Having an engagement letter––a legally binding document––in place from the outset of a case will lend security to both you and the client.
Engagement letters are the foundation of the legal relationship between tax professionals and their clients. They are letters that, once signed by both you and your client, constitute a legally binding contract between you (or your practice) and the client. As such, every time you take on a new client, that relationship should begin with an engagement letter for three big reasons…
Having a legally binding document in place from the outset of a case will lend security to both you and the client. In the (hopefully rare) case that there is a dispute between your practice and a client, the engagement letter can serve as the go-to document to resolve the dispute.
Tax resolution clients going through a tumultuous experience are desperate for you to offer them some predictability. Clients want to see specific language regarding pricing, the scope of your services, and how any changes to the agreement might occur. Knowing what to expect from the outset can give these clients the confidence they need to move forward.
For the tax professional, an engagement letter is the ideal place to spell out any expectations. These may include the necessity of prompt communication, as well as the need for the client to be diligently compliant with their taxes and forthcoming about all of their finances while their case is open.
Your relationship with the client will often begin with some sort of verbal agreement. You may not even think of it as an agreement in formal terms, but over the course of a consultation you say things that the client may take as promises or agreements.
Engagement letters take much of the guesswork out of your relationship with the client. After you put an agreement on paper and ask your client to read and sign it, no one has to try and remember exactly how much you quoted them in the consultation. The fee is in the engagement letter. The client doesn’t need to be surprised when you quote them an additional fee to represent them in an appeal or other additional services. You can simply refer them to the engagement letter (which, of course, has language explaining exactly what service they are paying for).
Even better, if the engagement letter is effective and clearly worded the likelihood of these kinds of misunderstandings ever arising is significantly reduced.
Want more from Canopy’s founder, Kurt Avarell? Check out his tips for creating the perfect engagement letter.