Revised ‘Best Practices’ in accounting services engagement agreement

I revised the Best Practices section (the wordy section) of my engagement agreements effective September 1, 2021 with a number of small changes but the major change is meant to accommodate the growing portion of clients who prefer an ongoing service agreement rather than repeatedly starting and ending shorter duration services. As before, a sample Best Practices agreement is published online and is typically shared by all clients. Work Plans, in contrast, are unique and private with each individual client.


 

Thank you for choosing me to help you with your accounting and finances. I look forward to us working together.

We will always work under an engagement agreement, a form of professional contract, that summarizes our intentions and responsibilities. There are two parts to our engagement agreement: 1) this “Best Practices” agreement email, and 2) a “Work Plan”. Both are typically communicated via email and require us both to acknowledge that we agree.

I am asking you to do three things:

1) read both parts of the engagement agreement (this email and the Work Plan when it arrives separately, and

2) Reply with “AGREED/SIGNED” to this email and the Work Plan to begin our work together, indicating that you understand and agree to these details.

3) Please ask me to discuss, clarify or change any of the details that are not clear and in alignment with your thinking.

This Best Practices agreement:

  • is meant to put into writing the best business practices that will lead to our joint success
  • is written in plain language and organized in a way that is meant to be most practical, useful, logical and searchable
  • replaces all previous engagements unless specifically stated otherwise
  • is the first part of at least two emails that make up our entire work agreement
  • begins and ends on the dates detailed below
  • applies to all of our work together
  • DOES NOT CONTAIN details on a specific Work Plan, tasks, timing or fees and does not bind us to any of these
  • refers to a second part of the agreement,  a “work plan”, that includes other details that typically follows later as we make progress on an action plan

We recognize that our Work Plan may change or that a mix of services may be provided over time that is different than what we see today. That’s the main reason for the second part of the agreement, the Work Plan, that is meant to be flexible and to change over time while this part of the agreement remains constant.

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CONTENTS

A) Work Process
Type of services
Work to be completed
Limitations of my work
Your responsibilities
Privacy and security
Online document handling
Document retention
Paper document handling
Timing of work

B) Communications
Goal of communications
Progress Update communications

Broadcast communications
Non-secure communications
Secure communications
Clear communications

C) Fees and Payment
Basis of fee
Advance retainer fee payment
Recurring monthly fees
Single matters fee
Small single matters fee
Bench marking fees
Tax preparation fees
Waiver of fee agreement
Additional fees
Fees after the end of this engagement
Finance and collection charges
Cost-saving measures
Third party payments and discounts
Payment

D) After End of Engagement
End of engagement
Early cancellation / end of engagement
Post-engagement work and long term service relationship

Replacement of electronic signature with manual signature
Post engagement questions
Local taxes
Re-opening and amending a tax return
In the event of audit
Penalties

E) Miscellaneous Provisions

Use of tax information

Coaching, consulting, advising and attestation
Other advice
Legal advice

Acceptable public behavior policy
Special circumstances
Jurisdiction
Electronic format signature

“I” and “me” used throughout this agreement refers to Tony Novak, my supervised staff, service providers and contractors. “You” refers to you and your spouse, if applicable, and any dependent on the tax return or other person who provides tax information. “Writing” includes text messages and email communications.

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A) WORK PROCESS

TYPE OF SERVICES: This agreement encompasses one or more of these areas of services:

1. BOOKKEEPING AND COMPLIANCE SERVICES include bookkeeping, payroll, bill payment, tax return preparation, audits, reviews, and financial reporting

2. REPRESENTATION typically before the IRS or state or local revenue departments to resolve tax and business licensing disputes
3. TECHNOLOGY/CONSULTING/ADVISORY/OUTSOURCED CFO SERVICES include obtaining financing, contracting, purchasing, performance-based service, data analytics, bench marking, business advisory, and lean processes
4. STRATEGIC COACHING SERVICES including support for clarifying the business and personal financial plans, developing financial forecasts, planning acquisitions, sales, mergers, retirement and succession planning

5. ATTESTATION includes verifying information, preparing third party reports and compilation, review or audit of financial statements

WORK TO BE COMPLETED: The work to be completed, timing and techniques is listed in the Work Plan, a separate part of this engagement agreement, usually in a separate email.

In addition to the tasks listed in the Work Plan, I will complete the following work as part of this engagement:
1. Read the documents that you provide.
2. Read your financial plan and key financial documents that you provide. It these documents are not available, I will help you replace or create them.
3. Electronically file the work product documents that were part of this agreement and provide you with evidence of acceptance of the electronic filing, unless paper filing or other arrangements are agreed.
4. Provide you with an electronic copy of all relevant filings via secure private online document portal. A paper copy is available on request at a standard fee.
5. Communicate with you directly in person, by telephone and email during the engagement.
6. When necessary, occasionally communicate with you to reach agreement about modification of this work plan.
7. Retain and securely store copies of records used in the preparation of our work and the resulting work product for at least as long as the period required by law and industry standards.

LIMITATIONS OF MY WORK: My work in connection with this engagement does not include any procedures or work not listed above or in the Work Plan. If you have obligations for other periods of time, in other countries, in other states or tax returns for local governments that are not listed above then we agree that I am not engaged to work on those filings or prepare those documents or filings. I will perform accounting services only as needed to prepare your tax returns. My work is not designed to discover defalcations or other irregularities, should any exist. If I suspect defalcations or other irregularities, my responsibility is to notify you but I am not responsible for investigating or addressing these issues. I will use my judgment in resolving questions where the law is unclear, or where there may be conflicts in the work process or differences between the applicable authorities’ interpretations of the law and other supportable positions. Unless otherwise instructed by you, I will resolve such questions in your favor whenever possible.

YOUR RESPONSIBILITIES: You are responsible for providing required documents and other relevant information that may be requested. We will depend on you to provide the information needed to prepare complete and accurate returns. I may ask you to clarify some items but will not audit or otherwise verify the data you submit. Review all documents carefully before signing them. I will require a copy of your personal identification each year to meet the government’s new identity theft prevention requirements. Also, if you plan to pay or receive a funds by electronic transaction, then I need your bank account number and routing number.

PRIVACY AND SECURITY: I follow a privacy and security policy that meets or exceeds industry standards. The policy is available online at https://www.tonynovak.com/privacy-and-security/ and is not produced here. This policy also explains how I share and control private information when working with a team of service providers. In this case, each many have its own privacy and security policies. If you want an electronic or paper copy of the privacy and security policy, please let me know. You are not required to adhere to any specified privacy and security standard. You may take the lead in modifying the standard and I may follow your lead. For example, if you ask a question in a public area and I answer, then that changes the level of our communication privacy. You may submit documents via text message and I may respond to the same text message number with personal tax information.

Protecting your privacy and maintaining a high level of security are our highest priorities. This section describes the allowable uses of your name and story while still maintaining your rights.

Use of Client Stories Without Names – My marketing, publishing and educational programs are based on client stories presented in a way that the identify of the client cannot be determined. For example, I may say “Today I settled a client’s $222,000 tax debt for an agreed monthly payment of $305 to IRS”.

Use of Individual Client Names – I may use individual client names only as necessary to privately confirm a fact, acquaintance or familiarity related to our work. For example, to verify employment, check a reference or verify  completion of a transaction with a third party or ownership of an asset. I do not discuss private information without your specific written authorization as expanded in this agreement.

Use of Business Client Names – Unless otherwise agreed, I may use the names of business clients publicly in a manner that is collaborative and supportive of our businesses. I may also reveal the nature of the service or engagement, as long as that reference is is a positive context and does not imply any negative connotation. For example I may say “I am honored to be selected as the controller for ABC Companies” but not “I gave bankruptcy advice to XYZ Company”.

ONLINE DOCUMENT HANDLING: I will provide a private secure online portal as the safest and most reliable way to deliver electronic documents. The preferred and most common electronic document format is PDF. Other communication methods are accepted (including fax, mail, email, text, etc.) however, you assume the additional security risk if you elect to use those less secure methods.

DOCUMENT RETENTION: I will retain and securely store electronic copies of your records that I use for my work and our own work papers used for your engagement for seven years. Copies of these or paper printouts of these documents are available, either under the engagement if still active, or at an additional fee if the engagement is terminated.

PAPER DOCUMENT HANDLING: If we accept any original paper records from you, they will be returned to you as soon as possible. I will not return envelopes, blank pages, mailing stuffers or advertisements unless you ask for them. You should store your original paper records, along with all supporting documents, canceled checks, etc., as these items may later be needed to prove accuracy and completeness of a tax return. I recommend that you scan and save electronic copies of all original paper documents as part of an ongoing functional accounting system and I offer help with setup of this service or “catch up” on this on request. I recommend that you install and use document scanning and storage systems that are available for smartphones. Otherwise, I do not keep copies of original paper documents. If you require paper copies of documents then you authorize my use of a third party document printer, like a print shop, and accept the security risks that may be associated with paper documents. There is a charge for handing, copying, scanning, and mailing paper copies of documents. If you have not selected to e-file your returns with our office, you will be solely responsible to mail the tax returns with the appropriate taxing authorities unless we make other written recommendations.

TIMING OF WORK: The timing of this engagement work plan is critical. Details on timing of work are included in the Work Plan part of this agreement. Unless otherwise stated in the Work Plan or this engagement agreement, completion of this work is expected on or before the due date. The work under this engagement starts when the agreement is signed and delivered and payment of the online invoice is received. The timing of completion of work is largely dependent on the date of delivery of requested information. I will communicate in writing of the expected completion of work date, review date and the filing date. I will also communicate any change in the expected dates in writing within 48 hours of any such change. In the event that work is not complete when a filing deadline approaches and other specific communications have not been made with regard to timing and the filing deadline, I have the right but not an obligation to file for a an extension of the filing deadline. This engagement ends as described below in section (D).

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B) COMMUNICATIONS

GOAL OF COMMUNICATIONS: Our goal is to minimize the time, stress and cost over the scope of our engagement while providing the specific information and service that you need on a timely basis. Clear communication, including this engagement agreement, plays an important part in this process. I truly value the trusting relationship implied and will do everything I can to prove that you were wise in making this choice.

PROGRESS UPDATE COMMUNICATIONS: I will provide informal updates on a more or less weekly basis throughout the engagement. If you do not receive these communications then it is your responsibility to ask about the status of the engagement. I will use your email address , your phone number for calls and text messages for these non-secure communications.

BROADCAST COMMUNICATIONS: Important non-protected information about changing laws, markets, regulations and technology and other similar information is typically broadcast in three formats: Facebook business page, Web site and email newsletter.  I initially enroll you in broadcast email unless you specifically opt out. It is your responsibility to gain a general understanding of these news items that may affect your finances. Please be aware that communications in the online platforms are not private or secure. I will be pleased to discuss any issue in greater depth in a private conversation.

NON-SECURE COMMUNICATIONS: Non-secure communications about this service can be made through any of the following: Email: tony@tonynovak.com, Cell/text: 856-237-9199, Office phone/text: 856-265-0306, Postal Mail: P.O. Box 333, Newport NJ 08345, Web: TonyNovak.com, Skype: novak.tony, or Facebook messenger account: Onlineadviser. Text message is welcome as the fastest, most practical way to ensure that I did not miss any other communication.

SECURE COMMUNICATIONS: Secure communications are safely and easily sent through a document portal. I will send you an email invitation to use this service. The secure document portal that you create is private, password protected and under your control. Alternately please use https://onlineadviser.securefilepro.com/ to use the guest portal without your own account. I use a secure voice and text message service; you can also use these by discussing this with me.

CLEAR COMMUNICATIONS: We agree that clarity of communication is a primary goal in this engagement and that if any part of this engagement agreement is unclear or in conflict then we will discuss this as soon as possible before continuing to rely on unclear, conflicted or possibly misunderstood communications. We also agree that if any electronic communication between us is not confirmed as received by the other party, then we will presume that the communication is not received.

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C) FEES AND PAYMENT

BASIS OF FEE: The fee for the services in the work plan is communicated separately in an electronic quotation, invoice or work plan email from me that you agree to so that it becomes part of this agreement by reference.  The web page  https://tonynovak.com/pricing/ provides more information on the pricing process.  The work plan may include a minimum fee. You are only obligated to pay the fees that you agree to pay.

EFFECT OF DELAY OR RUSH: In the event that the timing of the work plan is changed, the fee may be raised by agreement to include a surcharge during rush periods that typically occur before tax filing deadlines.

ADVANCE RETAINER FEE PAYMENT: Most work requires an advance payment. $1,000 is the most typical retainer, but may vary depending on our unique circumstances. In cases where a higher advance payment is requested, it is intended to cover a minimum risk or liability we assume in accepting the engagement and is not an advance payment for serviced not yet provided.

WE USE TWO TYPES OF FEE AGREEMENTS:

1. AUTOMATICALLY RECURRING MONTHLY FEE: Most clients use an automatic recurring monthly fee option, effected as an automated banking transaction, that is designed to result in the lowest overall fee. This is the most common and most popular with small business clients and long term clients. The amount is simply the expected, anticipated and agreed fee for all services divided by 12 (1/12 the total fee each month). Under this arrangement, you may stop the payment at any time to end the engagement. If you end the fee payment, the balance of the agreed fee is due immediately.

2. SINGLE MATTERS FEE: A “single matter” is defined as single occurrence work project. This is suitable for project defined by a beginning and ending date. An audit or tax audit representation, for example, falls under this category. The amount of the fee is stated in a separate written agreement and on the invoice.

In all cases, the fee is stated and agreed in advance.

ADDITIONAL FEES:

  1. PAYMENT PROCESSING FEE: $15 fee applies if payment is made in cash, manual paper check, or if payment is not made prior to the end of the engagement.
  2. MAIL HANDLING FEE: $30 if it requires certified delivery and a trip to the post office.
  3. REBILLING FEE: $15 if a fee remains unpaid 15 days after the end of engagement.
  4. FINANCE CHARGE: A finance charge of one and one half percent (1½) per month, which is an annual percentage rate of eighteen (18) percent, is charged on past due balances.
  5. COLLECTION FEE: Accounts more than 30 days past due date may be managed by a separate account receivables contractor. The customer agrees to pay our collection fees which are 50% of the outstanding balance plus any other expenses incurred as a result of the collection process plus court costs, cost of service, and similar fees.

FEES AFTER THE END OF THIS ENGAGEMENT: Fees may include charges for termination, post-engagement review and documentation, record retention, copies of records after the end of the engagement, and, if required, required third party communication and review. The advance retainer fee payment may be used as an offset to these final fees.

THIRD PARTY PAYMENTS AND DISCOUNTS: I try to negotiate discounts on products and services that I purchase and offer to sell to you and, if possible, I try to receive a commission or referral fee for products and services that I recommend to you. Any discount or payment that I may expect to receive is already considered in the overall pricing of future services that I offer to you. I will tell you the specific details of the discount I receive or fee that I am paid by a third party, however, I often do not know this in advance of a transaction so this is disclosed and incorporated into the next practical engagement agreement. For example, QuickBooks offers a 35% discount to businesses if the fee is paid through us.

PAYMENT: Payment is due when I send the invoice; typically at the beginning of the engagement and before filing of any returns. The invoice is usually sent by email that can be quickly and securely paid online by following the instructions on the invoice. Payment may be made through the secure 3rd party payment processing system linked to the invoice. Most clients use the “click and pay” feature from the electronic invoice. You may elect to initiate payment through another payment processor of your choice like PayPal or Venmo. Payment may be made from any bank account (using your bank routing number and account number), bank card or credit card for the payment.

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D) AFTER END OF ENGAGEMENT

END OF ENGAGEMENT: Unless otherwise agreed by extension agreement, our engagement ends with the completion of tasks listed in the Work Plan part of this engagement agreement. Typically this is the date of delivery of any completed work product documents to you or our confirmation of electronic filing of your documents with government or or e-filed tax returns. This is important because post-filing questions are not typically included under this engagement agreement.

EARLY CANCELLATION / END OF ENGAGEMENT: In the event that either of us encounters unexpected difficulties in completing the tasks anticipated under this agreement, we may opt to end this engagement before the time described above in the “End of Engagement” section by giving written notice. There may or may not be a reason stated for the early termination and we may recognize that a termination without stated reason is in our collective best interests to avoid further conflict. In some cases I may be obligated to disengage before the otherwise planned end of the engagement. In the event of early termination, the fee for the engagement will be reduced to half of the amount described in the “Fee” section above. All work will stop at the point of notice and provisions included in the “Work to be Completed” section above will no longer apply. Both of us acknowledge that these simple provisions in this “Early Cancellation / End of Engagement” section are intended to be used as a previously agreed compromise agreement to resolve a potentially stressful situation in the event of unforeseen circumstances.

POST-ENGAGEMENT WORK AND LONG TERM SERVICE RELATIONSHIP: After the end of this engagement and work plan, I may open another conversation on other issues or proposed services that may be handled in other additional work plan agreements as long as payment and other conditions of the earlier engagement agreement were met. However, I have no obligation to offer additional services. You may accept or decline this conversation on additional service topics. This continued service would be based on our success in reaching a new written engagement agreement and work plan agreement.

REPLACEMENT OF ELECTRONIC SIGNATURE WITH A MANUAL SIGNATURE: In some cases I agree to accept an electronic signature and later a third party requests a manual signature. This could be after the end of the engagement. In this case, you agree to provide the manual signature on request.

POST ENGAGEMENT QUESTIONS: Sometimes questions arise after the end of this engagement because of a communication from a tax authority or some other reason. In this case, I may be available upon request to provide additional service. Letters from IRS, state and local tax authorities are common and do not always require the re-engagement of a tax professional. I may require a new engagement agreement and fee to address some types of questions.

TAX SERVICE PROVISIONS

RE-OPENING AND AMENDING THE TAX RETURN: In some cases it becomes necessary or advisable to respond to a notice or to amend the tax return. In this case, I may be available upon request to provide additional service. The terms of this service and the cost of this service are not covered in this engagement agreement. Please be aware that the cost of amending a tax return can be substantial; sometimes exceeding the cost of the original tax return preparation.

LOCAL TAXES: Unless otherwise agreed, an engagement agreement for tax return preparation includes the calculation and preparation of a local tax return, if applicable, but does not include the filing of a local tax return. In most cases it is easier and more efficient for you to do this yourself. Most clients prefer this method. I am available to offer additional representation services on local tax issues, however, work on a local tax issue after the completion and delivery of the tax return as described here is considered to be work after the end of the engagement.

IN THE EVENT OF AUDIT: Your returns may be selected for review by the taxing authorities. Any proposed adjustments by the examining agent are subject to certain rights of appeal. The procedures and fees for representing you in an audit are not included in this agreement and no assurance is provided in this agreement that I will be available for representation in an audit.

PENALTIES: The law imposes penalties when taxpayers underestimate their tax liability. Please call me if you have concerns about such penalties. Should we encounter instances of unclear fact or tax law, or of potential conflicts in the interpretation of the law, we will outline the reasonable courses of action and the risks and consequences of each. We will ultimately adopt the alternative you select. I do not assume the cost or risk of tax penalties that may be imposed.

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E) MISCELLANEOUS PROVISIONS

USE OF TAX INFORMATION: We commonly use tax information in our work of providing other services. Federal law requires that we obtain consent you before disclosing your tax information to a third party. for purposes other than the preparation and filing of your tax returns. You are not required to authorize the use of tax return information to engage our services. Your consent is valid for one year unless specified otherwise. If you believe your tax return information has been disclosed or used improperly in a manner unauthorized by law or without your permission, you may

contact the Treasury Inspector General for Tax Administration (TIGTA) by telephone at 1-800-366-4484, or by email at complaints@tigta.treas.gov.

COACHING, CONSULTING, ADVISING AND ATTESTATION: Our Work Plan may specify that some of work is “coaching” in contrast to other work that is “advising” or “consulting” or “attestation”. It is important that we recognize the distinction. Each type of service may be subject to different standards. One key difference is that you are responsible for the outcome of your own decisions in a coaching relationship. Generally, for example, I may not advise you to take any action that is outside the law but I may support you in a decision you may reach in a coaching conversation. The responsibility to distinguish between coaching and advice is mine. I will use words like “I advise” or “I cannot advise” when documenting advice and words like “I support” or “we discussed” when documenting coaching.

OTHER ADVICE: During the work of this engagement I am likely to find other financial matters and accounting topics that we should discuss. In some cases I have a legal or professional requirement to bring these to your attention and so I will do that as required. The outcome of these possible additional discussions and any resulting work stemming from those discussions is not covered in this engagement agreement.

LEGAL ADVICE: Advice regarding business strategies may involve an application of general principles of business law but my services do not extend to the actual practice of law. I am not a lawyer. I am not offering legal advice. You should consult with your own lawyer for legal advice. I can generally provide the following services as part of an engagement that are not considered the practice of law:
1) Reading your legal documents.
2) Sharing sample legal documents and discussing how these samples might be useful.
3) Sharing redacted examples of other business’ legal documents and discussing their use.
4) Selling legal forms.
5) Filling in the blanks on a legal form.
6) Apply a general knowledge about the law to a problem arising in my field.
7) Employee benefits practice.
8) Preparation of business formation documents.
9) Tax returns.
10) Preparation of documents where I expect to be a principal in the transaction.

11) Work under the direction of your attorney or as part of a project work group that includes your attorney.

ACCEPTABLE PUBLIC AND ONLINE BEHAVIOR POLICY: We care about the public actions of our clients and believe that clients’ behavior reflects on the reputation of our firm. An Acceptable Public and Online Behavior Policy is published at https://tonynovak.com/acceptable-behavior-policy/  and incorporated into this agreement. The policy is designed to respect personal rights and freedoms while being clear about potentially controversial issues those that may infringe on others’ rights and freedoms.

SPECIAL CIRCUMSTANCES: Unique circumstances affecting this engagement may be discovered after the signing of this agreement. These may be listed and confirmed separately in writing between us through a Part 2 agreement and are incorporated by reference into the overall agreement.

JURISDICTION: We agree that this engagement agreement is a business contract entered in New Jersey.

ELECTRONIC FORMAT SIGNATURE: To affirm that this letter correctly summarizes your understanding of the arrangements for our work, please sign and return a copy of this letter. We agree that an email response from you acknowledging by typing “AGREED/SIGNED (/your name/)” or another form of electronic signature has the same impact as a manual signature.  In all other signature requirements related to this engagement I may accept an electronic signature including a text message or email in place of a manual signature based on our agreement here on three preconditions: 1) the communication apparently meets the legal requirements for a digital signature, 2) you sign and retain the original manual signature page, and 3) if I request a manual signature at a later date to confirm the digital signature, you agree to provide it.