Reference: 2020 Income Tax Returns

Dear Client:

This letter is to confirm and specify the terms of our engagement with you and to clarify the nature and extent of the services we will provide.  To ensure an understanding of our mutual responsibilities, we ask all clients for whom tax returns are prepared to confirm the following arrangements.

Sarah A Fox CPA LLC will prepare your 2020 Federal returns, as well as State and local income tax returns that you specify (collectively, your “Returns”) from information provided to us by you.  Our services are not intended to determine whether you have filing requirements in state, local or foreign taxing jurisdictions other than those which you specify. 

You agree to submit your 2020 income tax information to us no later than April 1, 2021.  Please be aware that if you submit your data after the date requested, we may not be able to prepare your Returns in time for the due date.  In that case, we will request an extension of time to file on your behalf. An extension DOES NOT extend the time to pay your tax liability; it only extends the time to file your Returns.   If your data is not complete by April 1, 2021, we request that you submit whatever is ready along with an estimate of your income and deductions.  This information is necessary so we can calculate an approximate tax liability and determine the amount, if any, to be remitted with your extension(s).  

We will not verify the data you submit, although we may ask you to clarify it or provide us with additional information.  In addition, by your signature at the end of this letter, you are confirming to us that any data you submit is supported by necessary records or documents in your possession and that you are furnishing to us ALL of the information necessary to prepare a complete and accurate return.   Upon request, we will furnish you with a questionnaire to help you gather and organize the necessary information for us.

We will exercise professional judgment to resolve questions in your favor where a tax law is unclear if there is a reasonable justification for doing so under the “substantial authority” standard (“Standard”) established by Sec 6694 of the Internal Revenue Code (IRC).  The IRC imposes penalties on both the Preparer and the Taxpayer for noncompliance with the Standards. To avoid exposure to these penalties, it may be necessary in some cases to make certain disclosures to you and/or in the tax return concerning positions taken on the return that do not meet such Standards.  We will advise you if we identify such a situation and we will discuss those tax positions that may increase the risk of exposure to penalties as well as any recommended disclosures prior to completing the preparation of your Returns. We will adopt whatever position you request so long as it is consistent with the code, regulation, interpretations and other tax authorities that satisfy the Standard requirements.   In the event that you ask us to take an unsupported tax position or refuse to make any required disclosures, we reserve the right to withdraw from the engagement without completing your Returns.  Likewise, you also have the right to choose another professional to prepare your Returns.  Such withdrawal would complete our engagement and you agree to compensate us for our services rendered through the date of withdrawal.   If the IRS should later contest the position taken, there may be an assessment of additional tax plus interest and penalties.  We assume no liability for any such additional penalties or assessments.

Foreign Interests: If you have a financial interest in, or signature or other authority over, bank accounts, securities, or other financial accounts having a value exceeding $10,000 in a foreign country, you are responsible for reporting such a relationship by providing our firm with all the information necessary to prepare and electronically file FinCen Form 114 required by the U.S. Department of Treasury (the “Treasury”) on or before April 15th of each tax year. This applies if you have direct or indirect control over a foreign or domestic entity with foreign financial accounts, even if you do not have foreign account(s).  The penalties for failure to file such report start at $10,000.  In addition, the IRS also requires information reporting under applicable IRC sections and related regulations, and the respective IRS tax forms are due when your federal income tax return is due, including extensions. The IRS reporting requirements are in addition to the Treasury reporting requirements stated above. Sarah A Fox CPA LLC will not be liable for any penalties that may be incurred for failure to disclose such accounts or interests.  Please check the appropriate box at the end of this letter.

Limited Authorization with the IRS: The IRS provides that you and your spouse, if applicable, may authorize the IRS to discuss your return with your return preparer.  This authorization is granted by checking the “Yes” or “No” box at the end of this letter, thereby giving the IRS permission to contact Sarah A Fox CPA LLC with questions that may arise during the processing of your return.  You would also be granting our firm permission to communicate with the IRS with regard to any missing return information, your return processing, the status of your refund, and or responding to any IRS tax return notices that you provide to us.  Once elected, the authorization cannot be revoked and is valid for up to one year after the due date for filing return.

As always, it is your responsibility to maintain the documentation necessary to support the data used in preparing your tax returns, including but not limited to the auto, travel, entertainment, documents to support charitable contributions and related expenses. Please contact us should you have any questions regarding the nature of the records you should maintain.

The tax laws call for significant penalties to be imposed against taxpayers for “substantial understatement” of tax and for “negligence”.  In cases of substantial understatement of income or substantial overstatement of deductions, the statute of limitations (numbers of previous years’ Returns still “open” for audit) can be extended.  We will prepare your Returns, applying our interpretation of the Internal Revenue Code, Treasury Regulations and current case law to the information that you represent to us.

Your Returns may be subject to review by one or more taxing authorities.  In the event of an audit, you may be requested to provide documents, records or other evidence to substantiate the items of income and deductions shown on the tax return.  Should the examining agent contest any positions taken on your return, there may be an assessment of additional tax liabilities, plus interest and possible penalties.  We assume no liability for such additional assessments.  Any items proposed by the examining agent are subject to certain rights of appeal.  In the event of any governmental tax examination or inquiry, we would encourage you to retain us to represent you since a tax examination is basically an adversarial proceeding.  Should you choose to retain us under such circumstances, a separate retainer will be necessary.  You will receive additional invoices for our time and expenses for these separately retained services.

In connection with this engagement, we may communicate with you or others via email transmission.  As emails can be intercepted and read, disclosed, or otherwise used or communicated by an unintended third party, or may not be delivered to each of the parties to whom they are directed and only to such parties, we cannot guarantee or warrant that emails from us will be properly delivered and read only by the addressee.  Therefore, we specifically disclaim and waive any liability or responsibility whatsoever for interception or unintentional disclosure of emails transmitted by us in connection with the performance of this engagement.  In that regard, you agree that we shall have no liability for any loss or damage to any person or entity resulting from the use of email transmissions, including any consequential, incidental, direct, indirect, or special damages, such as loss of revenues or anticipated profits, or disclosure or communication of confidential or proprietary information. Please check the appropriate box at the end of this letter.

Fees & Billing Services: Our fee for this engagement is not contingent on the results of our services, but will be based on our standard fixed rates. All invoices are due and payable upon presentation.  Billings become delinquent if not paid within 30 days of the invoice date.

Record Retention: It is our policy to retain copies of records related to this engagement for seven years.  However, Sarah A Fox CPA LLC does not keep any original client records as all original work papers are returned to you at the completion of this engagement.  It is your responsibility to retain and protect your records for possible future use, including potential examination by any government or regulatory agencies.

Governing Law and Forum Clause: This engagement letter shall be construed and interpreted in accordance within the laws of the State of Virginia.  Any claim, action or suit to be commenced by either party to this engagement shall be commenced in a court of competent jurisdiction located within the State of Virginia.  It is contractual in nature and includes all of the relevant terms that will govern the engagement for which it has been prepared.  The terms of this letter supersede any prior oral or written representations or commitments by or between the parties.  Any material changes or additions to the terms set forth in this letter will only become effective if evidenced by a written amendment to this letter, signed by all of the parties.

This engagement pertains only to the preparation of your Returns for the 2020 tax year.  It does not include the preparation of any tax returns of your family members or other members of your household.  However, we are available to do so under a separate engagement letter and fee.  Once we prepare your Returns and you authorize us to electronically file them on your behalf, we will do so.  Our engagement will be concluded upon the filing of your completed 2020 Returns.  In the case of joint Returns, information requested by either of the parties signing said Returns will be furnished without obtaining the consent of the other party.

We are responsible for preparing only the Returns referred to above.  Our fee does not include responding to inquiries or examinations by taxing authorities.  However, we are available to provide such services to you and our fees will be billed at our standard rates.  You understand that we are not responsible for the disallowance of doubtful deductions and deductions unsupported by adequate documentation or for resulting taxes, penalties and interest.

Deliverables: Upon our completion of the preparation of your Returns, we will upload a copy of your Returns to you via our secure portal. 

You have the final responsibility for your Returns, including their timely filing and prompt payment of any taxes due.  We will provide you with a copy of your Returns for review prior to electronic transmission, together with e-file authorizations.  You should review them carefully before you sign and authorize us to e file.  You must provide us with the signed e-file authorizations indicating that you have reviewed the Returns and that, to the best of your knowledge, they are correct before we can transmit your Returns to the taxing authorities.  If you have not provided us with your signed authorizations by April 14, 2021, we may place your Returns on extension, even though they may already have been completed.  In that event, you will be responsible for ensuring that any payment due with the extension is timely sent to the appropriate taxing authorities. By virtue of authorizing us to electronically file or filing the Returns yourselves, you thereby agree to the terms of our engagement as outlined herein.  If you have any questions, please contact us.

DUE TO CONSTANTLY CHANGING TAX LAWS, WE ARE REQUESTING A CLEAR COPY OF THE FRONT AND BACK OF YOUR DRIVER’S LICENSE (BOTH SPOUSES IF APPLICABLE). We can accept these through the following methods:

• Via form submission through the click to sign button below

• Email copies to sarah@sarahfoxcpa.com

• Mail photocopies to:
  Sarah Fox CPA LLC
  2400 Old Brook Rd
  Glen Allen, VA 23060

We are pleased to have you as a client and continue to look forward to a long and mutually satisfying relationship.

If the above is agreeable, please sign this engagement letter and return it to us.  We must receive this signed engagement letter prior to us commencing work on your tax returns.