Client understanding & acknowledgements?

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#1
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I have developed a three page "Annual Client Acknowledgements & Understandings" template that I am planning on having the strong majority of my clients esign each year. Everyone except for VIPs.

This isn't an engagement letter but rather is focused and sets expectations regarding billing for out of scope work, helping me keep fees as low as possible, and comfort/verification letters.

I feel like this is going to solve a lot of headache and problems as I'll have something to point to later.

Does anyone do anything similar?
 

#2
belle  
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No but I like the idea. Sorta' a condensed engagement letter?
 

#3
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belle wrote:No but I like the idea. Sorta' a condensed engagement letter?


I like to conceptualize it as separate from the engagement letter (and I even state in the wording that its not an engagement letter or promise to provide services).

Really it's just to get everyone on the same page regarding some pretty simple core concepts that are essential to a smooth-running relationship between a client and a tax firm.
 

#4
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We do this.

We make all of our clients check a box on an organizer that they have read about, understand, and agree to our terms and expectations.

They don't read it, and then they are still surprised when we give them extension vouchers and added fees, but they agreed to it.


EDIT: Not only that, but we nag our clients in nearly all of our communications with them:

"Do this". "Do that". "If you don't do this, this will happen". If you can't get us this by a certain date, that will happen". "There will be an additional fee". "Please make sure you have a written log, or else." "Please note that if you don't do this by then, you will owe penalties and our fee will be higher". "It does not appear as if you are paying for your medical insurance through your s corp". "We won't have the bandwidth to help you if you don't meet this date". "What? You want another change? OK, but there will be an additional fee". "I notice that you contributed to a ROTH IRA but you have no earned income, in our defense, we warned you for the last two years in a row that you couldn't do this". "I see you didn't check the box indicating whether or not you have foreign bank accounts and now it's 2 days to the extension deadline".

I'm not kidding. Most of our correspondence is warning and nagging clients. The bulk of my job is nagging, disclaiming, warning, and charging extra. Mostly nagging.

Sorry for the rant/hijack. I was just wondering if it were only us, and I think it is related to the expectations subject. The additional expectation disclaimer does not help very much (unless they try to blame us - but very few actually try to do that and we fire them when they do".
 

#5
Frankly  
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ItDepends wrote: The additional expectation disclaimer does not help very much (unless they try to blame us - but very few actually try to do that and we fire them when they do".

If clients don't read the writings and don't happily pay the extra fees, then what's the point in writing them? How exactly do the engagement/ acknowledgement/ understanding/ disclaimer letters make life better?
 

#6
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I send out an "annual update" concerning significant changes, fee structures, and other pertinent information. I've never bothered tracking how many actually read it but I suspect most do--I cannot recall anyone arguing with me about anything contained in the updates.

Otherwise, expectations are set out in the engagements. I make my position on comfort letters very clear, including a statement that it should be deemed negligence for a tax return to be utilized in connection with obtaining credit since tax law does not force tax returns to match actual income or cash flow.
 

#7
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Frankly wrote:If clients don't read the writings and don't happily pay the extra fees, then what's the point in writing them?


Clients will esign this as well (at least the doc I mentioned in the OP, I can't speak for others).

Failing to read the language in a document or contract does not absolve the signor of the document or contract of the terms therein or agreement to.

It will remove the excuse from the client's arsenal that billing practices were not communicated or made clear to them. That's the point. Without that excuse, there really is no reasonable excuse on the client side concerning billing.
 

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CornerstoneCPA wrote:I make my position on comfort letters very clear, including a statement that it should be deemed negligence for a tax return to be utilized in connection with obtaining credit since tax law does not force tax returns to match actual income or cash flow.


Yes, but I'm getting out ahead of the issue by making it clear that I can't provide comfort or verification letters. I'll provide my template provides zero assurance and merely states my role if the bank or lender insists, but that's it.

I want to make the client aware of this issue annually, not when they're in the middle of trying to obtain a loan, as tension and emotions often run high when they're in the middle of that process.
 

#9
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This is the applicable section of the template I've developed. I wrote all of this in one pass last night and need to compare it to my notes on comfort letters, therefore it may change. I'm pretty happy with everything except paragraph 3, which I plan to rework soon.

Feel free to let me know your thoughts or even to adapt for your own purposes.

Comfort Letters & Verification Letters

Certain banks, lenders and other third parties may sometimes request that you obtain what is commonly referred to as a “comfort letter” or a verification letter from a CPA. These letters frequently request that the CPA attest to or provide assurance regarding assets and/or income, or confirm assets and/or income. As these letters could be used in the event of default to attempt to shift liability from the institution requesting the letter to the CPA firm who wrote the letter, both the AICPA and many professional liability insurance carriers strongly dissuade tax practitioners from writing such letters.

As a tax compliance and consulting firm, we do not provide audit, attest or assurance services. These engagements are often very expensive as they must incorporate rigorous testing and confirmation procedures. Simply put, they take a material amount of a firm’s professional time and a formal opinion is issued according to AICPA professional standards. Contrary to the way many banks and lenders frame these requests, they are not “simple” nor “ordinary”.

Realistically, many banks and lenders do not need these letters as there is almost always more than one acceptable way to verify or confirm assets or income. However, rarely will they tell you this.

If a bank or lender insists on a letter from us, we are able to provide a signed letter on firm template. This letter will not provide any assurance nor verify income nor assets, and it will explicitly state this fact. The letter will also state our role, as tax return preparers and tax advisors, and expand on that role and the suitability of tax returns for lending and non-tax decisions. This is the only letter we are able to provide.
 

#10
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^^I like it

I also get ahead of this in advance and have very similar things to say about it (as we all have discussed it several times).
 

#11
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Finalized that section. It's very early, but the few clients who have signed it did so without issue. I like that this document helps me get ahead of certain issues, including comfort letters. And I like to believe that the way I explained that issue helps the client understand our side of things much better. Feel free to use in your own practice...and forward monthly license fees. :)

Comfort Letters & Verification Letters

Certain banks, lenders and other third parties may sometimes request that you obtain what is commonly referred to as a comfort letter or a verification letter from a CPA. These letters frequently request that the CPA attest to or provide assurance regarding assets and/or income, or confirm assets and/or income. As these letters could be used in the event of default or lawsuit to attempt to shift liability from the institution that requested the letter to the CPA firm who wrote the letter, both the AICPA and many professional liability insurance providers strongly dissuade tax practitioners from writing such letters.

As a tax compliance and consulting firm, we do not provide audit, attest or assurance services. These engagements are often expensive as they must incorporate testing and confirmation procedures. Simply put, they take a material amount of a firm’s professional time and a formal opinion is issued according to AICPA professional standards. Contrary to the way many banks, lenders and other third parties frame these requests, they are not “simple” nor “quick”.

Almost always, banks, lenders and third parties have more than one acceptable method at their disposal to verify or confirm an individual’s assets or income. However, rarely will they tell you this. They like to request a letter from a CPA because of the aforementioned liability shift and because it is the easiest and most convenient option for them.

If a bank, lender or other third party insists on a letter from us, we are able to provide a signed letter on firm letterhead. This letter will NOT provide any assurance regarding income or assets, and it will explicitly state this fact. The letter will also state our role, as tax return preparers and tax advisors, and expand on that role and the suitability of tax returns for lending and non-tax decisions. This is the only letter we are able to provide.
 


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