You got a positive response from your prospective client and want to kick-off the tax return filing in the current financial year / season. Or you have an existing client and you are renewing the engagement for tax preparation and return filing.
The first necessary thing you should do is to get a correctly written tax engagement letter signed. Tax professionals/practitioner should have the signed copy of the engagement letter of your tax service before starting client work formally or informally.
Why?
It has been proven time and again that engagement letter is your first line of defense when a dispute arise or dispute is escalated to judicial or quasi-judicial authority.
Fundamental of a taxation engagement letter
In this article we will get an overview of tax engagement letter is, why it is needed, what should it include and how to write it using a software like Fresh Proposals so that large part of it can be automated.
What is a tax engagement letter?
However eager you are to start offering your tax service, you will need to define what exactly ‘the tax preparation & submission work’ is going to be, who will provide the data, who will process it, who will submit it, when, etc. It also needs to be defined and agreed upon what are the charges, how payment will be done, who will respond in case tax authorities raise inquiry and if there are any additional charges for responding to tax officials? What are the terms of tax preparation services, who is responsible for what, etc?
A tax service engagement letter specifies and highlights answers to above questions. It is a sort of legal agreement between you (as a tax service provider) and your clients to have a common understanding of the services being offered, terms of services, etc. An engagement letter for tax services outlines the responsibilities of client as well as service provider, scope of services, engagement fees to be paid.
The tax engagement letter plays a vital role if service provider & client have dispute over the tax service matters. Hence as a tax service professional, you will should get an engagement letter signed by your client before you can commence actual work.
Read more about : what is an engagement letter, why accounting engagement letters are important, essential guide to accounting engagement letter.
Why do you need it?
Clear, concise engagement letters which are also free or errors or mistakes, are very important document for enrolled agents and their clients. While it is not a marketing document, it should be easy to scan, read and understand. It should clearly define the work, your work practices in simple terms so as to make your clients aware of the scope of tax services.
A well drafted tax engagement letter avoid confusions but it also saves you & client from possible legal issues.
A tax engagement letter is needed to
- Set Expectations: Enlist the services being performed and timeline
- Control scope creep: It brings clarity to the scope of service
- Identify responsibilities: It identifies clear responsibilities for each party
- Reduce risks, liabilities: In case a dispute reaches courts, engagement letter becomes the reference document
- Set the value system: This process brings transparency, it sets the professional standard and value system of your firm
The challenges in writing tax engagement letters
If you want to set right process, do the right things, you will face difficulties.
- When one decides to send a tax engagement letter, naturally the first question raises: where should I start, shall I write everything from scratch or ask someone to send a sample?
- If you already use MS Word/Google Doc or PDF file to send engagement letter, it is likely have copied data for the next engagement letter (stale data or incorrect client details)
- If changes are to be made to PDF file sent to client, you have rework, reedit the Word/ Google file, convert to PDF file again and send it
- You get no idea whether client has received, viewed your engagement letter?
- You can not get it easily signed unless you use third party software like DocuSign or Adobe
- If client wants you select/deselect fees, the fee tables are not interactive, you have to coordinate over phone or email and resend updated files again
There is so much hassle one has to go through, if s/he is using conventional methods. And it is not a case of “if it ain’t breaking, don’t fix it” type of thing. It is no brainer, you lose time, energy and business. So you must be wondering, there must be some better way of doing engagement letters?
Yes, there is smart & easy way to write, send the tax engagement letter. Use Fresh Proposals software. Your clients can select fees/packages by himself, electronically sign the engagement letter and you are instantly notified whenever client opens your document, signs it.
In short, you can streamline and automate the process of writing tax engagement letter using Fresh Proposals software. Let’s see how to do it.
How to write tax engagement letter?
If you look at the challenges mentioned above regarding tax engagement letter, you will realize how a sophisticated tool can solve solve these difficulties.
- You get ready to use engagement letter templates
- You can upload your own tax service agreement and get started with it
- Next client details are captured correctly, no need to manually keep updating/correcting those every other place in the letter
- Interactive fees table allow clients to select fees/packages they want to opt for and client’s do not need to come to you to update the selection
- No need to send PDF file or keep updating, exporting, resending attachment every other time client expects you to change something
- eSigning gets simple. No separate software is needed. Client can electronically sign the document on their laptop, desktop, tablet or mobile device while they are on the go
- You are notified whenever client comments about your engagement letter. You can locate, read client’s precise comment on a given page of the engagement letter
Now let’s look at some of these aspects and how you can streamline the process of creating, writing/updating the tax engagement letter.
Not very familiar with tax engagement letter document?
If you haven’t used tax engagement letter before or if you do not have a tax service agreement document, we recommend you consult legal expert and also check with the institutional bodies for tax professional in your country such as NATPTAX, CIOT or insurance provider for professional services. You will find guidelines for client-engagement letter about the terms and conditions, schedule of services to include in your tax engagement letter so as to protect your firm/ practice from known/unknown risks as best as possible.
Reuse existing PDF with tax services agreement?
Do you have a tax service agreement in a PDF file? You can import it in Fresh Proposals. You can add textbox with dynamic variables, images (logo), eSignature, input form on top of this imported PDF file.
You can keep using this updated template.
Just select the client and voila!
You are ready to send this separate engagement letter to the next client
Use existing tax engagement letter in Word file
Now let’s say you have your own terms of engagement document in a Word or Google doc format, you can copy its content to Fresh Proposals auto-flow text section. You can save a given content section as a content library.
You can use these sections as it is or keep updating from one client to another. It is totally up to you.
Pre-made engagement letter templates
To quickly create, get started & send engagement letter using Fresh Proposals, you will find engagement letter templates in the template library.
The reason to use such templates in the tool are:
- 100% customizable
- Impressive, interactive
- Reusability
- Saving productive time
- Avoid mistakes
- Improve chances of conversion by making the use of notification, analytics
You can preview these templates, for look and feel, its content, you can update it, customize it.
You can preview the engagement letter templates in terms of layout, its content by clicking on Preview button.
Customize template
You can customize the tax engagement letter document entirely – whether its content or design. You can greater choices and control over how to add/ update/ delete sections to the engagement letter. (more about it. below). If you prefer to make it one pager or multi-pager document, totally your choice.
Necessary sections of the engagement letter
While you have control over the content you can include, exclude in your tax engagement letter, as a best practice, we suggest you to include some of the important sections in it.
The sections you should include in your tax engagement letter are
Cover letter : Identify ‘client’ and ‘tax service provider’
Scope of tax planning, tax preparation, return submission services
Responsibilities of each party
Timeline for submission, process of tax related data
Tax service engagement fees
Payment terms
Terms & condition of the tax services
Let’s talk a bit more about some of these sections.
Tax service engagement fees
The one of the best things about Fresh Proposals software is, you can include interactive three tiered pricing in your engagement letter. It is impressive, it is interactive. Clients can select-desired pricing tier, change applicable quantities of items/months, select-deselect add-on fees. You can also make use of discounts, taxes in it.
Automate personalized document generation using dynamic fields/ Variables
One of the worst and common mistakes observed while using Google Doc or MS Word template for proposal or engagement letter is, stale client details get carried forward to the next client engagement letter.
It makes pretty bad impression. It is unfortunate but avoidable. With Google Doc or MS Word, you need to ensure that you have replaced all old references/values of client information are updated correctly.
When you use Fresh Proposals software and have used templates with fields/variables, documents are personalized automatically.
Not only the variable related mistakes are avoided. You just simply select desired client and all its related details appear in the new document. You don’t have to worry about replacing client details every other places. Basically you avoid mistakes related to stale data for new client.
Beside tons of standard variables, Fresh Proposals software allows you to define your own custom fields and use those variables in your document as well as in the emails.
Personalization is the key and Fresh Proposals enables you to achieve it.
Built in electronic signatures
Use electronic Signature to get faster conversion. Use of eSignature is no brainer. Not only it helps you close proposals, engagement letters, contracts faster, it also makes the document legally enforceable in most countries in the world. eSignature just makes the whole process so much quick and easy, even for your clients.
Why you should use Fresh Proposals to write, send & sign tax engagement letters?
Users representing accounting, bookkeeping, tax practices are using Fresh Proposals to create proposals using pre-made template, customized those further. Many of these engagement letters created from template are sent within few minutes after they are created and signed by the clients. In short, the time to create and send engagement letters has gone down drastically, as short as 5 minutes.
You can also check some of the best engagement letter software.
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