What a tax advisory engagement letter should cover.
The question being answered
Advisory scope is the question, not a form. State the specific planning area or question the engagement covers, and say that advice is limited to what was presented. Anything beyond it is a new engagement.
The basis of the advice
Your advice rests on the information the client gave you as of the engagement date. The letter should say you rely on that information without auditing it, and that you are not responsible for changes in law after the advice is given.
Hourly or flat fee
State the rate or the fee and what it covers. For hourly work, say the total depends on hours worked and when invoices are due. Say also that work may pause if an invoice goes unpaid.
What is excluded
Name what the client might reasonably assume is included but is not: preparing returns, legal advice, investment advice. Naming exclusions is the cheapest protection against a scope dispute.
Standard protections
Confidentiality, a limit on liability tied to fees paid, mediation before litigation, termination on written notice, and record retention belong in every letter, advisory included.
Generate the letter in minutes.
Choose Tax Planning & Consultation, enter the client name and entity type, the hourly rate or flat fee, and payment terms. Use the scope notes field for the specific question, and the excluded services field for anything outside it. EngageDraft generates a letter that covers the sections above, designed around AICPA guidelines.
Review the output. Edit anything that needs adjusting. Send for e-signature. Your client signs from their device. The signed record is stored in your dashboard.
Sample tax advisory and consulting engagement letter
This is a complete engagement letter generated by EngageDraft for an hourly tax planning engagement. Firm, preparer, and client names below are placeholders; the scope, terms, and structure match real output for this engagement type.
Download this sample as a Word document (.docx). No signup required.
Dear Harbor Street Design, LLC,
This letter confirms the terms under which Cedarline Tax & Advisory, represented by Riley Marsh, CPA, will provide professional tax services to Harbor Street Design, LLC for the 2026 tax year. This letter establishes a mutual agreement between Cedarline Tax & Advisory and Harbor Street Design, LLC and is intended to define the scope of services, the responsibilities of each party, and the terms governing the engagement. The services covered by this engagement are:
- Tax Planning & Consultation
All work product and advisory output produced under this engagement will be delivered to Harbor Street Design, LLC electronically for review.
Scope of Services
Tax Planning & Consultation
Cedarline Tax & Advisory will provide advisory services to Harbor Street Design, LLC based on information supplied by management or authorized representatives of the entity as of the date of this engagement. For the 2026 tax year, this engagement specifically includes advising on entity structure options and estimated tax planning for the coming year. All advice rendered is limited to the specific questions and circumstances presented during the engagement. The firm is not responsible for changes in tax law, regulations, or guidance that occur after advice has been rendered, and any such changes may affect the conclusions reached. This engagement does not include the preparation of any tax return, audit representation, or any other service not described in this section unless separately engaged in writing.
Services Not Covered by This Engagement
The following services are expressly excluded from this engagement and are not part of the scope described above:
- Legal advice
- Investment advice
- Preparation of tax returns
Client Responsibilities
Harbor Street Design, LLC, through its management and authorized representatives, is responsible for providing complete, accurate, and timely information necessary for the performance of the services described in this letter. Cedarline Tax & Advisory will rely on the information provided by management without independently auditing, verifying, or otherwise confirming its accuracy. Harbor Street Design, LLC accepts full responsibility for the accuracy and completeness of all information supplied to the firm.
With respect to tax positions, if management requests that the firm take a position that does not meet the standard of having substantial authority under IRC §6662, the firm will advise Harbor Street Design, LLC of that fact. Cedarline Tax & Advisory will not recommend any position that lacks a reasonable basis and will not prepare any work product that reflects a position the firm has advised the client is improper.
Fees and Payment
The fee for services rendered under this engagement is billed at a rate of $175 per hour for time spent on this engagement. The total amount billed will depend on the actual hours worked in delivering the services described above. Invoices are due within 15 days of the invoice date. If an account becomes past due, the firm reserves the right to pause work on the engagement until the outstanding balance is resolved. Fees charged under this engagement are not contingent on the outcome or results of any advice or service provided.
Confidentiality
All information provided by Harbor Street Design, LLC in connection with this engagement will be held in strict confidence in accordance with IRC §7216, applicable state law, and the professional standards governing the practice of certified public accountants. No client information will be disclosed to any third party without the prior consent of an authorized representative of Harbor Street Design, LLC, except as required by law or applicable professional standards. This confidentiality obligation extends to any client data that is stored or processed through third-party technology platforms used by the firm in the delivery of services under this engagement.
Limitation of Liability
The liability of Cedarline Tax & Advisory to Harbor Street Design, LLC for any cause of action arising out of or related to this engagement is limited to the total fees paid by Harbor Street Design, LLC for the specific services giving rise to the claim. The firm is not liable for any consequential, indirect, or punitive damages of any kind, regardless of the form of action brought or the theory of recovery asserted. This limitation applies to the fullest extent permitted by applicable law.
This sample was generated by EngageDraft, including its limitation of liability paragraph. It is a starting point, not legal advice, and has not been reviewed by an attorney. Confirm with your own counsel before use.
Dispute Resolution
Any dispute arising out of or related to this engagement shall first be submitted to mediation before either party may initiate litigation. Mediation shall be conducted in the jurisdiction in which Cedarline Tax & Advisory operates, under the rules of a mediator mutually agreed upon by both parties. Both parties agree to participate in the mediation process in good faith before pursuing any other legal remedy.
Termination
Either party may terminate this engagement at any time upon written notice to the other party. Fees for all work completed up to the date of termination will be due and payable by Harbor Street Design, LLC. Upon receipt of payment for completed work, the firm will return any documents originally provided by the client. Cedarline Tax & Advisory will retain all engagement documentation for a period of seven years following the termination or completion of this engagement, whichever occurs later.
Agreement and Acceptance
By signing this engagement letter, Harbor Street Design, LLC, through its authorized representative, confirms that it has had the opportunity to read and review the terms set forth in this letter, to ask questions about any provision it did not fully understand, and that it agrees to be bound by the terms and conditions described herein. This letter, once accepted, represents the complete agreement between the parties with respect to the services described above.
Frequently asked questions
What goes into an AICPA consulting services engagement letter?
Consulting engagements vary more than tax return or bookkeeping work, so the letter has to work harder to define scope. That usually means a clear description of what's being delivered, whether that's a memo, a set of calculations, or ongoing advice, how the work is billed if it's hourly rather than a flat fee, and what happens if the scope expands mid-engagement. AICPA's standards for consulting engagements exist precisely because open-ended work creates more room for a client and preparer to remember the agreement differently.
Do I need an engagement letter for tax planning work?
A written letter is the record of what you agreed to deliver. Advisory engagements vary more than return preparation, and the scope is the thing most often disputed, so it is where a signed letter earns the most.
Should a consulting engagement letter use an hourly or flat fee?
Either works if the letter says which. For hourly work, state the rate and that the total depends on hours worked. For a flat fee, state what the fee covers and how changes in scope are handled. The sample on this page is hourly.
What should a consulting engagement letter exclude?
Anything the client might reasonably assume is included but is not: preparation of returns, legal advice, investment advice, and any work beyond the question presented. Naming exclusions explicitly is the cheapest protection against scope disputes.
Is a consulting engagement letter different from a tax return engagement letter?
Yes. A return letter has a defined deliverable, the completed return. A consulting letter has to define the question being answered and the limits of the advice, because the deliverable is the advice itself.