To read or not to read....

So, we all know that the dreaded end of the year and tax season is upon us.  Now before we get into discussing what we will need from our clients I would like to discuss something we provide our clients.  What I am referring to is that multiple page letter that we ask you to read and sign the last page and return to us a signed copy.  This letter is called the engagement letter.

We know this letter is quite lengthy with lots of information and is…well…boring.  However, this letter is quite important.  This letter is essentially a contract between Pusey, Hatter, & Associates, LLC and the client for the engagement for which we are being hired to be of service.  But it provides so much more information.

Take for instance our individual income tax return engagement letter.  Not only does it spell out what the client should expect from us, and what we will expect from the client, it also provides insight as to various Internal Revenue Service (IRS) requirements to keep our clients and our firm out of trouble.

This includes such things as:

·         Electronic filing is required unless the taxpayer signs a waiver to the fact that they do not wish to electronically file.

·         A discussion of the required reporting of having financial interest or authority over financial accounts in a foreign country by persons or entities subject to the jurisdiction of the United States.

·         A discussion of what constitutes business or supplemental taxable activities.

·         A discussion of tax implications revolving around virtual currency or cryptocurrency.

·         A discussion of required disclosures if a position is taken on a return that we believe has less than a 50% chance of passing on examination.

The above are only a few of the important items that are discussed in our engagement letter. When a client signs the engagement letter, they state to us that they have read and understand everything that is stated in the letter.  Therefore, during the engagement we may not ask the client directly or inform the client directly of some of the items that were communicated in the engagement letter.

Thus, it is important for the client to read and understand the engagement letter in its entirety for us to prepare a correct and timely income tax return.  The client then needs to sign the letter and either return a full copy to us, or the signature page.  Also, note if we are preparing a joint income tax return we will need both taxpayers’ signatures. Without a signed engagement letter we are under no obligation to prepare a client’s engagement.