Client Engagement Considerations with Tax Season Upon Us

by Deb Rood, CPA, CNA | January 28, 2020

Dwight D. Eisenhower once said, “in preparing for battle I have always found that plans are useless, but planning is indispensable.” The same can be said about preparing for the upcoming tax season. As busy season gets underway, a review of client engagement letters can help keep things running smoothly. Below are some tips to help you prepare:

Client/Engagement Acceptance

  1. Review the firm’s client list. Consider terminating unprofitable, high risk and "problem" clients, such as those that do not need your advice, or who have historically procrastinated until the 11th hour.
  2. Identify and address clients that may create a potential conflict of interest for the firm. Establish protocols to address potential conflicts of interest that arise during tax season.
  3. Review the firm’s client acceptance procedures and protocols for new client opportunities that arise during tax season, such as performing an internet search on the prospect.

Engagement Letters

  1. Review the firm’s processes on issuing engagement letters. Obtaining signed engagement letters for all engagements is always the preferred risk management practice. However, unilateral engagement letters sent with tax organizers may be a practical alternative for low risk individual tax return preparation engagements. For business clients, tax consulting engagements, and complex or high net worth clients, get a dual-signed engagement letter.
  2. Review prior year engagement letters and update, as needed. Professional liability carriers and paid providers have samples that can be leveraged.

Managing Clients

  1. Proactively contact clients who have historically procrastinated in providing their tax return information. Consider providing incentives to them for early submission. Ideas on how to incentivize clients can be found in the articles How to Deal with Last-Minute Clients and The Early CPA Gets the Return (Done on Time).
  2. Inform your clients of items that may affect their return such as: 
    • The impact of changes in the tax law: Such as the South Dakota v. Wayfair, Inc. decision on client’s business.
    • Filing obligations: Such as Financial Crimes Enforcement Network Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”) and the consequences of non-compliance.
    • Potential tax savings such as the Qualified Opportunity Zone Funds.

Deborah  Rood

Deborah Rood

Deb Rood is a risk consulting director at CNA, the underwriter of the AICPA Professional Liability Insurance Program.

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