What it is
Many small-business clients buy monthly accounting support and tax returns from the same firm. One letter can cover both, provided it separates what you do each month from what you do at filing time and says where the client carries responsibility.
This template has a bookkeeping part and a tax part, with the client duties for each, the due diligence and reasonable inquiry that federal rules expect of a return preparer, filing and extension terms, a fee table, an optional consent block for using or disclosing return information, and ending the engagement.
When to use it
- Onboarding a small business that wants monthly bookkeeping and year-end tax preparation.
- Moving a client from a tax-only relationship to a full accounting and tax relationship.
- Annual renewal where scope or fees changed.
What’s inside
- Part A: bookkeeping tasks, reports for internal use only, client source document and cash control duties
- Part B: returns covered, due diligence, how positions are decided, filing authorization, extensions and notices
- Fee table, billing, and return of records on request
- Optional written consent block for use or disclosure of tax return information
- Records, confidentiality, electronic communication and ending the engagement
Standard cited
This template follows Circular 230 / IRC 7216. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
Is a separate engagement letter needed for each?
Not necessarily. One letter works if each service has its own scope, duties and fee. Add a separate letter if you will compile, review or audit financial statements. Those engagements follow their own standards.
What does the preparer have to do about client information?
Circular 230 section 10.22 requires a practitioner to exercise due diligence in preparing returns and papers, and the practitioner must make reasonable inquiries when information looks incorrect, inconsistent or incomplete. The letter tells the client that questions may follow and that the client remains responsible for the return.
When do we need a signed consent under IRC 7216?
A tax return preparer generally needs the taxpayer’s signed and dated written consent before using or disclosing return information for something other than preparing the return, with limited exceptions. The consent must identify the preparer and the taxpayer, the information and the purpose, and, for a disclosure, the recipient. Services generally cannot be conditioned on consent. Without a stated duration a consent lasts one year from the date signed. The optional block follows that structure.
Does an extension give the client more time to pay?
No. IRS guidance says an extension of time to file is only for filing, and tax owed should still be paid by the original due date. The letter tells the client to expect a request for an estimated payment if an extension is filed.
Related templates
- Bookkeeping Services Engagement Letter
- Tax Return Preparation Engagement Letter
- Preparation Engagement Letter (AR-C 70)
- Client Information Request Letter
Last updated 11/05/2026. All free templates.