Business Income Tax Engagement Letter
1. We are pleased to confirm our understanding of the arrangements for your income tax return(s). This letter confirms the
services you have asked our firm to perform and the terms under which we have agreed to do that work. Please read this
letter carefully because it is important to both our firm and you that you understand what you can and cannot expect from
our work. In other words, we want you to know the limitations of the services you have asked us to perform. If you are
confused at all by this letter or believe we have misunderstood what you need, please call us before you sign it.
2. This engagement letter represents the entire agreement regarding the services described herein and supersedes all
prior negotiations, proposals, representations, or agreements, written or oral, regarding these services. It shall be binding
on the heirs, successors and assigns of you and us. The Internal Revenue Service imposes penalties on taxpayers, and
on us as return preparers, for failure to observe due care in reporting for income tax returns. To ensure an
understanding of our mutual responsibilities, we ask all clients for whom we prepare tax returns to confirm the following
Tax Preparer Responsibilities
3. We will prepare the following tax returns listed below.
_____ 2020 Federal Income Tax Return-Form 990 1065 1120 1120-S
_____ State Income Tax Return(s) To Be Prepared (___________________________________________________)
_____ Prior Year and Other Returns (_______________________________________________________________________)
We will prepare your Federal Income Tax Return and Specific State(s) business income tax return from information you furnish us. We will not audit, review, compile or otherwise verify the data you submit although we may ask you to clarify some of the information. We are not responsible for returns prepared by other preparers. If you have taxable activity in a state other than that specifically listed, you are responsible for providing our firm with all information necessary to prepare any additional applicable state(s)or local income tax returns as well as informing us of the applicable states. We will prepare only those state returns specifically listed above.
4. We are responsible for preparing only the specific business income tax forms for the specified reporting
agencies listed in this letter. Any other required services, forms or other actions on our part require a separate
engagement letter. In the absence of written communications from us documenting such services, our services
will be limited to and governed by the terms of this engagement letter.
5. Please note that any person or entity subject to the jurisdiction of the United States (includes individuals, corporations,
partnerships, trusts, and estates) having a financial interest in, or signature or other authority over, bank accounts,
securities, or other financial accounts having an aggregate value exceeding $10,000 in a foreign country, shall report such
a relationship. Although there are some limited exceptions, filing requirements also apply to taxpayers that have direct or
indirect control over a foreign or domestic entity with foreign financial accounts, even if the taxpayer does not have foreign
account(s). For example, a corporate-owned foreign account would require filings by the corporation and by the individual
corporate officers with signature authority. Failure to disclose the required information to the U.S. Department of the
Treasury may result in substantial civil and/or criminal penalties. Such disclosure includes filing Form 8938 with your related tax return. If you do not provide our firm with information regarding any interest you may have in a foreign account,
we will not be able to prepare any of the required Income Tax related forms and penalties may be due, for which
we have no responsibility. In the absence of such information being provided we will presume you do not have
any foreign assets or financial interests and will not file any applicable disclosure forms without separate written
6. If you and/or your entity have a financial interest in any foreign accounts, you are responsible for filing Form FinCen
114 required by the U.S. Department of the Treasury on or before April 15th of each tax year. If you would like us to file the Form FinCen 114 on your behalf, then you will need to provide us all necessary documentation to prepare the forms at the same time you provide us your regular income tax return information.
7. In addition, currently the Internal Revenue Service, under IRC §6038 and §6046, requires information reporting if you
are an officer, director or shareholder with respect to certain foreign corporations (Form 5471); foreign-owned U.S.
corporation or foreign corporation engaged in a U.S. trade or business (Form 5472); U.S. transferor of property to a
foreign corporation (Form 926); and, for taxable years beginning after March 18, 2010, if you hold foreign financial
assets with an aggregate value exceeding $50,000 (Form 8938) . These code sections describe the information required
to be reported on the respective forms, which are due when your income tax return is due, including extensions.
Therefore, if you fall into one of the above categories you may be required to file one of the above listed forms. Failure to
timely file may result in substantial monetary penalties. By your signature below, you accept responsibility for informing us
if you believe that you fall into one of the above categories and you agree to provide us with the information necessary to
prepare the appropriate form(s). We assume no liability for penalties associated with the failure to file or untimely filing of
any of these forms.
8. You acknowledge that you have reported all 2020 income you received including barter, crypto-currency, consumer-to-consumer activity, cash-based revenues, and all other income whether received in person, in-kind or electronically.
9. You acknowledge that if you received any type of SBA/government assistance or tax credits due to the COVID-19 pandemic, you will provide to us documents and information related to the type of assistance for the preparation of your business tax return. If no information is provided to us, then you acknowledge that no SBA/government assistance or tax credits were received by you.
10. Our fee does not include responding to inquires or examination by taxing authorities or third parties, for which
you will be separately billed for time and expenses involved. However, we are available to represent you and our
fees for such services are at our standard rates and would be covered under a separate engagement letter. You
agree to immediately notify us upon the receipt of any correspondence from any agency covered by this letter.
Please do not respond to or click on any links from emails purportedly from the IRS-the IRS never initiates
correspondence via email and any such emails are attempts to steal your identity. Additionally, to protect
your identity we may verify your ID, birth date, social security number and driver’s license when you call or visit our office.
11. It is your responsibility to maintain, in your records, the documentation necessary to support the data you provided us to be used in preparing your tax returns, including but not limited to the auto, travel, entertainment, and related expenses and the required
documents to support charitable contributions for five years from the filing date. If you have any questions as to the type
of records required, please ask us for advice in that regard. It is also your responsibility to carefully examine and approve
your completed tax returns before signing and mailing them to the tax authorities or returning them to us to electronically file.
We are not responsible for the disallowance of doubtful deductions or inadequately supported documentation, nor for resulting taxes, penalties, and interest. We will rely, without further verification, upon information you provide to us from 3rd parties including, but not limited to, K1’s, 1099’s, 1098’s, and receipts and similar items. We DO NOT automatically file tax extensions for
clients-you must notify us in writing, email or fax if you wish us to file an extension, and the notification should
include your estimate of any balance due with the extension. We must receive your information by January 31st in
order to complete your return in a timely manner and information received after that date may cause your return
to be extended and completed after the appropriate tax due date. Failure to file an extension may make you subject to
various penalties and interest. Additionally, if your return is extended it does not relieve you from paying any tax due on
the due date or making quarterly estimated tax payments for the current year. Failure to pay any tax due with the
extension or failure to pay quarterly estimated tax payments may make you subject to various penalties and interest.
12. We will use our professional judgment in preparing your returns. Whenever we are aware that a possibly applicable
tax law is unclear or that there are conflicting interpretations of the law by authorities (e.g., tax agencies and courts), we
will explain the possible positions that may be taken on your return. We will adopt whatever position you request on your
return so long as it is consistent with the codes, regulations, and interpretations that have been promulgated. If the
Internal Revenue Service should later contest the position taken, there may be an assessment of additional tax plus
interest and penalties. We assume no liability for any such additional penalties or assessments.
13. New privacy laws were established by the IRS effective January 1, 2009 and we are now prohibited from providing
confidential information or copies to anyone other than you without your specific, written authorization. If we are asked to disclose any privileged communication, unless we are required to disclose the communication by law, we will not provide such disclosure until you have had an opportunity to argue that the communication is privileged. You agree to pay any and all reasonable expenses that we incur, including legal fees, that are a result of attempts to protect any communication as privileged. In addition, your confidentiality privilege can be inadvertently waived if you discuss the contents of any privileged communication with a third party, such as a lending institution, a friend, or a business associate. We recommend that you contact us before releasing information to a third party.
14. It is our policy to keep records related to this engagement for five years after which they are destroyed. However, we
do not keep any original client records, so we will return those to you at the completion of the services rendered under this
engagement. When records are returned to you, it is your responsibility to retain and protect your records for five years
for possible future use, including potential examination by any government or regulatory agencies. Prior to each tax filing
season we send client letters to most of our clients as a convenience to assist them with gathering their tax information. If you move or do not wish to receive a letter, please notify us or we will send the letters to the address we used on your prior year’s tax return.
15. Our bill will be due and payable upon completion of these returns, and additional services will not be performed until the bill for these services is paid in full. You understand that your bill will be based upon the standard billing rates presented to you. In the event of collection proceedings initiated by us to collect any sums due to us under this agreement, you shall be liable for all collection costs, including our reasonable attorney’s fees and all costs of court. You further acknowledge and agree that in the event we stop work or withdraw from this engagement as a result of your failure to pay on a timely basis for services rendered as required by this engagement letter, we shall not be liable to you for any damages that occur as a result of our ceasing to render services. Our services will conclude upon delivery of the completed income tax returns discussed above or upon our suspension of services or resignation from the engagement.
16. Our services will conclude upon delivery of the completed income tax returns discussed above or upon our suspension of services or resignation from the engagement.
17. In recognition of the relative risks and benefits of this agreement to both the client and the accounting firm, the client
and the accounting firm have discussed and have agreed on the fair allocation of risk between them. As such, the client
agrees, to the fullest extent permitted by law, to limit the liability of the accounting firm to the client for any and all claims,
losses, costs, and damages of any nature whatsoever, so that the total aggregate liability of the accounting firm to the
client shall not exceed the accounting firm’s total fee for services rendered under this agreement. The client and the
accounting firm intend and agree that this limitation apply to any and all liability or cause of action against the accounting
firm, however alleged or arising, unless otherwise prohibited by law. Both parties agree that there is a one-year limitation
period to bring a claim against us for errors and omissions. The one-year period will begin upon the date of the tax
professional’s signature on the tax returns covered by this engagement letter.
18. From time to time various third parties may request that we sign, for you, some verification of income,
employment or tax filing status. Because we were engaged only to prepare your income tax return, without
examination, review, audit or verification, our insurance carriers as well as the state board of accountancy
prohibit us from signing any such document and we suggest that you have them send IRS Form 4506 to the IRS
to obtain such verification.
19. In connection with this engagement, we may communicate with you or others via email transmission. As emails can be intercepted and read, disclosed, or otherwise used or communicated by an unintended third party, or may not be delivered to each of the parties to whom they are directed and only to such parties, we cannot guarantee or warrant that emails from us will be delivered and read only by the addressee. Therefore, we specifically disclaim and waive any liability or responsibility whatsoever for interception or unintentional disclosure of emails transmitted by us in connection with the performance of this engagement. In that regard, you agree that we shall have no liability for any loss or damage to any person or entity resulting from the use of email transmissions, including any consequential, incidental, direct, indirect, or special damages, such as loss of revenues or anticipated profits, or disclosure or communication of confidential or propriety information.
20. If you are a Partnership/LLC, you are required to tell us, as the tax preparer, who you are choosing as the company’s Partnership/LLC representative for IRS contact. This will not be the tax preparer’s responsibility and you agree to make this choice. In addition, unless you specifically tell us not to, we will choose to elect out of the centralized partnership audit regime under section 6221 (b).
21. We appreciate the opportunity to serve you. Please date and sign the enclosed copy of this letter to acknowledge your
agreement with and acceptance of your responsibilities and the terms of this engagement. It is our policy to initiate
services after we receive the executed engagement letter.
22. If any provision of this agreement is declared invalid or unenforceable, no other provision of this agreement is affected, and all other provisions remain in full force and effect.
23. This agreement shall be governed by the laws of the Commonwealth of Virginia, and any suit to enforce any party’s rights arising in connection with this agreement shall be brought and adjudicated in Fauquier County, Virginia.
Very truly yours,
Quality First Tax Service LLC
The terms described in this letter are acceptable and are hereby agreed to and shall remain in effect until terminated by either party in writing.
__________________________ (Signature) ___________________ (Date)
__________________________ (Printed Name)
______________________________________ Business Name