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Tax Engagement Letters

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#1
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I have been using AON's tax engagement letters for years, and I am honestly tired of them being 10 pages long. I want to simplify and my first round still has me exceeding six pages after, but really all I am doing is using bullet points instead of the cleaner AON format. AICPA just adopts what AON publishes.

Basically what I want is Firm responsibilities, Client responsibilities ("you are responsible for everything but poor or incorrect advice from us" and "you agree to provide all deliverables no later than 45 days before the original or extended due date of a return" type thing), and that the engagement remains in full force and effect until 1) at least 45 days written notice is provided and 2) unbilled or unpaid fees are paid. I am tired of modifying them every single year.

Anyone have short engagement letters they are willing to share? I want four pages at most.
 

#2
CathysTaxes  
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I so agree with you. The Drake engagement letters are way too many pages. I want a checklist, a list of those questions we have to ask, and then list all of the W2s, 1099s, etc that they had last year, so they can make sure they have them.

Oops stupid me. Engagement letter not organizer.
Last edited by CathysTaxes on 3-Oct-2022 2:34pm, edited 1 time in total.
Cathy
CathysTaxes
 

#3
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This is a main focus of mine after 10/15, but, as much as a voluminous EL can feel like a pain, it won't feel like a pain if you ever have to rely on the interpretation of a bullet point by a judge that could have been more clearly stated.

Most clients don't read them anyway. You could have a 25pg letter and they'd sign them blindly just as well as a 3pg one.
~Captcook
 

#4
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CaptCook wrote:This is a main focus of mine after 10/15, but, as much as a voluminous EL can feel like a pain, it won't feel like a pain if you ever have to rely on the interpretation of a bullet point by a judge that could have been more clearly stated.

Most clients don't read them anyway. You could have a 25pg letter and they'd sign them blindly just as well as a 3pg one.


Very true, so at minimum I want a single document that can last until I receive written notice of disengagement from client or I provide to them. I made changes and I'm still right at 8-9 frickin' pages.

The AON risk management seminars have made me afraid of not including EVERYTHING they suggest, not to mention what my lawyer decided to add! Which is rather funny given they are also a client. :roll:
 

#5
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CathysTaxes wrote:Oops stupid me. Engagement letter not organizer.


Same story for questionnaires/organizers. While mine utilize conditional logic, they can still be 90+ questions that a client has to answer. I do know TaxDome is making strides to automatically populate identical fields from prior organizers/questionnaires, but still, I have up to 180 questions based on how they answer things!!
 

#6
smtcpa  
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Mine is 4 pages:
https://www.dropbox.com/s/4adagjut0g16k ... .docx?dl=0

...and I took it from Camico's template which is 6.

https://www.dropbox.com/s/ive6piliqtx0u ... 1.doc?dl=0

(I hope the links work)
 

#7
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CornerstoneCPA wrote:
CathysTaxes wrote:Oops stupid me. Engagement letter not organizer.


Same story for questionnaires/organizers. While mine utilize conditional logic, they can still be 90+ questions that a client has to answer. I do know TaxDome is making strides to automatically populate identical fields from prior organizers/questionnaires, but still, I have up to 180 questions based on how they answer things!!



I just e mailed you a few 1 pagers that I use.
 

#8
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If I were a client and not a tax pro, I would probably be just as guilty of not reading long engagement letters.

"Well, I guess I'm signing my life away here but I need my taxes done, the preparer seems like a decent person, and I really have no choice".
 

#9
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The ones that read them usually have questions or want to change them.

I'm tryin' to make mine longer. :)
 

#10
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I'm curious if my lawyer client has actually read my engagement letter in full. In theory he should have at least once since he modified one of them, and wrote 3-4 additional pages for mandatory arbitration and other legal jargon that applies to ALL of my engagement letters. But I do wonder if he reads it year-over-year to see what I may have added or removed. I know he laughs while commenting about having to sign to his own legal terms every year.
 

#11
Taxaway  
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For those who have websites, how about a short version to give to clients with a link to the full version in all its legal glory posted on your website. The shorter one would say it is incumbent on the client to read it if they wish but constitutes public disclosure and acceptance by signing the shorter one. Something similar, I have my business policies posted and in my seasonal email and client engagement letter, make reference to it as an annual disclosure.
 

#12
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Interesting concept, I sent my lawyer an e-mail asking if he thinks I could get away with it or if it would create more havoc than it saves.
 

#13
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Hmm. Not sure about giving client a short version and putting the long version on a website. That sounds rather too close to signing the forms at the doctor that says you have been provided with the HIPAA and financial disclosures. Doing that just as you’re going in for a medical procedure has always irritated me.
 

#14
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I like the concept, but what stood out was a claim that the terms were modified. That is exactly what my lawyer confirmed in his opinion as a potential issue.
 

#15
MikeH  
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Here's what I use. It's 2 pages. My practice (what's left of it...I'm slowly retiring) has always been as a CFO/controller, etc. for small businesses, and, as such, I'm at their facilities frequently and probably have a closer personal relationship with them...

Dear [Client name]
Thank you for giving me the opportunity to provide tax services to you. I appreciate your trust in me and look forward to preparing your tax return. Both the IRS and the California Board of Accountancy have regulations regarding tax preparers. This letter contains important information regarding the preparation of your tax return; it outlines the responsibilities that each of us has in this engagement; and it outlines certain policies and procedures of mine that you should be aware of. When you provide me with information and data to start the preparation of your return, you are agreeing to all the terms outlined in this letter.

My fee for preparation of your 2020 Federal and California tax returns is $700. If you have W2s from a second or third state, the fee may increase from $25 to $50 more. The fee is payable upon presentation of the tax return to you, or upon receipt of your Federal refund.

During tax season, my office Hours are 9 a.m. - 6 p.m., Monday - Thursday, and Friday 9 - 1. during the summer and fall, I will make Monday and Friday appointments if I'm around.

I have enclosed a "CheckList" and some schedules that show last year's data to help you gather your paperwork. (Accountants call this an "Organizer.") You might use this organizer:
• as a checklist to make sure you get all of your paperwork; or
• to enter your information here, but you don't need to enter info here if you have your W2s,
1099s, bank statements, etc...
• don't use it if you don't want to...

Please focus on items that we used last year; these have been highlighted in color. Some of the lines in the organizer show last year's amounts for reference only. If you have provided me this information in a spreadsheet in the past, please continue to do so. If you need me to e-mail you last year's spreadsheet, or, if you would like to start sending me your info in a spreadsheet, please let me know.

Please note that the IRS and the US Treasury Department have very strict rules regarding disclosure of Foreign Bank accounts, Foreign assets, and Foreign income. The IRS requires that you disclose: 1) any interest earned from a foreign bank or securities account,
2) if you were an authorized signer for a foreign bank or securities account, or
3) if you had any money in a foreign bank account.

The IRS and the California Franchise Tax Board impose penalties on return preparers such as myself, and on the taxpayer (you), for failure to observe due care in preparing income tax returns. In order to ensure an understanding of our mutual responsibilities I ask all clients for whom I prepare tax returns to confirm the following arrangements.

Continued on reverse...


{Client name} Page 2 of 2 October 18, 2022

I will use my professional judgement in preparing your returns. In resolving where the law is unclear or where there are conflicts between the IRS's interpretations of the law and other supportable positions, I will explain the various positions that are available. I will adopt whatever position you request on your return so long as it is consistent with Tax rules, regulations, and interpretations. If a taxing authority should later contest the position taken, there may be an assessment of additional tax plus interest and penalties. I have no liability for any such additional tax, interest, penalties or assessments.

I do not audit or otherwise verify the data you submit, although I may ask you to clarify some of it or furnish me with additional data. Whether I am preparing a business, or personal, return for you, my work is not likely to discover fraud, theft, defalcations, or errors or omissions of any kind.

It is your responsibility to provide me with all the information that you have regarding your tax returns. All information that I receive from you is confidential and is subject to disclosure by me only at your request or as compelled by law or for regulatory matters. You understand that any information given to me is not protected under the Internal Revenue Code or any California law; there is no "CPA - client" privilege. Thus, it is subject to disclosure as compelled by law.

Your returns may be selected for examination by the taxing authorities. In the event of an audit, you will be requested to produce documents, records, or other evidence to substantiate the items of income and deduction shown on a tax return. If an examination occurs, I will represent you if you so desire; however, these additional services are not included in my fee for preparation of your returns.

PRIVACY & RETENTION POLICIES
It is my policy to keep records related to this engagement for 7 years for existing clients, and 4 years for clients who no longer use my services. Former clients' records may be destroyed 4 years after the date of preparation of the last tax return without further notice. However, I do not keep any original client records; these are returned to you when the tax return is given to you. When records are returned to you, it is your responsibility to retain and protect your records for possible future use, including potential examination by any government or regulatory agencies.

I may consult with you by telephone, fax, and E-mail, as necessary, to answer questions. Communications with you made by telephone, fax, and E-mail will normally not be encrypted.

I am committed to respecting your privacy. I do not disclose any information about my clients to any third party. The only exception to this is Drake Software, Franklin, North Carolina. Drake provides the software that I use to prepare your return, and Drake is the company that actually e-files your return with the IRS, so I electronically transfer your return to them when it is ready for e-filing. I also occasionally get support from them in the preparation of returns, and I may transfer your return data to them while working on an issue. All of Drake's personnel are U.S. based. Furthermore, under Section 54.1 of the California Board of Accountancy Regulations and Section 7216 of the Internal Revenue Code, I am generally prohibited from disclosing client information to non-affiliated third parties except under the following circumstances:
• Complying with a validly issued subpoena or summons;
• Disclosures made in response to an official inquiry from a governmental agency;
• Disclosures made in connection with a proposed sale or merger of my professional practice;
• Other disclosures mandated or permitted under Section 54.1 of the California Board of Accountancy Regulations.

LICENSING & REGULATION
As a CPA, I am licensed by the California Board of Accountancy. The Board may be reached at 916/263-3680 or online at http://www.cba.ca.gov.

I appreciate this opportunity to serve you. If you have any questions or need any additional information, please call. I look forward to working with you. Thank you.
Mike Hartfield
Canyon Country, CA & Bullhead City, AZ
CPA in California
Office: 661/309-4681 Cell: 818/433-5359
 


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