CPAs are considered to be experts in documentation by jurors (who are members of the public), and falling short of that expectation when faced with a liability lawsuit may be viewed by the public as negligent and below the standard of care for the services rendered.
The following are some documentation tips to follow for tax season:
- If you need information at the last minute to complete a return, have the client send the data via email or fax. The email or fax becomes part of your records, support and documentation. Remind the client that their return may need to be extended if they fail to cooperate with the request.
- Obtain written confirmation of the amounts used for calculations. For example, a confirmation can be sent to the client with the tax extension payment form, giving the client an opportunity to review the information and to change any information that appears incorrect, prior to April 15. The confirmation then serves as a record of the client’s representations in case the client incurs a late payment penalty.
- Always document significant meetings, communications and follow-up. Follow up with written communication in the following circumstances, such as:
- Change in the scope of an engagement (may require a new engagement letter)
- Negative information (e.g., tax return is already late, client’s failure to timely provide information, client is facing an audit)
- Judgment calls (e.g., the former CPA took an aggressive position that client is aware of and has consented to)
- Client needs to take material action on discussion
- Conversations regarding transactions or amounts used for extension payments
Remember, be proactive, not reactive, as you work with your clients. It is important to recognize that you may have some clients that are no longer the “right fit” for your firm; disengaging from those clients may be in everyone’s best interests in the long run.
More information about CAMICO insurance solutions and risk management programs is available at www.camico.com