I appreciate the opportunity to work with you. This letter is to confirm and specify the terms of my engagement as a Certified Public Accountant with you and to clarify the nature and limitations of the services in which I will provide. In order to ensure an understanding of our mutual responsibilities, I ask all clients for whom returns are prepared to confirm the following arrangements by signing and returning this letter to my office at the earliest convenience. The engagement between you and my firm will be governed by the terms of this letter.
I will prepare your 2019 federal income tax return and income tax returns for the state and local taxing authorities in which you deemed yourself a resident in 2019. You understand that your income tax returns will be electronically filed through a secured third party filing service. You may opt out of electronic filing if you so choose. This engagement pertains only to the 2019 tax year, and my responsibilities do not include preparation of any other tax return years that may be due to any taxing authority. I am responsible for preparing only the returns referenced above. If you have taxable activity in a state or other taxing authority other than that referenced, you are responsible for providing me with the names of the applicable states and local tax authorities and all information necessary to prepare these returns. If you operate a business, I am not responsible for advising you on nexus in other states or sales and use tax obligations of the company unless specifically engaged to do so. You are responsible for determining your filing obligations including, but not limited to, income, franchise, sales, use, room occupancy, property or unclaimed property taxes. I will prepare the above referenced tax returns solely for filing with the Internal Revenue Service (IRS) and state and local tax authorities as identified above. Our work is not intended to benefit or influence any third party, either to obtain credit or for any other purpose. You may be required to make quarterly estimated tax payments. I will calculate these payments based on information provided and have no obligation to update recommended payments after the tax return is prepared. Contact me if you want these estimates updated.
Certain individuals may be required to electronically file Form 114, Report of Foreign Bank and Financial Accounts (FBAR) with the U.S. Department of the Treasury. Failure to comply with the filing requirements may result in significant civil and criminal penalties. Unless otherwise specifically agreed in writing, I will not prepare, file, or provide assistance with this form. However, it is your responsibility to inform us if you hold an interest in assets in a foreign country and provide the income generated from those assets. If you would like to add Form 114 to this engagement, please use the Comments or Additional Requests space provided below.
Unless otherwise noted, I will perform our services in accordance with the Statements on Standards for Tax Services (“SSTS”) issued by the AICPA and U.S. Treasury Department Circular 230. It is my duty to perform services with the same standard of care that a reasonable income tax preparer would exercise in this type of engagement.
I will prepare the returns based upon your filing status and dependents as reflected on your tax returns from last year. If there is a change, please inform me as soon as possible. I will prepare the returns from information which you will furnish to me. It is your responsibility to provide all the information required for the preparation of complete and accurate returns. Items of income, deduction and credit provided by you must be able to be substantiated by you with receipts, cancelled checks or other documents upon request. If filing as “Head of Household (HOH)”, you represent that you paid more than half the cost of keeping up your home and qualify to claim HOH. You represent that any children or other dependents claimed on your return reside with you or if not living with you, you have an active Form 8332 signed by the custodial parent permitting your dependency exemption. You are responsible for reporting all virtual currency transactions (trading, mining, lending, paying for services etc.) and ensuring that personal expenses, if any, are segregated from business expenses. If virtual currency transactions are not provided, then you represent that there have been no virtual currency transactions during the year. You represent that the information you are supplying is accurate and complete to the best of your knowledge and that expenses such as, but not limited to, meals, travel, business gifts, charitable contributions (especially if over $250), dues and memberships, and vehicle use are supported by records as required by law. You represent that if any Forms 1099 are required to be filed, you have filed or will file these forms. If claiming rental or business activities as not passive, you maintain contemporaneous records of time spent supporting your position. The IRS requires that formal records of business related deductions, such as automobile mileage and business promotion be maintained so as to support the nature and deductibility of such expenses. Your signature on this letter confirms that I have advised you of the record keeping requirements. In the event I or you are assessed additional tax, penalties and interest due to my reliance on inaccurate, incomplete, or misleading information you supplied to me (with or without your knowledge or intent), you will indemnify me, defend me, and hold me harmless as to those penalties and assessments.
I will furnish you with questionnaires and/or worksheets to guide you in gathering the necessary information to prepare your return if I believe it will be helpful or it is available upon your request. Your use of such forms will assist in keeping pertinent information from being overlooked. I have not been engaged to and will not prepare financial statements. I will not audit or otherwise verify the data you submit. However, it may be necessary to ask for clarification of some of the information you provide. My work in connection with this engagement does not include any procedures designed to discover errors or other irregularities, should any exist and cannot be relied upon to disclose errors, fraud, or other illegal acts that may exist.
If the tax returns prepared in connection with this engagement are filed using the married filing jointly filing status, both spouses are deemed to be clients of the firm under the terms of this Agreement. Both individuals acknowledge that there is no expectation of privacy from the other concerning my services in connection with this Agreement. I am at liberty to share with either of you, without prior consent of the other, documents and other information concerning the preparation of your tax returns.
The law provides various penalties that may be imposed when taxpayers understate their tax liability. You acknowledge that any such understated tax, and any imposed interest and penalty thereon, are your responsibility, and that I have no responsibility in that regard. If you would like information on the amount or circumstances of these penalties, please contact me. Your returns may be selected for review by the taxing authorities or you may receive a notice requesting a response to certain issues on your tax return. If this occurs, any proposed adjustments by the examining agent are subject to certain rights of appeal. In the event of such government tax examination or inquiry, I will be available upon request to represent you or respond to such inquiry. I will render additional invoices for these services and expenses incurred or include it with invoices for other services provided later.
You are responsible for maintaining an adequate and efficient accounting system, for safeguarding assets, authorizing transactions and retaining supporting documentation for those transactions. You should maintain copies of all the documents, canceled checks and other data that form the basis of income, deductions and credits for a minimum of seven (7) years. These may be necessary to prove the accuracy and completeness of the returns to a taxing authority. You have the final responsibility for the income tax returns and, therefore, you should review the efile authorization forms or tax returns carefully before you sign them. I will provide you with a copy of your final returns for review prior to electronic transmission. I cannot transmit any return until I have the appropriate signed authorizations. You agree to review and examine the tax returns carefully for accuracy and completeness. If you find an error or misstatement I will make the necessary corrections. In the event that your returns are not e-filed, you will have final responsibility for mailing your returns to the applicable taxing authorities.
I will use professional judgment in resolving questions where the tax law is unclear, or where there may be conflicts between the taxing authorities’ interpretations of the law and other supportable positions. There may be situations where I am required by law to disclose a position on a tax return. I am not responsible for positions taken by other preparers of documents necessary for the preparation of tax return such as Schedule K-1 or on previous years returns prepared by another firm or tax preparer.
I will provide accounting and/or research services as determined necessary for preparation of the income tax returns. Services of this nature will be included with the billing for your tax return. I am also available upon request (via telephone, conference or email) throughout the year to advise you on the tax implications of financial transactions, tax law changes, changes in income or any other questions you may have. My services may consist of tax research, tax projections and planning, consulting or other professional services provided by Certified Public Accountants. I will render additional invoices for these services incurred or include it with invoices for other services provided later as deemed necessary at my standard hourly rate.
It may become necessary to apply for an extension of the filing deadline if there are unresolved issues or delays in processing, or if I do not receive all of the necessary information from you on a timely basis. All taxes owed are due by the original filing due date. To the extent you wish to engage my firm to apply for extensions of time to file tax returns on your behalf, you must notify me of this request in writing. Additional charges will apply for such services.
My professional fee for the services outlined above is not contingent on the results of my service nor on the completion of services if you or I choose to terminate this engagement in writing. Rather, my fees for this engagement, including tax planning, preparation of your returns and any other services will be based on a number of factors including, but not limited to, the time spent as well as the complexity of the services I will perform. My standard hourly rate is $150.00. In addition, you agree to reimburse me for any out of pocket costs incurred in connection with the performance of my services. I highly recommend that you fill out any worksheets and provide all necessary documents and answers to questionnaires in a timely manner (via telephone, mail, or email) as this material may be time sensitive. The more information you provide may decrease your tax and decrease my time and fee. I may require a retainer for services, which will be requested under separate cover.
All invoices are due and payable upon presentation. My invoice for fees may be rendered each month as work progresses, at the completion of a service or at the end of a calendar period. Invoices unpaid 30 days past the billing date may be deemed delinquent, and are subject to an interest charge of 1.5 % per month. This is an Annual Percentage Rate of 18 percent. Additionally, late payments, missed payments, or other defaults on your account may be reported to credit bureaus. I reserve the right to suspend my services or to withdraw from this engagement in the event that any of my invoices are deemed delinquent. In the event that any collection action is required to collect unpaid balances due, you agree to reimburse me for the costs of collection including attorney fees.
If you or I elect to terminate my services, my engagement will be deemed to have been completed upon written notification of termination (including email sent), even if I have not completed your return. For these purposes, any nonpayment, inability to sign the return due to an unreasonable tax position taken by you or refusal to make any required disclosures, non-response by you of information requested (among other things) will constitute a basis for my election to terminate my services. Additionally, you will be invoiced for the time or services performed prior to our termination.
The parties to this engagement agree that any dispute that may arise regarding the meaning, performance or enforcement of this engagement, except for any action by me for the collection of fees and associated expenses in regards to this engagement, will (prior to resorting to litigation) be submitted to mediation, and that they will engage in the mediation process in good faith once a written request to mediate has been given by any party to the engagement. Any mediation initiated as a result of this engagement shall be administered within the County of Norfolk, State of Massachusetts, by American Arbitration Association, according to its mediation rules, and any ensuing litigation shall be conducted within said county, according to Massachusetts law. The results of any such mediation shall be binding only upon agreement of each party to be bound. The costs of any mediation proceeding shall be shared equally by the parties.
Any litigation arising out of this engagement, except actions by me to enforce payment of my professional invoices, must be filed within one year from the completion of the engagement, notwithstanding any statutory provision to the contrary. My liability relating to the performance of the services rendered under this letter is limited solely to direct damage sustained by you. In no event shall I be liable for the consequential, special, incidental, or punitive loss, damage, or expense caused to you or to any third party (including without limitation, lost profits, opportunity costs, etc.). Notwithstanding the foregoing, my maximum liability relating to services rendered under this letter (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the fees received by me for this engagement. The provisions set forth in this paragraph shall survive the completion of the engagement.
In the event that I am or may be obligated to pay any cost, settlement, judgment, fine, penalty, or similar award or sanction as a result of a claim, investigation, or other proceeding instituted by any third party, and if such obligation is or may be a direct or indirect result of any inaccurate, incomplete, or misleading information that you provide to me during the course of this engagement (with or without your knowledge or intent), you agree to indemnify me, defend me, and hold me harmless as against such obligation.
Notwithstanding anything contained herein, both Certified Public Accountant and client agree that regardless of where the client is domiciled and regardless of where this Agreement is physically signed, this Agreement shall have been deemed to have been entered into in Sharon, Norfolk County, Massachusetts, USA, and Norfolk County, Massachusetts, USA, shall be the exclusive jurisdiction for resolving disputes related to this Agreement. This Agreement shall be interpreted and governed in accordance with the Laws of Massachusetts.
This engagement letter is contractual in nature, and includes all of the relevant terms that will govern the engagement for which it has been prepared. The terms of this letter supersede any prior oral or written representations or commitments by or between the parties. Any material changes or additions to the terms set forth in this letter will only become effective if evidenced by a written amendment to this letter, signed by all of the parties.
If, after full consideration and consultation with counsel if so desired, you agree to authorize me to prepare your personal income tax returns pursuant to the terms set forth above, please execute this letter on the line(s) below designated for your signature(s).
After you receive your copy of this engagement letter, send us the retainer payment along with supporting documentation for your tax return preparation. You should keep a copy of this fully executed letter and documents for your records. If I do not receive from you the acceptance of this engagement letter, in fully executed form, but receive supporting documentation requested therein, then such receipt by me shall be deemed to evidence your acceptance of all of the terms set forth above and we will commence with the tax return preparation process. However, under no circumstances, shall I sign or electronically file a completed tax return until I receive this letter, in fully executed form, with the required signature.
I appreciate the opportunity to be of service to you.
Andrew T. Kofman, CPA, P.C.