2023 Individual Tax Engagement Letter
Dear Valued Client,
Prestige Tax & Accounting, LLC (“firm,” “we,” “us,” or “our”) is pleased to provide you with the professional services described below. This letter confirms our understanding of the terms and objectives of our engagement and the nature and limitations of the services we will provide. The engagement between you and our firm will be governed by the terms of this Agreement.
Engagement Objective and Scope
We will prepare the following tax returns for the year ended December 31, 2023:
- Federal Form 1040, including extensions, estimates, and electronic filing;
- All applicable state income tax returns, including extensions, estimates, and electronic filing;
- All applicable local income tax returns, including extensions, estimates, and electronic filing;
- FBAR forms and any other related foreign asset filings, once we determine that you are required to file based on the information you provide us, including extension and electronic filing.
We will prepare your tax returns based upon information and representations that you provide to us. We have not been engaged to and will not prepare financial statements. We will not audit or otherwise verify the data you submit to us, although we may ask you to clarify certain information.
We will prepare tax returns solely for filing with the Internal Revenue Service (“IRS”) and state and local tax authorities. Our work is not intended to benefit or influence any third party, either to obtain credit or for any other purpose.
You agree to indemnify and hold us harmless with respect to any and all claims arising from the use of the tax returns for any purpose other than filing with the IRS and state and local tax authorities regardless of the nature of the claim, including the negligence of any party.
Our engagement does not include any procedures designed to detect errors, fraud, or theft. Therefore, our engagement cannot be relied upon to disclose such matters.
This engagement is limited to the professional services outlined above.
CPA Firm Responsibilities
Unless otherwise noted, we will perform our services in accordance with the Statements on Standards for Tax Services (“SSTS”) issued by the American Institute of Certified Public Accountants (“AICPA”) and U.S. Treasury Department Circular 230 (“Circular 230”). It is our duty to perform services with the same standard of care that a reasonable income tax preparer would exercise in this type of engagement. It is your responsibility to safeguard your assets and maintain accurate records pertaining to transactions. We will not hold your property in trust for you, or otherwise accept fiduciary duties in the performance of the engagement.
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. 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.
Confidentiality
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 our services in connection with this Agreement. We are 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.
Bookkeeping Assistance
We may deem it necessary to provide you with accounting and bookkeeping assistance solely for the purpose of preparing the tax returns. These services will be performed solely in accordance with the AICPA Code of Professional Conduct. We will request your approval in writing before rendering these services. Additional charges will apply for such services.
Estimated Tax Payments
You may be required to make quarterly estimated tax payments. We will calculate these payments for the 2024 tax year based upon the information you provide to prepare your 2023 tax returns and have no obligation to update recommended payments after the engagement is completed. If you ask us to update your estimated tax payments, we will confirm this with you.
Tax Planning Services
Our engagement does not include tax planning services. During the course of preparing the tax returns identified above, we may bring to your attention potential tax savings strategies for you to consider as a possible means of reducing your taxes in subsequent tax years. However, we have no responsibility to do so, and will take no action with respect to such recommendations, as the responsibility for implementation remains with you, the taxpayer. If you ask us to provide tax planning services, we will confirm this with you and additional fees may apply.
Government Inquiries
This engagement does not include responding to inquiries by any governmental agency or tax authority. If your tax return is selected for examination or audit, you may request our assistance in responding to such an inquiry. If you ask us to represent you, we will confirm this representation in a separate engagement letter and additional fees will apply.
Third-Party Verification Requests
We will not respond to any request from banks, mortgage brokers or others for verification of any information reported on these tax returns.
Tax Advice
Our advice is based upon tax reference materials, facts, assumptions, and representations that are subject to change. Tax reference materials include, but are not limited to the Internal Revenue Code (“IRC”), Tax Regulations, Revenue Rulings, Revenue Procedures, Private Letter Rulings and court decisions. 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.
Arguable Positions
We will use our judgment to resolve questions in your favor where a tax law is unclear, provided there is substantial support for doing so. If there are conflicting interpretations of the law, we will explain the possible positions that may be taken on your return. We will follow the position you request, provided it is consistent with our understanding of the Internal Revenue Code (“IRC”), tax regulations, Revenue Rulings, Revenue Procedures, Private Letter Rulings and court cases. If the IRS, state or local tax authorities later contest the position taken, additional tax, penalties, and interest may be assessed. We assume no liability, and you hereby release us from any liability for such additional tax, penalties, interest, and related professional fees.
Client Responsibilities
We will provide you with an income tax questionnaire to help you compile and document the information necessary to prepare your income tax returns. You must complete the income tax questionnaire with accurate and complete information. Income from all sources, including those outside the U.S., is required.
We rely upon the accuracy and completeness of both the information you provide in the income tax questionnaire and other supporting data you provide in rendering professional services to you.
Documentation
You are responsible for maintaining adequate documentation to substantiate the accuracy and completeness of your tax returns. You should retain all documents that provide evidence and support for reported income, credits, and deductions on your returns, as required under applicable tax laws and regulations. You are responsible for the adequacy of all information provided in such documents. You represent that you have such documentation and can produce it, if necessary, to respond to any audit or inquiry by tax authorities. You agree to hold our firm harmless with respect to any additional tax, penalties, interest and professional fees resulting from the disallowance of tax deductions due to inadequate documentation.
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 2023, is $17,000 per taxpayer. You are responsible for informing us if gift tax returns are required to be filed. If you ask us to prepare these returns, we will confirm this representation in a separate engagement letter.
Personal expenses
You are responsible for ensuring that personal expenses, if any, are segregated from business expenses and that expenses such as meals, travel, entertainment, vehicle use, gifts, and related expenses are supported by necessary records required by the IRS and other tax authorities. At your written request, we are available to provide you with written answers to your questions on the types of supporting records required.
State and Local Filing Obligations
We will prepare your state and local returns based upon your tax filings required for last year. 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 of this responsibility and ask you to contact us. If you ask us to prepare these returns, additional fees will apply.
U.S. Filing Obligations Related to Foreign Financial Assets
As part of your filing obligations, you are required to report the maximum value of specified foreign financial assets, which include financial accounts with foreign institutions and certain other foreign non-account investment assets that exceed certain thresholds. You are responsible for informing us of all foreign assets, so we may properly advise you regarding your filing obligations.
These assets include any ownership interests you directly or indirectly hold in businesses located in a foreign country, and any assets or financial accounts located in a foreign country over which you have signature authority. Based upon the information you provide; this information will be used to calculate any applicable foreign tax credits. We will also use this data to inform you of any additional filing requirements, which may include Form 8938, Statement of Specified Foreign Assets, and FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”). Failure to file required forms can result in the imposition of both civil and criminal penalties, which may be significant. The FBAR is not a tax return and its preparation is not within the scope of this engagement. If you ask us to prepare the FBAR, we will confirm this with you and additional fees will apply.
Foreign Filing Obligations
You are responsible for complying with the tax filing requirements of any other country. You acknowledge and agree that we have no responsibility to raise these issues with you and that foreign filing obligations are not within the scope of this engagement.
Ultimate Responsibility
You have final responsibility for your tax returns. We will provide you with a copy of your electronic tax returns and accompanying schedules and statements for review prior to filing with the IRS and state and local tax authorities (as applicable). You agree to review and examine them carefully for accuracy and completeness.
You will be required to verify and sign a completed Form 8879, IRS e-file Signature Authorization, and any similar state and local equivalent authorization form before your returns can be filed electronically.
In the event that you do not wish to have your tax returns filed electronically, please contact our firm. Additional procedures will apply. You will be responsible for reviewing the paper returns for accuracy, signing them, and filing them timely with the tax authorities.
Timing of the Engagement
We expect to begin our services upon receipt of the completed 2023 income tax questionnaire and all documents requested either in the questionnaire or by our office.
If your federal return is electronically filed, our services will conclude upon the earlier of:
the filing and acceptance of your 2023 tax returns by the appropriate tax authorities and mailing or delivery of non-electronically filed tax returns (if any) for your review and filing with the appropriate tax authorities,
written notification by either party that the engagement is terminated, or
one year from the execution date of this Agreement.
If you are required to file a paper return, or choose to do so, our services will conclude upon the earlier of:
mailing or delivery of your 2023 tax returns for your review and filing with the appropriate tax authorities,
written notification by either party that the engagement is terminated, or
one year from the execution date of this Agreement.
Extensions of Time to File Tax Returns
The original filing due dates for your tax returns are April 15, 2024 for federal and April 15, 2024 for most states and localities. Information needed to complete your tax returns must be received no later than March 25, 2024 so that the returns may be completed by the extended filing due dates.
It may become necessary to apply for an extension of the filing deadline if there are unresolved issues or delays in processing, or if we do not receive all of the necessary information from you on a timely basis. Applying for an extension of time to file may extend the time available for a government agency to undertake an audit of your return or may extend the statute of limitations to file a legal action. All taxes owed are due by the original filing due date. 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 or late filing of returns, and underpayment of taxes. You, as the taxpayer, remain responsible for the payment of all tax, penalties, and interest charges imposed by tax authorities.
We rely on the accuracy and completeness of the information you provide to us in connection with the preparation of your tax returns. Failure to disclose or inadequate disclosure of income or tax positions may result in the imposition of penalties and interest charges.
Professional Fees
Our fee will be based upon the complexity of the work to be performed, and our professional time, as well as out-of-pocket expenses. In addition, this fee depends upon the timely delivery, availability, quality, and completeness of the information you provide to us. You agree that you will deliver all records requested and respond to all inquiries made by our staff to complete this engagement on a timely basis. You agree to pay all fees and expenses incurred whether or not we prepare the tax returns.
Governing Law
For the purpose of enforcing any arbitration award, we agree that the courts of the state of New York have jurisdiction over the parties and all disputes between us, and we agree to submit all disputes to either the District or Supreme Court of Suffolk County, New York, which is the proper and most convenient venue for resolution. Any disputes relating to a formal or informal accounting will be under the jurisdiction of either the Surrogates Court or the appropriate Appellate Court, thereof. We also agree that the law of the state of New York shall govern all such disputes.
We appreciate the opportunity to be of service to you. If you agree to authorize us to prepare your 2023 personal income tax returns pursuant to the terms set forth above, please execute this letter on the line(s) below designated for your signature, and return the original of this executed letter to us along with a completed copy of the enclosed tax questionnaire and documentation required to complete your return. You should keep a copy of this fully executed letter for your records. If we do not receive from you the original of this letter, in fully executed form, but receive from you a completed copy of the enclosed tax questionnaire and/or supporting documentation required to complete your return, then such receipt by us shall be deemed to evidence your acceptance of all of the terms set forth above. If, however, we receive no response to this letter from you, then we will not proceed to provide you with any professional services, and will not prepare your 2022 income tax returns.
Very Truly Yours,
Matthew R. Savello, CPA | CEO/Founder
Prestige Tax & Accounting, LLC