client may seek input from other professionals, such as tax attorneys. While third-party advice can provide valuable insight, reliance on that advice comes with its own risks. When a CPA incorporates the work of others into a deliverable, the CPA may be held liable for deficiencies in the third party’s work.

Under Treasury Circular 230, Section 10.37(b), Reliance on Advice of Others, a CPA may rely on third-party advice if the reliance is reasonable and made in good faith. Documenting your evaluation of the third party’s credibility and the assumptions underlying their advice can help mitigate exposure. The November 2022 Professional Liability Spotlight column, “Working With Third-Party Experts,” provides further guidance on this topic.

WHY DOES DOCUMENTATION MATTER?

Documentation is at the core of each step when responding to incomplete information. Contemporaneous records are often the strongest evidence of conversations between the client and the CPA. Documentation also demonstrates that the practitioner adhered to the professional standards, that the client understood and accepted its risks, and that the client ultimately decided how to proceed.

W IS ALSO FOR WINNING

Incomplete information does not have to lead to incorrect decisions. Using the five Ws can transform uncertainty into a structured process that protects both the client and the firm — and take the CPA from asking, “Why me?” to confidently saying, “Wow — I handled that!”

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Hotly litigated

No. 3: During FY 2025, accuracy-related penalties were the third-most-litigated issue in Tax Court for Form 1040 taxpayers and the most-litigated issue for non-Form 1040 taxpayers.

Source: National Taxpayer Advocate, Annual Report to Congress, 2025.

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Kathleen Koehl, CPA, is a risk control consultant at CNA. For more information about this article, contact specialtyriskcontrol@cna.com.

Continental Casualty Company, one of the CNA insurance companies, is the underwriter of the AICPA Professional Liability Insurance Program. Aon Insurance Services, the National Program Administrator for the AICPA Professional Liability Program, is available at 800-221-3023 or visit cpai.com.

This article provides information, 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 recommendations of a retained professional. Such consultation is recommended in applying this material in any particular factual situations.

Examples are for illustrative purposes only and not intended to establish any standards of care, serve as legal advice, or acknowledge any given factual situation 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 services may not be available in all states and may be subject to change without notice.