bundle tax services with financial planning

two sample engagement proposals.

by ed mendlowitz
how to build a stronger tax practice

following are two sample engagement proposals for tax return preparation bundled with additional financial planning and business planning services.

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letter 1:

dear _________________:

it was good meeting with you last week. ed and i are excited to be working with you and look forward to a long and satisfying professional relationship.

the purpose of this memo is to summarize our mutual understanding of the engagement. unlike other accounting firms that bill on an hourly basis, we are opting instead to charge you a flat, annual fee of $xx,xxx beginning may 1, 20yy, and payable in monthly installments when invoiced. it is our belief that such an arrangement relieves both the client and the professional from concerns about “watching the clock” and fosters a more open working relationship.

we envision providing a fairly comprehensive package of ongoing financial, charitable, estate and income tax planning and projection services as well as assistance with investment allocation and business oversight. a core function of our service will be the preparation of your 20yy personal income and gift tax returns, your son’s personal returns and the returns required for ___________ llc. the service also includes quarterly reviews of your estimated income tax payments and preparation of the appropriate vouchers or instructions for withholding as part of your overall payroll as well as routine interaction with the federal and state taxing authorities as required.

what the service does not include is preparation of business tax returns for business group, inc. (bgi), representation before federal or state/local taxing authorities in the event of a formal tax examination, succession planning analyses with respect to bgi, and any formal written letters or advice memoranda. such services will be covered under a separate engagement memo after a discussion with you of the fee.

we will also charge you $x,000 for the preparation of your 20xx tax returns as described above. this will be payable $y,000 upon acceptance and the balance april 15, 20yy. we are not aware of whether you usually file extensions, but we prefer to file all returns on time if at all possible. if we cannot because we do not receive the information on time, then we will prepare and file extensions at no additional charge. in preparing the extensions we will project the expected taxes to be due based on information we have and discussions with you.

these fees are fixed through april 20zz. since we are just starting with you and are not fully aware of all the exact services required, we will review our fee arrangement at that time after we have had a year’s experience working with you. our fee is predicated on receiving all requested information on a timely basis.

an essential part of our services will be the monthly review of the operating statement and balance sheet of bgi, which we would also need to receive on a timely basis.

to begin we need copies of the 20ss and 20tt individual tax returns for you and your sons. we also will need copies of all previously filed gift tax returns and copies of all executed trust instruments.

to facilitate the receipt of brokerage account information, we suggest granting us internet access to your accounts. this will permit us to review the activity if necessary for our meetings and download reports and tax statements as needed. the access can be granted without the authority to trade or cause any other transactions to take place. please note that such access will merely facilitate our receipt of data but in no way holds us responsible for advising you of activities in those accounts we do not think appropriate for you.

while i will be primarily handling your account, ed will be available to meet with you as necessary. during a reasonable introductory period with me, ed would also like to receive copies of all email correspondence between us, including the bgi monthly statements.

if these arrangements are satisfactory, please send me a reply email indicating your approval. we thank you for engaging us and look forward to a long and successful relationship!

regards,

letter 2:

dear ___________:

it was good meeting with you earlier this week. ed and i are excited to be working with you and look forward to a long and satisfying professional relationship.

the purpose of this letter is to summarize our mutual understanding of the engagement. we will be undertaking a review of your personal income tax returns, the corporate returns for btc, inc. and the two llc returns. we will focus mainly on the 20ww returns with an eye toward addressing any accounting or tax issues but will also review the open tax years of 20tt, 20uu and 20vv. we may recommend amendment of some of the returns if warranted.

we will also begin the construction of a set of corporate books for btc, inc. in particular we will specifically chart the proper cash and retained earnings balances as of december 31, 20tt and 20uu. we will review the prior returns to determine that state and city taxes were properly deducted.

we will review your contract with your major contractor to make sure that revenues have been recorded in accordance with the contract for 20ww and that they will be received and recorded appropriately for 20ww. our fee for this service is $xx,000, one half payable upon acceptance of this agreement and the balance on april 15, 20xx.

upon completion of the consulting assignment, you will evaluate whether or not you want to retain us on an annual basis. unlike other accounting firms that bill on an hourly basis, we will opt instead to charge you a flat, annual fee of $xx,000, beginning may 1, 20xx, and payable in monthly installments when invoiced. it is our belief that such an arrangement relieves both the client and the professional from concerns about “watching the clock” and fosters a more open working relationship. we envision providing a fairly comprehensive package of ongoing financial, business, investment allocation and income tax planning services.

a core function of our service will be the annual preparation of your personal income tax returns, and your children’s personal returns and the returns required for btc inc. and the two llcs. the service also includes quarterly reviews of your estimated income tax payments and preparation of the appropriate checks and vouchers as well as routine interaction with the federal and state taxing authorities as required. we will maintain a set of books for the corporation using quickbooks, which we intend to update on a monthly basis. accordingly we will need copies of your checkbook stubs, deposit information and monthly bank statements.

a payroll account will be opened with a payroll service company who will make all the necessary withholding payments from your bank account. we will explain this to you more thoroughly before it is set up. you will be billed separately by the payroll service company for these services according to their independently administered fee schedule. we will review their monthly activity on line and record it in quickbooks. also included will be an annual review of your pension accounts and preparation of the information required by the actuary to prepare the required calculations and tax returns.

what the service does not include is representation before federal or state/local taxing authorities in the event of a formal tax examination, services relating to new ventures or investments, and any formal written letters or advice memoranda. such services will be covered under a separate engagement memo after a discussion with you of the fee.

while services relating to new ventures or investments are specifically not covered under this arrangement, we will make an exception for any initial exploratory meetings for which we will not charge. there is no limit on the number of initial meetings for new ventures – the more the better and hopefully some will become profitable activities for you.

these fees are fixed through april 20ss. since we are just starting with you and are not fully aware of all the services required, we will review our fee arrangement at that time after we have had a year’s experience working with you. our fee is predicated on receiving all requested information on a timely basis.

if these arrangements are satisfactory, please send me a reply e-mail indicating your approval. we thank you for engaging us!

regards,

posted on october 4, 2023