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For ending a client relationship

A disengagement letter that says exactly where your work stops

Most engagements end without a word said. The client stops sending documents, the firm stops chasing, and a year later nobody agrees on who was supposed to file the extension.

A disengagement letter is the letter that formally ends an engagement, and it closes that gap. It tells the client, in writing, the date your work stopped, what you finished, what you did not, and which deadlines now belong to them. It is the same document whether the client is leaving you or you are firing a client, and the same one some firms call a client termination letter.

Last reviewed against 4 primary sources.

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Disengagement letter

The full letter in Word and PDF, written for the United States, with the completed-work, deadlines, records and fees sections.

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

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It matters more for tax work than for most. A client who believes you are still handling their return will not file it, and a missed deadline after you stopped working is exactly the dispute the letter exists to prevent. It also settles the question the client will ask next: what happens to their records.

The template below is written for CPA firms and tax practices. It keeps the reason for ending the engagement out of the letter, because the letter does not need it and a reason in writing is one more thing to argue with.

What a disengagement letter has to say

Five things. Leave any of them out and the letter invites the argument it was written to prevent.

  1. 1

    The date the engagement ended

    One date, stated plainly. Everything after it is the client's, and everything before it is described in the letter. "We will no longer be able to assist" with no date is not a disengagement.

  2. 2

    What was completed, and what was not

    Name the returns filed, the periods closed and the work you started but will not finish. The unfinished list is the one that protects you.

  3. 3

    The deadlines the client now owns

    Give each upcoming filing or payment date you know of: the return on extension, the quarterly estimate, the payroll filing. The client should not learn from a penalty notice that you had stopped.

  4. 4

    What happens to the records

    The AICPA Code sorts records into client-provided records, member-prepared records, work products and working papers, and each has its own rule. Circular 230 adds a duty to return the records a client needs for their federal tax obligations. Say what you are returning, how, and by when.

  5. 5

    Fees and authorizations

    State the final invoice and anything still outstanding. If you hold a Form 2848 power of attorney, say that you are withdrawing from it, and then do it.

The disengagement letter

Written for United States. 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],

Our engagement has ended

This letter confirms that [Firm name] no longer represents [Client name] as of [end date]. Our engagement letter dated [date] ends on that date. We will not perform further services unless we both agree to them in writing.

Work we completed

Before [end date] we completed: [the [year] federal and [state] income tax returns, filed on [date] / bookkeeping through [month and year] / the financial statements for the year ended [date], issued on [date]]. Copies of these have been [provided to you / enclosed].

Work we did not complete

We did not complete, and will not complete, the following: [list, for example the [year] return, now on extension / payroll filings for the quarter ending [date] / the response to the notice dated [date]]. Responsibility for this work is now yours, or your new adviser's.

Deadlines you now need to meet

The following dates fall after [end date]: [the extended due date of [date] for the [year] return] / [the estimated tax payment due [date]] / [the payroll filing due [date]] / [the reply to the notice dated [date], due [date]]. We will not track these dates or remind you of them, and we are not responsible for penalties or interest if they are missed. Please give this list to your new adviser.

Your records

We will return the original records you provided to us [by [date] / enclosed with this letter / through our client portal]. [We will also provide [list any adjusting entries, schedules or other records we prepared that are not in your books].] We will keep copies of what we return, and our own working papers remain our property. We will retain our files for [number] years, in line with our retention policy.

Fees

Our final invoice for work through [end date], [number], is enclosed, for [amount]. [Invoice [number], dated [date], for [amount], remains unpaid.] Please pay within [number] days.

Tax authorizations

[We are withdrawing from the power of attorney (Form 2848) you gave us for [tax matters and periods], and will notify the IRS.] [We will also withdraw any authorization on file with [state agency].] After that, notices will go to you or to the representative you appoint.

If a new adviser contacts us

We will not discuss your affairs or share your tax return information with anyone, including a new adviser, without your written consent. If you would like us to speak with your new adviser, please tell us who they are and sign the consent we will send you.

Please keep this letter

This letter records the date our work ended and what remains to be done. Please keep it with your tax records. Thank you for the opportunity to work with you.

Sincerely,
[Name], [Firm name]

Enclosures: [final invoice / records list / returned records]

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.

Where disengagements go wrong

The extension nobody finished

The firm filed the extension in April and stopped working in June. The client assumed the return would follow. A deadlines section that names the October date turns that into the client's problem, in writing.

Records held for a fee

Holding the client's own documents until the invoice is paid feels like leverage. Under the AICPA Code and Circular 230 it is mostly not available, and it turns a collections problem into an ethics one.

The power of attorney still on file

The engagement ended, the Form 2848 did not, and notices keep coming to the firm. Withdraw from it when you disengage, not when the first letter arrives.

Other letters a firm sends

What it is Engagement letters Accounting Accounting Tax preparation Tax preparation Bookkeeping Bookkeeping

Questions about disengagement letters

Can we keep the client's records until our fees are paid?

Mostly, no. The AICPA Code gives no ground for withholding records the client gave you. It lets you withhold only records you prepared and work products, and only for fees due on that specific work. Circular 230 says a fee dispute generally does not relieve you of returning the records a client needs for their federal tax obligations. A state-law lien does not change the AICPA answer.

How quickly do we have to return records?

The AICPA Code says as soon as practicable, and, absent extenuating circumstances, no later than 45 days after the request. You may charge a reasonable fee for retrieving, copying and shipping, but you cannot withhold the client's own records because that fee has not been paid.

Do we have to hand over our working papers?

No. The AICPA Code treats working papers as the member's property. The records the client needs to complete its books are a different category: adjusting entries and supporting schedules you prepared that are not in the client's records are member-prepared records, and you should make them available unless fees for that work are unpaid.

Can we talk to the client's new accountant?

Only with the client's specific consent, under the AICPA's confidentiality rule. For tax return information, section 7216 sets its own consent requirements; see the Form 7216 consent page for the wording.

Do we have to give the client a reason for firing them?

Nothing requires one, and the letter is better without it. State the end date, the work and the deadlines. If you are ending the engagement because the client will not correct an error on a filed return, record separately that you advised them of it, as Circular 230 §10.21 requires.

How should we send it, and should a lawyer read it?

Send it in a way you can prove, and keep a copy with the client file. Return records in a usable format, whether paper or a client portal the client can download from. For a contentious exit, have your attorney or your professional liability insurer review the letter first.

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. AICPA AICPA Code ET 1.400.200 (Records Requests)
  2. IRS Circular 230 §10.28(a)
  3. IRS Form 2848 instructions
  4. IRS Section 7216 information center

What changed

  • Added an editable Word (.docx) copy of the letter beside the PDF.

Records leave. Your record stays.

When a client goes, the vault still holds every document they sent and every one you returned, and the audit trail shows who downloaded what and when. Retention is yours to set, on every plan.

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