Why this matters
Surprise bills are the classic accountant complaint, and they're almost always a scope problem: you thought preparing your taxes included that IRS notice; the firm bills notices hourly. An engagement letter turns assumptions into a list, and protects both sides when the relationship ends.
What "done" looks like
- Signed engagement letter before any work starts
- Included services listed by name, and exclusions too (notices, amendments, audits, cleanup)
- Fee basis and out-of-scope hourly rate stated
- Exit terms: how and when your records come back
How to do it
- Ask for the engagement letter draft, any established firm has a template; reluctance here is a red flag.
- Check the included services against your requirements; name the returns explicitly (1120-S, 1065, state, sales tax).
- Get the exclusions in writing, IRS notices, amended returns, audit representation, and bookkeeping cleanup are the classic hourly surprises.
- Pin the numbers: the fee, what changes it, and the hourly rate for out-of-scope work.
- Sign before work starts and re-sign annually, scope drifts.
Common mistakes
- Starting work on a handshake "to save time" during filing season
- Reading only the fee line and skipping the exclusions, where surprise bills live
- Not defining your own obligations, late documents from you void their deadline promises
Real-world examples
- Engagement letters are standard practice, AICPA guidance and CPA liability insurers recommend them, and missing or vague letters recur in malpractice claims.
- AICPA auditing standards require written engagement terms for audit engagements, the profession's own rule for its highest-stakes work.
- Firms commonly re-issue letters annually, the re-signing is your scheduled chance to re-scope and re-price.
From a founder's point of view
The letter isn't bureaucracy; it's the price list you'll be billed against. Every dollar of "surprise" fee traces back to a line that either wasn't written or wasn't read, and reading takes ten minutes.
Rule of thumb
If a task isn't named in the letter, assume it's billable extra. No signed letter, no work started.
