January 5, 2009

 

1040  Taxation Drive

Trustworthy, MN 55999

 

            Re:       Preparation of Individual Income Tax Returns

 

Dear  Taxpayer:

 

This letter is to confirm our understanding of the terms of our engagement and to clarify the nature and limitations of the services we will provide for the year ended December 31, 2008.  In order to ensure an understanding of our mutual responsibilities, we ask all clients for whom tax returns are prepared to confirm the following arrangements.

 

            I.          Scope of Professional Services

 

We will prepare your 2008 Federal and requested state income tax returns from information that you furnish to us. We will not audit or otherwise verify the data that you submit, although we may need to ask you for clarification of some of the information. Our work in connection with the preparation of your income tax returns does not include any procedures designed to disclose defalcations or other irregularities, should any exist.  We have provided you an organizer to guide you in gathering the necessary information needed for preparation of your tax returns. Your use of such forms will assist in keeping pertinent information from being overlooked.

 

We will use our judgment in resolving questions where the tax law is unclear, or where there may be conflicts between the taxing authorities’ interpretations of the law and other supportable positions.  Unless otherwise instructed by you, we will resolve such questions in your favor, whenever possible.

 

The law provides various penalties that may be imposed when taxpayers understate their tax liability.  If you would like information on the amount or circumstances of these penalties, please contact us.

 

It is your responsibility to provide all the information required for the preparation of complete and accurate returns.  You should retain all the documents, canceled checks and other data that form the basis of income and deductions.  These may be necessary to prove the accuracy and completeness of the returns to a taxing authority.   You have the final responsibility for the income tax returns and, therefore, you should review them carefully before you sign and file them.

 

You represent that the information you are supplying to us is accurate and complete to the best of your knowledge and that your expenses for meals, entertainment, travel, gifts and vehicle use are supported by records as required by law.

 

You understand that, due to their special purpose, nature and format, your income tax returns and related schedules do not constitute a fair presentation of financial position, results of operations and changes in cash flows in accordance with generally accepted accounting principles.  Therefore, they should be used only for income tax purposes and not for obtaining credit or any other purposes.

 

Although we are preparing your tax return(s) it is your obligation and responsibility to file the tax return(s) with the appropriate taxing authorities. 

 

We want to ensure that you receive all possible tax benefits for Federal and State credits or special deductions for which you may be eligible.  If you qualify for these credits, such as the credit for increasing research activities, federal empowerment zone credits, the foreign tax credit, various state credits, among others,  you will provide us with the information necessary to claim these credits.  If you have any questions about whether you qualify for credits or special deductions, please contact us.

 

The law provides various penalties that may be imposed when taxpayers understate their tax liability.  If you would like information on the amount or the circumstances of these penalties, please contact us.

 

Your returns may be selected for review by the taxing authorities.  Any items which may be resolved against you by the examining agent are subject to certain rights of appeal.  In the event of such government tax examination, we will be available upon request to represent you and will render additional invoices for the time and expenses involved.

 

If there is any missing information or other circumstances beyond our control, extensions may be mandatory.  Our estimate of the tax due for purposes of an extension is subject to revision upon completion of the final tax return.  Any difference between the amount of tax computed for purposes of an extension and the final tax return may result in inadequate estimated tax payments, which may cause penalties and interest to be added to the balance due.  Any such penalties and interest are your responsibility.  It is the consensus of tax preparers that the only way to ensure that there will be no underpayment penalties is deliberate overpayment of the estimate payments.

 

In order to ensure accurate and timely filing by April 15, 2009, returns submitted to us for preparation after March 22, 2009 will be extended at our discretion, at an extra charge.  Please contact us if all sufficient information to file a complete return will not be available by the tax return due date and you would like us to prepare and file an application for extension of time to file your income tax returns.  We will need information from you to estimate your 2007 income tax liability to be reported on the extension application as well as your 2008 estimated income tax payments, if necessary. Be aware that if you fail to submit to us information needed to complete your 2008 tax return(s) after the date requested, we may not be able to deliver delivery your 2008 tax return(s) to you for timely filing, and ultimately you may be subject to tax penalties because of this delay.

 

If an extension of the time is required, any tax that may be due with this return must be paid with that extension.  Any amounts not paid by the filing deadline are subject to interest and late payment penalties when those amounts are actually paid.

 

            IV.       Fee Arrangements

  

Our fee for these services will be based upon our standard billing rates, plus out-of-pocket expenses. We will bill you on that basis, and invoices will be due and payable upon presentation.

 

A late charge of 1½ per month will be assessed on any unpaid balance for 30 days or more.  This finance charge will be computed after deduction of current payments, credits and allowances.  This is an Annual Percentage Rate of 18 per cent.  Payments received on an account will first be credited against any finance charge incurred and then against the unpaid balance of your original billing.

 

Our liability arising from this engagement shall be limited to no more than 100% of the fees, which you pay us for the performance of this engagement.

 

If any dispute arises (between/among) the parties hereto, the parties agree first to try in good faith to settle the dispute through non-binding mediation.  The costs of mediation shall be shared equally by the parties.

 

The parties agree that, if any dispute cannot be settled through mediation, the dispute may then be brought before a court of competent jurisdiction, but the matter will ultimately be decided by the court, sitting without a jury.  The parties agree to waive all rights to have any such dispute determined by a jury, but otherwise retain all rights afforded under the applicable civil justice system.

 

We want to express to you our appreciation for this opportunity to work with you.  If you have any questions about the organizer or any other tax or accounting matters, please give us a call.

 

If the foregoing is in accordance with your understanding, please sign the copy of this letter in the space provided and return it to us in the enclosed envelope.

 

Very truly yours,

 

Steven H. Mangan, CPA 

 

 

The foregoing engagement letter fully describes the services required and is in accordance with our understanding of all matters described therein.

 

 

 

 

 

By: _______________________________                Date:____________________________