Engagement Letters: Six Things Tax Pros and CPAs Should Include in Every Letter

Engagement Letters: Six Things Tax Pros and CPAs Should Include in Every Letter


Hi, today we’re covering something that
every practitioner has to do frequently, which is writing an engagement letter.
Getting your engagement letter right is a vital start to every case and will
give both you and your client peace of mind. With that in mind, let’s take a look
at six things you should include in all of your engagement letters. Number one- a
clear introduction. Your introduction should be simple, to the point. You
really only need to quickly summarize the purpose of the letter, which is to
define important aspects of the engagement, such as scope and pricing. Be
sure to also write in a way that makes sense to your clients. This applies to
the entire document. Just because an engagement letter is
legally binding doesn’t mean that it needs to sound like nonsensical fine
print. Number two- services offered. An engagement letter should state the
services you will be providing as part of the engagement. The more specific you
can be, the better. For instance, stating that the engagement
will include preparing and submitting a doubt as to liability offer and
compromise, is far more effective than saying you will aid the client in
resolving their tax debt. Number three- the term of the engagement.
Your engagement letter should state that the engagement will end after a specific
time, such as 12 months, or until services are completed, whichever is first. The
last thing you want is to be responsible for a case with no end in sight and no
easy way to get out of it. If the case hasn’t been resolved at the end of the
term and you want to continue to represent a client, you can always start
a new engagement. Number four- clear pricing. The engagement letter is the
perfect place to make sure that your client understands their financial
responsibilities. You should include relevant, specific information, such as
the total your client can expect to pay, your practice fees due upfront, available
discounts, potential penalties, and any expenses that they can expect to pay the
IRS. It’s also a good idea to include language explaining that in rare
extraordinary circumstances, the engagement will prove to be
significantly more complicated than expected. In such cases you can reserve
the right to adjust your fees to reflect the additional time or expertise
required, promising to notify the client promptly if their case will require such
an adjustment. Number five- termination and refund. If you find that
it’s in your best interest to terminate the agreement early for whatever reason,
it’s nice to have an escape plan built into the engagement letter.
If your firm offers a refund for any unperformed services, be sure to make the
terms of the refund clear as well. number six fixes two other problems. Your
engagement letter should be personalized to you and your practice. That means you
have the opportunity to address the needs of your practice in the language
of the engagement letter if you find that certain things tend to break down
in your relationship with your clients. Consider building provisions that
address those problems in your engagement letter. For instance, if you
were constantly having to wait weeks for your client to respond with needed
information, then write in a communications clause. If you are
insistent that the client defer all contact with the IRS to you and others
within your practice, make that clear in the engagement letter. The engagement
letter is the place to put all of your expectations down in writing. Well that’s
all we have for you here today. Thanks for watching. Let us know the comments
that what you think is vital in an engagement letter. And of course, don’t
forget to like and subscribe. We’ll see you next time. You know it’s easier than
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