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Issue link: https://cpapracticeadvisor.epubxp.com/i/511071
May 2015 • www.CPAPracticeAdvisor.com 17 Te engagement leter not only sets out what services you will pro- vide, it lays the groundwork for the client's role in making those services achievable. You can describe your plan to prepare tax returns, but that pl a n i s cont i ngent on t he c l ient providing you the necessary infor- mation so that you can prepare those returns correctly. No info from the client, no tax return from you. A nd you a re protec ted f rom l iabi l it y when the signed engagement leter spells out the need for the client to be a participant in the data collec- tion process. Tere are plenty of accountants who don't t h i n k t he engagement letter is necessar y, or who send a boilerplate description of ser v ices w i t h o u t e x p e c t i n g t o r e c e i v e a signed acceptance of the leter back f rom t he cl ient . K eepi ng f i ngers crossed that a lawsuit won't occur is not t he best way to do bu si ness. Protect yourself from risk and at the sa me ti me in for m your cl ients of e x ac t ly what t hey shou ld e x pec t from you, and you'll all rest easier at the end of the day. Many of your engagement leters w i l l re a d t he s a me be c au se you probably provide the same or similar ser v ices to most of you r cl ient s . However, you'll want to fne tune the engagement leter if you are working with clients on state and local taxes (S A LT). Here a re some spec i f ic points you'll want to include: S t a t e a nd lo c a l t a x l a w s a r e subject to change. Te SA LT arena is volat i le, laws a nd rates cha nge frequently. Indicate your expecta - tion to stay current with those legis- lative changes, but also mention that new laws m ig ht mea n add it iona l discussion and an amended engage- ment leter will follow. Client might start or stop doing business in a taxing jurisdiction. If the client expands business to a new taxing jurisdiction or no longer does business in an existing jurisdic- tion, the terms of the engagement leter might have to change. Be sure to stipulate what your agreement covers in terms of potential changes in the client's business operations. W hat will happen in the event of a SA LT audit? Be sure to indicate that extra time and additional fees might be involved should there be a SA LT audit. E x plain your role in representing your client before state and local tax authorities, and men- tion there is no guarantee of results. E ngagement let ters shou ld be prepared and signed annually by a representat ive of t he accou nt i ng frm and also the client representa- tive. If you're new to using engage- ment leters, you'll fnd it worthwhile to consult with your atorney or your liability insurance representative to make sure you're using language that will protect you. 3 Tips to a Better SALT Engagement Letter By Gail Perry, CPA MAY SALT Checklist Review engagement letters with SALT clients to make sure you are protected from risk (see ac- companying article). Create a checklist to use with clients to discuss their SALT-related plans for the year ahead, in- cluding planned capital expenditures, hiring plans, and training needs. Determine potential for negotiating SALT-related credits and incentives with taxing jurisdictions, and then develop plan for moving forward with these negotiations (see accompanying article). Update your calendar with SALT continuing educa- tion opportunities for the months ahead. Make sure you are on mailing lists for SALT news in all states where you have clients doing business. W hen you and your clients agree on the s e r v i c e s y o u a r e going to prov ide, there should be an engagement letter that summarizes those services and the expectations of both you and your client. Not only does this ensure there will be no confusion as to what services are to be performed, the engagement leter actually serves as a contract should there be dispute over the services at some point in the future. ✓ ✓ ✓ ✓ ✓