An engagement letter for an accounting firm of up to ten people usually covers eight things: the services, the work the fee leaves out, fees and payment, what the client provides, deadlines, records, how the engagement ends, and who signs. Send it once the client accepts your proposal, before any work starts. Returning clients get a fresh one each year, before the organizer goes out.
Read what follows as a working list, not as legal advice. The wording of your letter is your firm's own, and your counsel, your insurer and your state board have the final say on what it must hold.
Why the letter comes first
Most fee arguments happen in April and start in January. A client dropped off a folder, nobody signed anything, and the return got started on a handshake. Then a K-1 shows up late, a second state gets added, and the invoice is twice what the client remembers hearing.
The letter is where both sides agree before any of that. It says what your firm will do, for how much, by when, and what the client owes in return. When a question comes up mid-season, the answer is already written down, and nobody has to remember a phone call.
1. The services, named one by one
List each service by name, by form and by tax year. “Preparation of your 2026 federal Form 1040 and your Ohio return” is clear. “Tax services” is not, and it invites the client to fill in the rest.
For a business client, name the entity and its return: the 1120-S, the 1065, the payroll filings if your firm does them. For monthly bookkeeping, say which months the fee covers and what a month includes, such as the accounts you reconcile, a monthly report and a call each quarter. For advisory work, describe the project and the point where it ends.
If your firm also prepares the state return, a city return or a foreign account report, write each one in. Anything the letter doesn't name is extra.
2. What the fee does not cover
Plenty of letters leave this part out. It's the part clients dispute come April. Name the work that gets billed separately:
- IRS and state notices, and anything that follows from them
- Amended returns and returns for prior years
- Returns for other people or entities, family members included
- Bookkeeping cleanup needed before a return can start
- Planning meetings outside the return itself
Then say how extra work gets priced. A short written quote before it starts works, and so does a stated hourly rate. What matters is that the client hears the cost before the work happens, not when the invoice arrives.
3. The fee, the deposit and the due dates
State the fee or how it is worked out: a flat fee per return, a minimum, a monthly fee or an hourly rate. If the fee can change when more forms arrive, say how, for example a set amount for each extra K-1 or state.
Then say when the money is due. Many small firms ask for a deposit when the client signs, and the balance before filing. Monthly clients often pay by card on autopay. Write in what happens when a payment is overdue: a reminder schedule, a late fee if your firm charges one, or a pause on new work until it's paid.
If your firm publishes its fees on its website, keep the website and the letter in step. Circular 230 holds CPAs, enrolled agents and the others it covers to a published fee for at least 30 days after it was last published.
4. The client's part: documents and a cutoff
The client owes your firm complete and accurate information. Say so plainly, then say what that means day to day. List the documents you expect: W-2s, 1099s, K-1s, bank and brokerage statements, plus the prior year's return for a new client.
Then define a complete file. Some firms write that work starts only when every item on the organizer is in. Others name a date, such as March 1 for an April 15 return. Either way, a client who writes “you should have everything now” gets checked against a list, not a memory.
Say how documents should come in, too: an upload link, a drop-off at the office, or the mail. A firm that names one way gets fewer photos sent to a preparer's personal email.
5. Deadlines and extensions
Give the client your cutoff. A file that is complete by that date gets filed by the deadline: the March deadline for S corporations and partnerships, April 15 for individuals.
A file that isn't complete by the cutoff gets an extension. Say whether the extension is part of the fee or charged separately, and say that your firm will tell the client when it files one. That one line saves the April 14 call asking why the return isn't done.
6. Records and copies
Say which copies the client receives: the filed return, the documents they sent and any forms they signed. Say how many years your office holds on to its own files, and look up your state board's rule before you write the number in.
Say what the client should keep as well. A line saying the client holds on to their own originals heads off the call three years later asking whether you still have their W-2s.
7. Ending the engagement
Either side should be able to end the engagement in writing. Say what the client owes for work already done, and what happens to their documents and to any return in progress.
This matters most for the client who goes quiet after the deposit. A line saying your firm may close the file after a set time without a reply, once it has given notice, lets the office move on in August instead of wondering.
8. Who signs
Everyone the letter covers signs it. For a joint return, that usually means both spouses, since both sign the return. For a business, it means an owner or officer who can bind the entity, named with their title.
The engagement letter is not the e-file authorization. Once the return is ready, the client signs the e-file form in the email from your tax software, as today.
If your firm asks return clients for consent to use their information beyond the return, for a review request or an offer of bookkeeping, that consent is a document of its own. Under the section 7216 regulations it can go out alongside the letter, but the engagement can never depend on the client signing it.
When to send it
For a new client, send the letter the day they accept your proposal, before anyone opens a document. A deposit taken at signing answers the question of whether the client is ready to start.
For returning tax clients, send next year's letter in December or early January, with any new fee written in, before the organizer goes out. A client whose documents arrive before the letter is signed gets a reminder about the letter. The return waits.
For monthly clients, renew on the same date each year, and send a new letter whenever the work itself changes.
Renewing it each year
Treat each season as a new engagement. Last year's letter covered last year's return at last year's fee. A fresh signature each year means the services, the fee and the cutoff get agreed again, on paper, every season.
Keep the wording steady across seasons where you can, and change only what changed. Clients read a familiar letter faster, and the front desk answers fewer questions about it.
To skip the sending by hand, AccrueNest fills each letter in from the accepted proposal, lets the client sign it on a phone and takes the deposit at signing.
A last check before it goes out
Read the letter the way the client will, on a phone, and check five things:
- Every service is named, with its form and tax year.
- The excluded work is listed, with how it gets priced.
- The fee, the deposit and the due dates are stated.
- The cutoff date and what counts as a complete file are written in.
- Records, ending the engagement and each signature have their own line.
For what happens once the letter is signed, the new client onboarding checklist walks through each step after it, through the kickoff.
AccrueNest
AccrueNest writes for the front office of small US accounting firms: the phones, organizers, engagement letters and invoices that sit around the returns themselves.
