Sample tax representation agreement

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Documents included: 1) Privacy policy, 2) Confidentiality Privilege Agreement, 3) Engagement Agreement, 4) Summary of Special Circumstances

Purpose: __________

Fee: $___ billed in advance for work as described based on ‘best case’ scenario

Timeframe: Expected to begin and be completed in ________

Dear _______:
Thank you for choosing me to represent you in response to the examination of your ________ income tax return. I will work on your behalf to maintain the confidence that you have placed in me. This work requires me to provide you with additional documentation and disclosure.

The four documents that follow below will enable us get started.

1) PRIVACY POLICY – A copy of my privacy policy is provided for your consideration. No action is required from you; this is a notification only.

2) CONFIDENTIALITY PRIVILEGE ENGAGEMENT LETTER – This allows us the option to assert that our communications are private privileged advice. I will assert confidentiality under the terms described unless you instruct me to do otherwise. This is optional but I suggest that you simply accept it now and reconsider the impact later in the rare circumstance that this privilege might be invoked.

3) TAX REPRESENTATION ENGAGEMENT AGREEMENT- This email communication describes the work that we anticipate, the fees and responsibilities related to that work. The purpose of this email is to enhance our verbal communications and confirm our mutual understanding of the work assignment. This is the heart of our agreement that includes expectation and fee details.

4) SUMMARY OF SPECIAL CIRCUMSTANCES – This describes how our work differs from a standard tax preparation service agreement. Should you have any questions or concerns regarding your account or my services, please contact me. You may wish to add to or modify this section; just let me know.

If all of the following fairly sets forth your understanding of our intended work together, PLEASE RESPOND TO THIS EMAIL BY TYPING THE WORD “AGREED” and return it to me. If there is additional accounting work or there are any additional tax returns you expect me to prepare, please inform me by noting so along with your response.

Thanks for your business,


CPAs, like all providers of financial services, are now required by law to inform their clients of their policies regarding privacy of client information. CPAs have been and continue to be bound by professional standards of confidentiality that are even more stringent than those required by law. Therefore, we have always protected your right to privacy.

Types of Nonpublic Personal Information We Collect: We collect nonpublic personal information about you that is either provided to us by you or obtained by us with your authorization.

Parties to Whom We Disclose Information: For current and former clients, we do not disclose any nonpublic personal information obtained in the course of our practice except as required or permitted by law. Permitted disclosures include, for instance, providing information to our employees and, in limited situations, to unrelated third parties who need to know that information to assist us in providing services to you. In all such situations, we stress the confidential nature of information being shared.

Protecting the Confidentiality and Security of Current and Former Clients’ Information: We retain records relating to professional services that we provide so that we are better able to assist you with your professional needs and, in some cases, to comply with professional guidelines. In order to guard your nonpublic personal information, we maintain physical, electronic, and procedural safeguards that comply with our professional standards.

Work with Third Party Entities: We frequently share work with third party entities. If the work will be performed by an employee, partners or a contractor under my supervision then I will not discuss this with you in advance and the responsibility for maintaining privacy remains with me. If I propose working with other independent parties we will discuss it first and confirm our understanding and agreement to do this in writing.

Please call if you have any questions, because your privacy, our professional ethics, and the ability to provide you with quality financial services are very important to us.

The Internal Revenue Code, as amended by the Internal Revenue Service, sometimes extends a CPA–client confidentiality privilege to qualified tax advice that we provide to you. In order to ensure that all communications resulting from tax advice is covered under the privilege umbrella of the Act, I am asking you to confirm the following arrangements:
I will provide tax advice as needed or requested to meet specific objectives or generally to meet long-term tax related goals and objectives.
You have the right to review and/or be supplied with copies of any and all tax planning or research memos and work papers prepared by our firm related to such tax advice.
Tax advice includes, but is not limited to, the following:
– Researching the income tax reporting of a particular transaction. We will review these situations with you and resolve issues in your favor whenever possible.
– Providing business tax and consulting to you for consideration in making tax-related decisions.
– Providing services related to the expected outcome of future tax decisions.
Privileged tax advice does not include communications associated with the preparation of tax returns, tax accrual work papers associated with a financial audit or other financial statement engagement, or in providing general business or accounting recommendations or other non-tax engagements.
You may assert the confidentiality privilege in any noncriminal tax matter before the Internal Revenue Service or any proceeding in Federal Court brought by or against the United States.
I will not disclose any advice provided under the scope of this engagement letter to the Internal Revenue Service or third parties unless you provide us written consent to do so.
Any disclosure of confidential information by you or us to the IRS or third parties may cause the Confidentiality Privilege to be waived. Caution must be taken by both parties to not inadvertently waive the privilege. You should notify us of any requests by the Internal Revenue Service for information about any tax advice or tax advice documents provided by us to you.
If you advise me to assert the Confidentiality Privilege on your behalf you agree to hold Tony Novak Certified Public Accountant harmless and indemnify us for any attorney fees and any other costs and expenses including penalties incurred by us in defending your confidential communication.

This email will confirm the arrangements for my representation of you with respect to the Internal Revenue Service examination of your Federal income tax return, wage tax filings for ________. As part of this engagement, I request that you sign the attached Form 2848, Power of Attorney and Declaration of Representative, which will notify the IRS that I are your authorized representative.

I will represent you before the Internal Revenue Service during this examination, unless the arrangement is terminated in writing by either party. Furthermore, in the event I cannot resolve all of the issues at the examination level, I will be available to appeal any proposed deficiency at the Appeals Division of the Internal Revenue Service, although that appeal is not part of this engagement.

I will not audit, or otherwise verify, any information provided by you for presentation to the Internal Revenue Service during the course of the examination, unless I deem it necessary or you specifically request us to do so in writing. However, I may ask you for further clarification and expect you to provide that clarification promptly and candidly.

Our communications are “confidential,” not “privileged.” This means that in most cases our communications cannot be disclosed to third parties without your approval. On the other hand, privileged communications are not permitted to be disclosed, even in court. There is no CPA-client privilege in criminal tax matters. Accordingly, if I am served by a properly issued administrative summons compelling me to testify in court proceedings, even my confidential communications are subject to disclosure.

The Internal Revenue Service has recently begun emphasizing a number of procedures during examinations to ascertain that taxpayers have reported all of their income. These procedures have led to a growing number of requests by examining agents to interview the taxpayer directly. However, you do have a statutory right to be represented, and not to meet with the examining agent (unless you are served with an enforceable administrative summons). It is in your best interest to refer any questions or other contact from the agent to me without discussing the case with the agent. By signing this engagement letter you acknowledge that any direct contact by the IRS will be promptly referred to me as your authorized representative. It is hereby acknowledged that if you choose to appear before or discuss this case with the agent against my advice, you do so at your own risk.

My tax representation agreement will be designed to perform the following services:

1. Complete and submit Form 2848 to notify the IRS that I am representing you in this examination. This document authorizes specific rights and responsibilities while the power of attorney is in force.

2. Attempt to collect copies of all correspondence from you and from IRS including correspondence that preceded the assessment notice.

3.  Obtain a copy of your tax transcript from the IRS for the period of time covered by this work.

4. Attempt to establish a personal communication with the examination agent for the purpose of establishing rapport and obtaining additional informal information that may aid in the resolution of the matter.

5. Review all responses from IRS and plan our response.

6. Discuss with you an appropriate response including documentation plan and a discussion of cost/benefit of the remainder of the examination.

7. Complete the response strategy that you endorse.

8. Communicate the results of our work to you and my conclusion as to the best way to end the engagement.

LIMITATIONS OF WORK: My work in connection with the preparation of your income tax returns does not include any procedures or tax return not listed above. My work is not designed to discover defalcations or other irregularities, should any exist. I will use my 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, I will resolve such questions in your favor whenever possible.

PENALTIES: The law provides various penalties on the taxpayer and the tax return preparer 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 me. You are responsible for the proper recording of transactions in some books or records of accounts, for the safeguarding of assets, and for the substantial accuracy of the financial records. You have the final responsibility for the income tax returns and, therefore, you should review them carefully before you sign and file them.

END OF ENGAGEMENT: This engagement ends when I complete the work listed above and return any original documents to you. I reasonably expect this work to be completed by _______. This agreement does not offer to extend services extend beyond the end of the engagement. For example, there is no assurance or agreement that I will provide the same services under the same agreement next year.

When this engagement ends, the power of attorney is also terminated unless we agree to extend it in a separate subsequent engagement.

EARLY END OF ENGAGEMENT: Either of us may opt to end the engagement before the time described above in the “end of engagement” section by giving written notice of early termination of the agreement and returning any original documents. The written notice must include the specific words “cancel tax engagement” in the heading or top of the communication. There 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. In the event of early termination the total fee for the engagement will be reduced to half of the amount listed in the “fee” section below. 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 the simple provisions in this “early end of engagement” agreement are intended to be used as a means to avoid conflict in the event that circumstances change for either of us.

OTHER ADVICE: During the work of accounting I am likely to find other financial and accounting topics that we should discuss. The results of these possible additional discussion and any resulting work stemming from those discussions are not covered in this letter.

FEE: My fee for these services will be $___ in advance plus out-of-pocket expenses. This fee is based on the ‘best case scenario’ based on what I know now. The fee could be more if new complications develop during our work. The fee does not include to price of additional accounting procedures not included in this agreement that may become necessary to complete the work. If we discover that additional accounting procedures are requires, these additional procedures will be covered under a separate engagement agreement.

PAYMENT: All invoices sent electronically are due and payable upon presentation at the beginning of the engagement.

This agreement is made with recognition of the following special circumstances that differ from a standard tax service agreement:
1) This agreement does not affect any other past agreements or other agreements currently under consideration for other accounting and financial planning.

2) You acknowledge that all work under previous agreements is complete and that the previous  engagement is ended.

If all of the foregoing fairly sets forth your understanding of our intended work together, PLEASE RESPOND TO THIS EMAIL BY TYPING THE WORD “AGREED” and return it to me. If there is additional accounting work or there are any additional tax returns you expect me to prepare, please inform me by noting so along with your response.


One response to “Sample tax representation agreement”

  1. […] tax representatives use a separate engagement agreement that spells out the responsibilities and terms of the representation. The agreement should clearly […]

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