The American Institute of CPAs (AICPA) responded to concerns expressed by members about the 15,000 letters sent in April 2012 by the Farm Service Agency (FSA), a branch of the U.S. Department of Agriculture, to individuals who receive certain federal farm payments directing them to provide certification of their income.
To qualify for these payments, farmers need to prove that their adjusted gross income (AGI) does not exceed specified limitations by furnishing three years of their federal income tax returns or by providing a certification letter from a CPA or attorney.
AICPA members questioned whether they could respond to requests from farmers generated by the letter, given that they prepare tax returns based on information provided by the taxpayer and do not audit or otherwise verify the information used in the preparation of the returns. Furthermore, professional standards prescribe what CPAs can and cannot do in these circumstances, and there are professional risks to signing such letters.
To answer these member concerns, the AICPA created a dedicated webpage coordinated with the FSA’s release of a sample certification statement for average AGI compliance verification. The webpage provides issue-specific resources, as well as additional guidance. The AICPA worked with the FSA to craft a resolution that meets both the FSA requirements and the professional standards of its members. Members can also download a sample disclosure letter, which the AICPA suggests they use in connection with providing the statement for average AGI compliance verification
The AICPA is encouraging participants who receive the FSA letter to provide the last three years of their federal income tax returns to meet the FSA requirement. However, in some limited situations, those tax returns will not provide sufficient information to meet the compliance initiative—e.g., where the person qualifies individually for the farm program but files tax returns using married filing joint status. In that case, the only remaining option would be the certification letter from a CPA or attorney.
This information is excerpted from The Tax Adviser story that ran online on Aug. 24, 2012.