Holiday wish list – engagement letters and organizers

Ami Oppe, CPA, CGMA, Manager – Walsh Kelliher & Sharp APC

November 30, 2017

holiday wish list – engagement letters and organizers

It’s that time of year again. Holiday decorations are going up, people are making their holiday wish list, and accountants are getting ready for the upcoming tax season. For me, getting my first look at the new version of the tax software is like opening an early Christmas present. I can’t wait to see the software enhancements, view the draft versions of the tax forms, and preview the organizer package.

In anticipation of the tax software release, I have put together a holiday wish list for tax engagement letters and organizers. Each wish is followed by ideas to help your (engagement letter and organizer) dreams come true.

1.  I wish clients returned their engagements letters signed (by both taxpayer and spouse, if applicable) when they deliver their tax information to the office (or even earlier).

  • Communicate and enforce the office policy that tax returns will not be started until the engagement letter is received.
  • Be able to deliver and accept the engagement letter in multiple ways (mail, email, and fax).
  • Train your administrative staff to consistently request the engagement letter when tax information is dropped off and to follow up with clients who have not yet returned them.
  • Note on the engagement letter in an attention-grabbing font that it must be signed by both the taxpayer and the spouse.

2.  I wish the engagement letter and organizer educated clients on their responsibilities related to the tax return.

  • Use the engagement letter to spell out the responsibilities of the client. Sample language can be found in the template engagement letters available from a variety of sources such as the AICPA Tax Section (2017 Annual Compliance Kit), your own research service, and your malpractice insurance carrier.
  • Use the organizer to educate your clients. For example, if there is a question about whether a client has adequate records or sufficient evidence to substantiate a certain deduction, include a definition of substantiation requirements.

3.  I wish the engagement letter could be used to obtain permission from the client to gather information from third-party sources to complete the tax return.

  • Consider including the following paragraph in your engagement letters: “By signing below, you authorize [firm name] to receive financial information from outside sources that will be necessary for the completion of your tax return.” 

holiday wish list – engagement letters and organizers4.  I wish clients returned a completed organizer with their tax information.

  • Communicate and enforce the office policy that the completed organizer is a required part of the tax documents you need from the client. Include this office policy as often as you can in the engagement letter, organizer cover letter, body of the email, etc.
  • Consider separating your organizer into a “required section” and an “optional section.” The “required section” would include the questionnaire and any other documents you consider absolutely necessary to complete the tax return.
  • Consider generating a checklist list-style questionnaire. List all items that may be applicable in checklist form. This will include a heading that indicates the client should mark the box for items they had this tax year and include the additional information. This style resembles a familiar medical questionnaire. 
  • Consider shorter and customized organizers for your clients who have less complex tax returns.
  • Make the delivery format of the organizer personal to the client. Possible options include paper, a fillable PDF copy delivered to their email, or an electronic format that can be completed online. If your software has a variety of these options available to you, consider employing each of them this year when you send out your organizers.

5.  I wish the organizer included all required questions and responses. This would ensure that nothing has been missed, help me comply with the due diligence requirements needed for the tax return, and also offer insight into what financial planning services I could offer my client.

  • Think about those questions that require last-minute calls to the client and add them to your questionnaire, if appropriate. Items to consider would be the delivery mode of their tax return, paying a balance due electronically, and whether a client wants their refund applied to next year’s taxes, etc.
  • Consider adding a place at the top of the organizer for the client to update their contact information. If it is the very first page they see, there is probably a better chance they will fill it out.
  • Consider adding questions in the organizer to help you comply with your due diligence requirements of various credits, such as the earned income tax credit, child tax credit, and American opportunity tax credit. Read through the instructions for Form 8867 and include questions in your organizer that help you fill out that form.
  • Consider adding an optional section of the organizer that has questions about additional planning opportunities that you could offer to your client. Then, use the client’s answers to these questions to start a conversation about services you could offer in the “off-season.”

May your tax season be productive, efficient, and merry!

Be sure to review the recently released engagement letters and organizers available to Tax Section members as part of the 2017 Annual Compliance Kit to help you with your holiday wish list!