FirmHello
Tour Who it's for Features Security Pricing About
CA CAD

Currency and local tax terms

United States USD Canada CAD United Kingdom GBP Australia AUD
Get started
For tax season

A Canadian tax preparation engagement letter for the season ahead

Tax preparation is the engagement with the hardest deadline and the least time to negotiate. Everything you have not written down by April you will be arguing about in April.

The letter has two jobs here. The obvious one is scope: which returns, which entities, which year. The less obvious one is allocating responsibility for the information the return is built on, because you are signing something based on numbers you did not audit.

Last reviewed against 4 primary sources.

Free download

Tax preparation engagement letter

The full letter in Word and PDF, written for Canada, including late-records and representation clauses.

Download the PDF Download for Word

No email required.

Use the free engagement letter generator

Type in your firm, the client, the scope and the fee, and it writes a complete engagement letter for Canada, ready to print or save as a PDF. Nothing you type is stored.

Next step: send it to the client through FirmHello, where it stays on their record beside everything else they send you.

Get started

It also needs to say what happens when the records arrive on April 30 minus three days, which is the single most predictable event in a practice's year.

The clauses tax season depends on

  1. 1

    Exactly which returns, for exactly which year

    "Tax returns" is not a scope. Name each return — T1 personal return, T2 corporate return, T5013 return — the entity, the jurisdiction and the year. A client with a rental property in Quebec will assume it is covered.

  2. 2

    That you rely on what you are given

    You are preparing from the client's information without auditing it. Say it, and say that they are responsible for keeping the records that support every figure — mileage, home office, charitable donations, T3 basis.

  3. 3

    What happens if records are late

    Name a cut-off date after which you cannot guarantee the April 30 deadline, and say what you will do instead: file late with the consequences explained, or not file at all. The CRA does not extend the filing deadline for a personal return, and clients routinely assume it does.

  4. 4

    Representation is a separate engagement

    If the CRA examines the return, responding is not included in the preparation fee. Firms that do not say this end up doing it for nothing.

The tax preparation engagement letter

Written for Canada. The downloads are the same text, as a Word document to edit and a PDF to put on your letterhead.

[Firm letterhead]

[Date]

[Client name]
[Client address]

Dear [Client contact],

The engagement

We will prepare the [T1 personal return / T2 corporate return] of [Client name] for the year ending [date], and [list any additional returns, jurisdictions or entities]. We will not prepare any other return unless we agree it with you in writing.

What we rely on

We will prepare the return from the information you provide. We will not audit or otherwise verify it, although we may ask you about it where something appears inconsistent or incomplete.

You are responsible for the completeness and accuracy of that information, and for keeping the records and documentation that support every position taken on the return. They may be asked for by the CRA, and the burden of producing them is yours.

Timing

To file by April 30 we need your complete information by [date]. If it reaches us later, we may not be able to file by the deadline. The CRA does not grant extensions of time to file this return, and a late return with a balance owing attracts a late-filing penalty as well as interest.

What is not included

This engagement does not include bookkeeping or the preparation of year-end financial statements, GST/HST filings, payroll filings, tax planning or advisory work, returns for any other entity or individual, or representation in any audit, examination or enquiry by the CRA. Each of those is available as a separate engagement.

Your review before filing

You will review the return before it is filed and tell us about anything that looks wrong. We will file only with your authorisation, and the return remains your responsibility once filed.

Fees

Our fee is [amount] in Canadian dollars, invoiced [when] and payable within [number] days. It assumes complete and organised records. Additional work — reconstructing records, amending a filed return, responding to a notice — is charged at [rate] per hour after we have agreed it with you.

Confidentiality and retention

We keep your information confidential except where the law or our professional body requires disclosure, hold it in accordance with PIPEDA or its provincial equivalent, and retain our files for [number] years.

Agreement

Please sign and return a copy before we begin.

[Name], [Firm name]

Agreed by [Client name]:

Signature ______________________ Date ____________

Before you use this

Supplied as-is, with no guarantee. These templates are general information, not legal advice, and not a substitute for it. Have your own legal adviser review and adapt one to your practice and your jurisdiction before you put it in front of a client. FirmHello accepts no responsibility or liability for any use made of them.

The Canadian rules behind a tax preparation letter

A Canadian preparer's letter has to fit the Income Tax Act's penalty and reassessment rules, not only the spring deadlines. The T1 and T2 letters cover the forms specific to each return; these points apply to any return you prepare for a fee.

Each is a reason to record what the client gave you, and when, so the file can show it years later.

Relying on client information

Section 163.2 penalizes a preparer who makes or assents to a statement they knew, or would reasonably be expected to know, was false. Relying in good faith on the client's information is not culpable conduct by itself, so record what you relied on.

How long a return stays open

The CRA can normally reassess an individual or a CCPC for three years after the original notice of assessment, and most other corporations for four. Say whether answering a reassessment inside that window is covered by the fee or quoted separately.

Objection deadlines differ

An individual can object until the later of one year after the filing deadline and 90 days after the notice; a corporation has 90 days. If you will watch for notices, say so. If not, say the client must forward them at once.

Paper returns carry a penalty

A preparer paid for more than five returns of one type in a year must file them electronically, or face $25 for each paper T1 or T3 and $100 for each paper T2. Make the client's consent to e-filing a condition of the engagement.

What goes wrong in April

The return nobody mentioned

A second property, a side business, a trust. Scope by naming returns, not by naming the client.

The deadline assumed to be movable

Say it in the letter and say it again in the email. It is the single most expensive misunderstanding in tax season.

The notice that arrives in August

Without an exclusion, answering it is assumed to be part of the original fee, five months after that fee was paid.

Other engagement letters

What it is Engagement letters Accounting Accounting Bookkeeping Bookkeeping

Questions about tax engagement letters

Do I need a separate letter for each family member?

For separate returns, yes — each taxpayer is a client. There is no joint return here, so spouses file separately; one letter can still cover both if it names each of them and says who may give you instructions.

Should the letter mention audit representation at all?

Yes, to exclude it. Silence is read as inclusion, and a CRA review arrives long after the fee was agreed. Offer it as a separate engagement at a stated rate.

What if the client wants a position I am not comfortable with?

That is a professional standards question rather than a drafting one, and your provincial CPA body's tax practice guidance is the place to start. The letter helps by recording that positions are taken on the basis of information the client warrants is complete.

Is an engagement letter needed for a simple return?

The simpler the return, the less time the letter takes to send. The arguments that arise from an undocumented engagement are not proportional to the complexity of the work.

Sources

The primary sources this page is written against, last read against it on . Check them before relying on a detail; rules and thresholds change.

  1. Justice Laws Website (Canada) ITA s.163.2(4) third-party preparer penalty
  2. Justice Laws Website (Canada) ITA s.152(3.1) normal reassessment period
  3. Government of Canada Objection deadlines
  4. Government of Canada Mandatory e-filing for preparers paid for more than 5 returns of a type

What changed

  • Added an editable Word (.docx) copy of the letter beside the PDF.
  • Added the section on what Canadian law adds, written from primary sources, and reviewed the shared letter text for wording that only US law supports.

The letter is the easy half

Sending it, getting it back signed, and finding it again in two years is the half that eats the week. That is what the portal is for.

No card and no sales call. If you would rather tell us about your firm first, use the longer form.