Forza CPA, PLLC (“firm,” “we,” “us,” or “our”) is pleased to provide tax return preparation services to you, as described in Your Service Schedule.
Please read this Letter of Engagement, the attached Terms and Conditions Addendum, and any other attachments incorporated herein (collectively, “Agreement”). This Agreement details the nature and limitations of the services we will provide, the terms of our engagement, and each party’s responsibilities.
We strive to make our tax return process as straightforward and convenient as possible for you. Our goal is to minimize any hassle on your end while also making things as efficient as possible on our end. This allows us to deliver your returns expediently, while also bringing a high level of technical expertise and personal service.
What Is the Scope of This Engagement?
This engagement is limited to the professional services outlined in Your Tax Service Schedule. The objective of our services is to assist you with the calculation of your tax due and provide you with forms and schedules we believe are suitable for you to file with the Internal Revenue Service (“IRS”) and applicable state and local tax authorities and sufficient to comply with your tax filing obligations.
We will prepare the tax returns referenced in Your Service Schedule solely to assist you with your tax filing obligations with the IRS and applicable state and local tax authorities.
We will not prepare any tax returns other than those identified in Your Service Schedule, without your written request, and our written consent to do so.
Our engagement does not include any procedures designed to detect errors, fraud, theft, or other wrongdoing. Therefore, our engagement cannot be relied upon to disclose such matters. In addition, we are not responsible for identifying or communicating deficiencies in your internal controls. You are responsible for developing and implementing internal controls applicable to your operations.
Our services are not intended to benefit or influence any third party, including any entity or investment which may seek to evaluate your creditworthiness or financial strength. You agree to indemnify and hold us harmless from any and all claims arising from the use of the tax returns for any purpose other than complying with your tax filing obligations, regardless of the nature of the claim, excepting claims arising from our gross negligence or intentional wrongful acts.
You may request that we perform additional services not contemplated in this engagement letter. If this occurs, we will communicate with you regarding the scope and estimated cost of these additional services. Engagements for additional services may necessitate that we amend the Agreement or issue a separate agreement to reflect the obligations of all parties. In the absence of any other written communications from us documenting additional services, our services will be limited to and governed by the terms of this Agreement.
You have the final responsibility for the filing and content of your tax return(s).
Are These Services Included In This Engagement?
Preparation of U.S. Federal and State Returns
Yes. With this letter, you are engaging us to prepare your U.S. and state individual income tax returns. We will do so with the information you furnish to us in the process described below. If you have taxable income or loss in a state or locality other than your resident state, we will generally prepare your nonresident state or locality returns, as well, unless you indicate in advance that you prefer we not prepare these nonresident filings.
State and Local Filing Obligations
The preparation of any state or local tax return not listed in our Tax Service Schedule is not within the scope of our engagement. You are responsible for fulfilling your filing obligations with any state or local tax authorities, including but not limited to, income, franchise, sales, use, and property taxes or abandoned and unclaimed property. However, if upon review of the information you have provided to us, including information that comes to our attention, we believe that you may have additional filing obligations, we will notify you.
If you are unsure if you have any other filing obligation with other state or local tax authorities, you are responsible for alerting us and requesting assistance. If you do not alert us or request assistance, we will infer that you do not have other state or local filing obligations. You will be responsible for tax due and penalties associated with the failure to file or untimely filing of any form for which we were not engaged to prepare.
Preparation of Certain Dependent Tax Returns
In some cases, a dependent or minor child under your care and supervision may be required to file a U.S. income tax return, state income tax return, and/or International Informational Report (e.g., FinCEN Form 114 (FBAR)). Generally, if you request that we prepare such forms on your dependent’s behalf, we will consider that service to be covered under the current engagement as a “dependent tax filing,” and we will bill the preparation to you based on our most recent tax preparation fee schedule. However, in some circumstances, we may require that the preparation be handled under a separate engagement, with an additional Engagement Letter to be completed by you, the parent or guardian. In that case, we will notify you of the requirement for a separate engagement.
Bookkeeping Services
If we are currently engaged in an ongoing bookkeeping agreement, these services will fall under the scope of our bookkeeping engagement letter.
If we are not currently engaged in an ongoing bookkeeping agreement, we may determine that you require accounting and bookkeeping assistance solely for the purpose of preparing the tax returns. These services are typically outside the scope of tax return preparation and will be performed solely in accordance with the AICPA Code of Professional Conduct. In the event we conclude that such services are necessary to prepare your tax returns, we will notify you of the need for these services and bill you for the required work. You agree to pay for those required services, if applicable.
Tax Planning Services
Unless Your Service Schedule lists Tax Planning, our engagement does not include tax advice which affects the calculation of tax due or the filing of tax forms and schedules for previous or future tax years. However, we may communicate potential tax strategies to you, and you may ask high-level questions of us. It is your responsibility to communicate to us, in writing, any interest in pursuing a tax strategy identified, or if you require more than a cursory response to your question. If you do not request our assistance in writing, we will infer that you do not wish to pursue any suggestion made to you. If you do request our assistance and we agree, we will confirm our understanding with you in a separate agreement prior to proceeding.
We shall not be liable for any forgone tax or other benefits if you fail to advise us of your desire to investigate or pursue any tax strategy communicated to or by us. Any tax advice described in this paragraph and provided to you shall be governed by this Agreement and billed at our standard hourly rates.
Prior-Year Returns
If for the preparation of your current-year returns, you provide us with a copy of your prior-year returns, our review of the prior year’s tax return will necessarily be limited and may not find all errors. We will, however, bring to your attention errors that we do find. Similarly, if you become aware of any information affecting prior year tax returns, please contact us. If an error or information affecting prior year tax returns is discovered by you or us, we will discuss your options with you. If you ask us to prepare amended tax returns, and we agree, we will confirm this engagement in a separate written agreement.
Preparation of Foreign Bank Account Reports (FBARs)
You are responsible for informing us of all foreign financial assets and interests, including any financial interest in, or signature authority over assets, or financial accounts located in a foreign country. If, based on the information you have provided to us, we believe that you have a requirement to file FinCEN Form 114 (otherwise known as a Foreign Bank Account Report or “FBAR”), the preparation of your FBAR(s) will notify you and send a separate Engagement Letter. If you prefer that we not prepare your FBAR(s), you may opt-out by notifying us in writing.
Preparation of Forms 3520 and 3520-A (Foreign Gifts, Foreign Inheritance, Certain Foreign Trusts & Foreign Pensions)
If, based on the information you have provided to us, we believe that you have a requirement to file Form 3520 and/or Form 3520-A, we will notify you and send a separate Engagement Letter. We will prepare those forms in conjunction with your individual tax returns, under the same terms.
Returns for a Spouse Filing Separately
In some cases, it may be determined that individuals who have filed or can file “married filing jointly” should in fact file “married filing separately.” If this is the case, then our firm would require both spouses to have separate paid engagements. Our full fee schedule would apply to both tax returns. Lastly, should the spouses want to discuss their respective tax returns with our firm, then we may require signed consent forms or signed conflict of interest waivers.
Gift Tax Returns
The IRS considers a gift to be any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return. Under federal tax law, certain gifts are taxable and subject to an annual gift tax exclusion amount, which for 2024, is $17,000 per taxpayer. You are responsible for informing us if you have made any transfer of value for which you did not receive full consideration, such as, but not limited to, those made in trust, forgiveness of debt, or the use of property for which no or below-market rent was charged, as these may affect both income tax and gift tax returns. Should you request this additional service, and we agree to provide it, we will send you a separate engagement letter for these services.
Corporate Transparency Act Beneficial Ownership Information Disclosures
Assisting you with your compliance with the Corporate Transparency Act (“CTA”), including beneficial ownership information (“BOI”) reporting, is not within the scope of this engagement. You have sole responsibility for your compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership information. We shall have no liability resulting from your failure to comply with CTA. Information regarding the BOI reporting requirements can be found at https://www.fincen.gov/boi. Consider consulting with legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements and issues surrounding the collection of relevant ownership information.
Administrative Adjustments and Compliance with BBA
If you are or were a partner at any time in a partnership and receive(d) Schedule K-1 (1065), you may receive a Form 8986, Partner’s Share of Adjustments to Partnership-Related Items. Form 8986 is used by partnerships to correct errors on previously filed partnership returns and to provide the IRS and partners with each partner’s share of those tax corrections. Recipients of Form 8986 must report this information and any additional tax due to the IRS on Form 8978, Partner’s Additional Year Reporting Tax, within a specified timeframe.
Our services do not include assisting you with anything pertaining to Form 8986 and/or Form 8978 unless specifically identified in the Engagement Objective and Scope section. If you receive a Form 8986 once our work has begun but prior to the filing of your tax return, you are responsible for alerting us and requesting assistance. Additionally, the impact an adjustment from Form 8986 may have on any state return you have previously filed is unclear and may only be determined with additional research. If you do not alert us or request our assistance, we will infer that you have not received Form 8986 absent other information you provide to us.
Foreign Tax Returns
You may have a filing requirement or tax liability in a foreign country. Generally, you are responsible for determining whether you must file and pay taxes in a foreign country and to comply with any requirements. You acknowledge and agree that we have no responsibility to raise these issues with you and that any foreign filing obligation is not within the scope of this engagement. We do not prepare foreign tax returns.
What Are Your Responsibilities during the Tax Preparation Process?
The responsibilities detailed in this section are not exhaustive, and our services to you may require additional responsibilities not listed.
Timely Information and Clarifications
You must provide all the information required for the preparation of complete and accurate returns. Our team is committed to getting your return done as efficiently as possible, but to do so, we need you to deliver all records and information we request in a timely manner. Failure to do so may result in your inability to file your returns or pay your tax due by the original filing due dates. You are responsible for fully and accurately disclosing to us all relevant facts affecting your returns.
To help you assemble the information needed for your returns, we will provide you with a questionnaire, organizer, and/or other document requesting specific information. Our questionnaires include deadlines for sending us your information, based on the type of return(s) you file and whether you hope to file by the original deadline, by the extended deadline, or after the deadlines.
You are responsible for fully and accurately completing the income tax organizer, including any activities in which you engage outside of the U.S. or your home state. Please know that failure to provide information via completed questionnaires and organizers may require an extraordinary effort on our part, which may be reflected in our fee for service.
If, during the course of your tax return preparation, we determine that additional information or clarifications are needed in order to complete your returns, we will let you know. You are responsible for providing such additional information in a timely manner so that we can prepare your returns efficiently and timely. We will rely upon the completeness and accuracy of the information and representations you provide to us. We will not audit or otherwise verify the data you submit to us, although we may ask you to clarify certain information. Please know that a lack of responses on your part may result in extraordinary follow-ups and efforts on our part, which may be reflected in an additional fee for service.
If you fail to comply with the responsibilities as described in this Agreement, your actions or your inactions may result in economic or other loss to you, such as disallowance of tax deductions or credits claimed, additional tax, penalties or interest assessed against you, loss of administrative rights, or criminal punishment. You will be responsible for any loss suffered by you as a result of your failure to comply with your responsibilities, including any professional fees required to defend or correct changes made to your tax returns or prepare previously unfiled or amend previously filed tax returns.
Reporting All Income
You are responsible for identifying and communicating to us all income earned and received by you from any U.S. or non-U.S. source. This includes income earned from gambling and online wagers, gig or hobby work, and activity for which you should receive a Form 1099-K (online sales) whether or not you actually receive a 1099-K.
Documentation
You are responsible for maintaining adequate documentation to substantiate the accuracy and completeness of your tax returns. Our workpapers do not satisfy your documentation responsibility. You should retain all documents that provide evidence and support for reported income, credits, deductions, and other information on your returns, as required under applicable tax laws and regulations. The IRS recommends that you maintain this documentation for as long as it may be relevant to your taxes.
You represent that you have such documentation and can produce it, if necessary, to respond to any examination or inquiry by tax authorities. You will be responsible for any liability, including but not limited to, additional tax, penalties, interest and related professional fees, resulting from the disallowance of tax deductions due to inadequate documentation.
Personal Expenses
In general, personal expenses are not deductible for income tax purposes. You are responsible for ensuring that personal expenses, if any, are separated from business expenses and that expenses such as meals, travel, vehicle use, gifts, and related expenses are supported by documentation and records required by the IRS and other tax authorities.
Confidentiality for Filers of Joint Tax Returns
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 spouses acknowledge that any tax return information, including supporting documents provided to us, used in the preparation of your joint return, and any communications made to us by either of you in connection with the preparation of your joint return, may ultimately be shared with either spouse, without prior consent of the other.
Digital Assets
There are specific tax implications of investing in digital assets (e.g., virtual currencies such as Bitcoin, non-fungible tokens, virtual real estate, and similar assets). The IRS considers these to be property for U.S. federal income tax purposes. As such, any transactions in, or transactions that use, digital assets are subject to the same general tax principles that apply to other property transactions.
If you transacted in digital assets during the tax year, you may have tax consequences and/or additional reporting obligations associated with such transactions. Depending on the nature or volume of those transactions, a change to the scope of our services may be required. You are responsible for providing us with complete and accurate information, including basis, regarding any transactions in, or transactions that have used, digital assets during the applicable tax year.
U.S. Filing Obligations Related to Foreign Investments and Activities
U.S. citizens and residents generally must report income and activities related to both domestic and foreign assets (worldwide income). You are responsible for fulfilling your filing obligations related to foreign activity where required. U.S. reporting requirements related to foreign activity are very complex. Contact us immediately if you have:
Ownership of, investment in, or officer responsibilities for a corporation, partnership, or other business entity formed under the laws of another country;
Fiduciary, grantor, or beneficiary relationships in connection with an entity formed under the laws of another country;
Ownership of, signature authority over, or control over any financial account held in a financial institution located in another country;
Citizenship or government-approved employment/visa status with a country other than the U.S. (including anyone in your immediate household, or your parents who live outside the U.S.);
Transferred property, including cash, offshore either directly or through the purchase of or investment in an entity formed under the laws of another country;
Received or have legally-recognizable rights to receive property, including cash, from a trust, business, or investment formed under the laws of another country or individual residing in another country;
Conducted business with any entity or person physically located in another country, regardless of whether such business is for-profit, not for-profit, or informal/irregular;
Received property, including cash, or income from a source outside of the U.S. which is not reported on a brokerage statement (such as a 1099-B or similar report); or
Any other activity or economic arrangement which takes place outside of the U.S.
Failure to timely file the required forms may result in substantial civil and/or criminal penalties. You agree to provide us with complete and accurate information regarding any foreign activity in which you have a direct or indirect interest, or over which you have signature authority, during the above referenced tax year.
If you are unsure if you have any other filing obligation related to foreign activity, you are responsible for alerting us and requesting assistance. If you do not alert us or request assistance, we will infer that you do not have foreign activity absent information you provide to us. In any event, you will be responsible for tax due, penalties, and interest associated with the failure to file or untimely filing of any form for which we were not engaged to prepare.
Schedules K-3
If you are a partner or shareholder in certain pass-through entities, you may be required to obtain Schedules K-3, “Partner/Shareholder’s Share of Income, Deductions, Credits, etc. – International,” in addition to Schedules K-1. It is your responsibility to make sure that your pass-through entities are aware of your correct status (as a foreign or domestic partner/shareholder). It is also your responsibility to notify your pass-through entity timely (generally more than 30 days before the due date for the pass-through tax return) of your requirement to receive a Schedule K-3, if you are a foreign partner/shareholder or if you are a domestic partner/shareholder with foreign reporting requirements on your tax returns.
Compensation and Withholding Compliance
If you or your business compensates individuals (including household employees) for services performed, there are various federal, state, and/or local payroll tax and income tax obligations affecting both payor and payee. We will not provide employment, labor, or immigration law advice to you as part of our engagement, including the classification of workers as employees or independent contractors. You should seek the advice of an appropriate professional, such as an employment attorney, to address any classification or employment eligibility questions. You agree to indemnify and hold us harmless for any and all claims related to misclassification or improper eligibility of individuals whom you compensate for services, excepting claims arising from our gross negligence or intentional wrongful acts.
If our service to you includes preparation of Form 1040, Schedule H, we will rely on information provided by you to support your filings and we will not audit or otherwise verify the data you submit to us.
Further, you acknowledge it is your responsibility to both timely comply with all payroll tax and income tax filing and remittance obligations that apply to you, and to maintain all necessary documentation to support those filings and remittances. Such forms are due as early as January 31, and significant penalties may be assessed for late filing, non-filing, or filing of incorrect information. In some cases, penalties may also be assessed against responsible individuals, such as owners and officers, in their personal capacity.
Preparation of these forms and calculation of any withholding amount due (excluding Form 1040, Schedule H where required) is not within the scope of this engagement.
Ultimate Responsibility
You are ultimately responsible for complying with any substantive or procedural tax law which applies to you, and for ensuring your tax returns and any required tax payments are timely received by the appropriate tax authority. Notwithstanding any term of this Agreement, this responsibility cannot be delegated to us.
Our assistance related to your tax return is based upon tax reference materials, facts, assumptions, and representations that are subject to change. We will not update your return after the conclusion of the engagement for any reason. To the extent we provide written advice concerning federal tax matters, we will follow the applicable guidance contained in our professional standards.
You have final responsibility for the accuracy of your tax returns and all schedules. We will provide you with a copy of your draft tax returns and accompanying schedules and statements for review. You agree to review and examine them carefully for accuracy and completeness. Tax authorities impose various penalties and interest charges for non-compliance with tax laws and regulations including failure to file or late filing of returns, and underpayment of taxes. You will be responsible for the payment of any additional tax, penalties, and interest charges imposed by tax authorities.
You have final responsibility for the payment of your taxes in whatever amount ultimately determined. You may choose to have funds automatically withdrawn from a designated account and transmitted when your tax return is electronically filed. We will not transmit partial payments. It is your responsibility to provide us with correct account and routing numbers, to review this information for accuracy prior to submission of your return, and to ensure that sufficient funds are available at the time of payment. We shall have no liability for any tax due, penalties, interest, or overdraft charges which may result from your failure to ensure sufficient funds are available at the time of payment.
What Are Forza CPA, PLLC’s Responsibilities Under This Engagement?
As a CPA firm, our work is held to high standards. It is our duty to prepare your returns based on the same standard of care that a reasonable tax return preparer would exercise in this type of engagement. Unless otherwise noted, the applicable standard of care for a “reasonable tax return preparer” shall be based upon the following pronouncements:
the Statements on Standards for Tax Services (“SSTS”) issued by the American Institute of Certified Public Accountants (“AICPA”);
U.S. Treasury Department Circular 230 (“Circular 230”); and
the Internal Revenue Code, Treasury Regulations, and any applicable state/local corollaries (collectively, “the Code”).
As tax return preparers, these pronouncements restrict our ability to sign a tax return when the tax positions you report do not comply with tax law. We will be unable to sign your return and may terminate this Agreement if you:
request that we report a tax position on your return which we feel is contrary to published guidance, frivolous, or a willful attempt to evade tax;
request that we include a deduction, credit or refund on your return that we believe you do not qualify for; or
decline to disclose a position wherein our professional judgment tax law requires disclosure.
Absent any direction from you, we will prepare your tax returns based upon your filing status (single, married filing jointly, married filing separately, head of household or qualifying widow[er] with dependent child) as reflected in your income tax returns for last year. Your filing status may be affected by any addition or subtraction to the members of your immediate household, a change in your marital status, or a change to the support you provide to individuals not in your immediate household. If you do not alert us, we will infer that you do not wish to change your filing status absent other information you provide to us. If your filing status has changed, you wish to change your filing status, or you have questions about your filing status, please contact us immediately.
Forza CPA, PLLC will not make any management decisions or perform management functions on your behalf.
What Positions Do We Take When Tax Law Is Not Clear?
Arguable Positions
If there are conflicting interpretations of tax law, or if tax law is unclear, we will explain the possible positions that may be taken in order for us to sign your return. We will follow the position you request, provided it is consistent with our understanding of tax reference materials and our professional standards. Tax reference materials include, but are not limited to, the Code, Revenue Rulings, Revenue Procedures, court cases, and similar state and local guidance. If the IRS, state or local tax authorities later contest the position you select, additional tax, penalties, and interest may be assessed. You will be responsible for these amounts, as well as any related professional fees you may incur, to respond to the tax authority.
Reliance on Others
There may be times when you engage another advisor to assist you.
If you wish to take a tax position based upon the advice of another advisor, before we are able to sign your tax return, we must comply with the applicable provisions of the Code and the SSTS.
We will review the other advisor’s work and may require a written statement from the advisor describing the statutory basis for the position and the suggested disclosure needed to appropriately report the position. If we believe additional research is required, we will discuss the matter with you. You agree to pay for the additional charges necessary to complete the disclosure or research as this is not included in the scope of our service.
Moreover, you understand that the IRS, state or local tax authority may disagree with the position taken on the return. If this occurs, you will be responsible for any additional tax, penalties and interest, as well as any related professional fees, you may incur.
If, after review of the work prepared by your other advisor, we determine that we are unable to sign the tax return, we will be unable to proceed and may terminate this Agreement.
Substantial Understatement Penalties
The IRS and many states impose harsher accuracy-related penalties (20%) for substantial understatement of tax. Substantial understatement of tax may be found where the tax that should be reported on your return is less than what is actually reported on your return, based on a statutory formula which defines when an understatement is “substantial”. In some cases, avoiding substantial understatement penalties can be achieved if the tax position is adequately disclosed in a method approved by the IRS. Similar rules may apply at the state level.
While the decision to disclose or not disclose is yours, if we conclude that your return contains a tax position which we believe you are required to disclose, we will ask that you consent to include a disclosure in a method approved by the IRS. If you decline to disclose the tax position, we will be unable to proceed and may terminate this Agreement.
Abusive Tax Strategies
Certain tax positions or strategies, while not currently identified as “abusive” by the IRS, may ultimately be determined to be so in the future. Consequently, you agree to advise us of any transaction you have entered into that entitles you to disproportionate tax benefits (deductions, credits, or refunds), that generates significant income deferral or non-recognition, or that generates significant tax losses without corresponding cash impacts (“abusive tax strategy”). If you fail to timely notify us, in writing, of any abusive tax strategy you have entered into, you will be responsible for any liability, including but not limited to, additional tax, penalties, interest and related professional fees.
Reportable Transactions
The law imposes substantial penalties on taxpayers and tax advisors for failure to disclose listed and other reportable transactions on Form 8886, Reportable Transaction Disclosure Statement and, in some cases, extends the statute of limitations tax authorities have to contest any tax return claiming those tax positions. In general, reportable transactions are potentially abusive transactions identified by the IRS that have a primary purpose of tax avoidance, including but not limited to listed transactions, confidential transactions, transactions with contractual protection, loss transactions, and transactions of interest (a definition of “reportable transactions” is located at https://www.irs.gov/instructions/i8886 and includes a link to a summary of listed transactions).
If we conclude that your return contains a reportable transaction we believe you are required to disclose we will ask that you consent to include a disclosure, either on Form 8886 or other method approved by the IRS. If you decline to disclose the reportable transaction, we will be unable to proceed and may terminate this Agreement.
How Do We Handle Extensions of Time to File Tax Returns?
The obligation to file a tax return and/or extension is solely that of the taxpayer. Although we will make every reasonably prudent effort to assist you with this obligation, this Agreement is not intended to and does not create an agent/principal relationship. By signing this Agreement, you understand that actual and timely receipt of your filings by the appropriate tax authority is the duty and responsibility of the taxpayer and the taxpayer alone.
If you would like us to file an extension on your behalf, or if you need more time to gather your information and thus require an extension, just let us know. If you have not yet sent your tax information, then we require that you at least send us an executed copy of this Agreement, and your express written authorization to file an extension, before we can file one on your behalf. In some cases, your signature may be required on such applications prior to filing.
Failure to timely request an extension of time to file can result in penalties for failure to file tax returns, which accrue from the original due date of the returns, and can be substantial.
If you submit your information to us after the information submittal cut-off date indicated in your tax questionnaire but before the original deadline, we will automatically file an extension on your behalf. If you prefer to file your own extension, then be sure to let us know at the time you submit your information. In some years, we can begin (and sometimes complete) returns that come in after the cut-off date, by the original filing deadline. However, we make no guarantees, and we often file protective extensions for these returns.
If you prefer to file by the original due date of your returns (without an extension), then be sure to send your information early, and no later than the information submittal cut-off date indicated in your tax questionnaire. Our firm works on a first-in, first-out basis. The cut-off dates each year are set based on historical volumes. If you send your complete information by that date, then we typically finalize your returns in time to file by the original deadline. However, your submission by the cut-off date is not a guarantee that we will complete your returns by the original due date.
In some cases, you or we may determine that additional time is needed to file your returns. For example, your return may include complexities that require further analysis or clarifications; you may be waiting on missing forms or other information after the cut-off; we may discover close to the deadline that additional information is needed; we may experience unprecedented high volumes; or you may want to take additional time to answer questions, review your returns, or send your e-file authorizations back to us.
We reserve the right to unilaterally file and place any client on extension if we determine that our firm will be unable to complete a true, accurate, and complete tax return by the filing deadline.
We also may file “protective” extensions at our discretion, during the last week of the filing deadline, to allow our clients more time to review their returns, ask questions, and submit their e-file forms, and to allow our team the necessary time to make any updates, complete reviews, and e-file.
Please note that a tax return extension typically will not bring you higher on the IRS’s radar. In fact, the majority of returns historically selected for audit come from those filed by the original deadline, and many CPAs extend their returns as a matter of course. Applying for an extension of time to file may limit your ability to make certain elections, extend the time available for a government agency to undertake an examination of your return and/or extend the statute of limitations to file a legal action. Additionally, extensions may affect your liability for penalties and interest or compliance with governmental or other deadlines.
Penalties and Interest Charges
Federal, state, and local tax authorities impose various penalties and interest charges for non-compliance with tax laws and regulations, including failure to file extensions or returns, late filing of returns, and underpayment or late payment of taxes. You will be responsible for the payment of any additional tax, penalties, and interest charges imposed by tax authorities.
How Do We Handle Extension Payments?
Even if your tax return filing deadline is extended, all taxes owed must still be paid by the original filing due date. Otherwise, the tax authorities will charge penalties based on the amount owed and the date you ultimately pay it.
It is often difficult to know how much to pay, as your tax return has not been completed yet, and U.S. tax returns have many factors that increase or decrease the final tax liability.
You have several options for estimating and making extension payments:
Make a rough, conservative (high) estimate, pay it by the original filing deadline, and expect a refund when the return is filed. This approach is common among our clients. It allows clients to avoid interest and penalties, while also knowing that if they have paid too much, the rest will be refunded when they file their returns (or can be applied to next year’s taxes, if they prefer). To calculate their estimated payment, clients consider their historical trends and changes from the prior year, and make a rough estimate. States typically apply higher interest rates than the IRS, so we advise being especially conservative (high) when making state payments.
Skip the extension payment and just pay any tax due, with interest and penalties, when the return is filed. Some clients prefer this approach for its simplicity. It generally makes sense when they do not anticipate large balances due, and their situation is similar year-to-year.
Engage us to calculate your estimated balances due (an additional fee applies). If you would like us to calculate the estimated amount you should pay by the original due date of your return, then you can let us know. We charge an additional fee for this service, as it often involves preparing a draft tax calculation based on draft tax numbers. Typically, extension calculations make sense for first-time filers, first-time residents, clients whose tax situations have changed substantially from the prior year, and clients who have high levels of income that fluctuate significantly from year to year. Otherwise, our fee may exceed any penalties and interest you would likely incur.
To request that we prepare an extension payment calculation for you, you must notify us in writing and be sure to submit your tax information by the Extension Calculation Deadline in your tax questionnaire. If you submit your information (or request a calculation) after the Extension Calculation Deadline, then we may not see your request in time or have the capacity to prepare a calculation. In these cases, we assume no responsibility for assisting with extension estimates.
How Do We Handle Quarterly Estimated Tax Payments?
You may be required to make quarterly estimated tax payments in various tax jurisdictions. We calculate the estimated tax payments using the IRS Safe Harbor provision for the upcoming tax year based upon the information you provide to prepare your current year tax returns. Updating recommended quarterly estimated tax payments to more closely reflect your actual current year’s income is not within the scope of this engagement, unless requested by you, and agreed to by us, in writing. These services will be billed at our standard rates and will be subject to the terms of this agreement.
What Happens Once We Deliver Your Returns to You?
Ultimately, you have the final responsibility for your income tax return, along with all schedules, attachments provided to support the filing, and any payments due. Once we send you your returns, you should review everything carefully for accuracy and completeness before signing the returns. If you have questions, you should reach out to your preparer timely, and we would be happy to assist.
When we deliver your returns to you, we will send you filing instructions. If your returns qualify for e-filing, you are responsible for timely signing the e-file authorization forms and returning them to us by the cut-off times specified in our communications. For joint returns, both spouses must sign the e-file authorization before the return can be transmitted. You are also responsible for making any tax payments directly to the tax authorities. If we receive your signed e-file authorization forms, we will send you confirmation of e-file acceptance. If you fail to timely sign and return e-file authorization, we cannot and will not e-file any form on your behalf. In those situations, you will be solely responsible for any penalties or interest assessed against you.
If you choose not to have your return e-filed, or if your return cannot be e-filed, we will deliver to you a paper copy suitable for mailing to the taxing authorities. Once delivered to you, you bear full responsibility for reviewing the paper returns for accuracy, and either signing and timely filing them, along with any payments due, or notifying us of any issue which may need to be addressed prior to filing.
You are also responsible for maintaining proof of timely filing. Once our services have concluded, we shall have no obligation to notify you of future tax law developments affecting your return(s) except as may be required by Circular 230 or the SSTS related to errors we identify.
Additional Information Provided after the Fact
In reviewing their returns, some clients discover that they forgot to send us certain forms or information or inadvertently sent us incorrect information. We highly encourage you to be thorough in the original data you provide to us. If you provide us additional information after we send you your returns, we must redo already completed work. Given our heavy workload, we understandably do not want to redo work that we have already completed.
If you provide additional information after we have delivered your return, we will assess a fee to update your return with the new information. If you provide such information close to a deadline, we may not be able to update your return by the deadline. In such a case, we may advise you to make payments before the deadline, to minimize interest and penalties, and we will update your returns as soon as we are able to do so.
What Are Our Professional Fees for This Engagement?
Fees for our services will be charged according to Your Service Schedule. This fee is based upon the complexity of the expected work to be performed, our professional time and out-of-pocket expenses. Circumstances may arise that impact our estimated fee such as, but not limited to, (1) the timeliness, accuracy, or completeness of information you provide to us; (2) changes in your personnel, use of other advisors, or operations that impact our services; (3) mutually agreed changes in the scope of this engagement; or (4) other unanticipated items that arise during our engagement and that require additional time in order to complete the agreed-upon services. You agree to pay all fees and expenses incurred whether or not we complete the engagement.
When and How Do Our Services Conclude Under This Engagement?
Timing of the Engagement
We expect to begin our services upon receipt of this executed Agreement, the completed income tax organizer and all documents requested either in the organizer or by our office.
Our services under this Agreement will conclude:
on the later of:
the latest date of electronic acceptance of your tax returns by the relevant tax authority;
the date we deliver the paper copy of your returns to you,
upon written notification by either party that the Agreement is terminated; or
one (1) year from the execution date of this Agreement, whichever comes first.
Changing Tax Laws, Regulations, and Guidance
Tax laws and regulations and/or their interpretation are subject to change at any time, and such changes may be retroactive in effect and may be applicable to advice given or other services rendered before their enactment dates. We do not assume responsibility (and will have no liability) for such changes occurring after the date we have completed our services.
Any advice we may provide is based upon tax reference materials, facts, assumptions, and representations that are subject to change. We will not update our advice after the conclusion of the engagement for subsequent legislative or administrative changes or future judicial interpretations. To the extent we provide written advice concerning federal tax matters, we will follow the guidance contained in Circular 230, §10.37, Requirements for Written Advice.
Disassociation or Termination of Engagement
Either party may terminate this agreement at any time upon written notice of termination to the other party. In the event of termination, you will be responsible for fees earned and expenses incurred through the actual date of termination. Should termination occur prior to the completion and delivery of the tax returns, then we will invoice you (on an hourly basis) for any work conducted between the time services were authorized (by the signing of this engagement letter) and the termination of the engagement. We will also return any original documents to you.
What Happens If You Are Later Audited?
Government Inquiries
As you may be aware, tax returns and other filings are subject to examination by taxing authorities. We will generally be available to assist you in the event of an audit or any issue for which we have provided services under this agreement. If you are contacted by any governmental agency or tax authority, either for an examination or other inquiry, you may request our assistance in responding. However, unless otherwise indicated, our fees for these additional services are not included in our fee for the services covered by this agreement.
Support for Examinations by Tax Authorities
Not every interpretation of promulgated tax rules is straightforward and/or without uncertainty. Accordingly, we will use our professional judgment in preparing your returns. If a tax authority should later contest a position taken, or otherwise impose penalties and/or interest for non-compliance with tax laws and regulations, there may be an assessment of additional tax plus interest and/or penalties. We assume no liability for any such additional assessments. Any items resolved against you by the examining agent are subject to certain rights of appeal. In the event of an examination, we may be available to represent you. Since the selection of your return for review or examination is beyond our control, our fee to prepare your returns does not include responding to inquiries or examination by tax authorities, unless you have opted for, and are eligible to obtain, audit insurance as part of your tax return preparation services.
In the event we are required by law, government regulation, subpoena, or other legal process, to produce documents or testimony with respect to this engagement, so long as we are not a party to the proceeding in which the information is sought, you agree to reimburse us for our professional time and expenses, as well as the fees and expenses of our counsel incurred in responding to such demands.
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