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Clarifying my strongest political conviction

I clarified my strongest political conviction on the topic of immigration reform after the recent statistic in this week’s news that 1 in every 7 people here in this country today was born elsewhere. This is reported to be the highest ratio since the early 1920s. The majority of us  are living here in the U.S. today because our ancestors were immigrants who did not have pre-approval from the United States government to enter this country.

I refuse to accept the premise that any human being is entitled to a lesser portion of the world’s resources, wealth, jobs and opportunities that I enjoy based solely on the fact that they suffered the misfortune of being born on the other side of a man-made line that we call a border. This is not to say that illegal immigration is excusable, but rather the bigoted attitudes that persist in some Americans is fundamentally wrong and unacceptable.

Acceptance of my belief comes with the understanding that it will lead to a lower level of affluence for myself and my fellow citizens than the United States might have enjoyed otherwise. Yet I believe that the eventual dispersion of natural resources will happen in time as a function of economic law regardless of my (our) beliefs. Our only choice is whether we take the humane approach or the economic self-interest approach to eventually achieve the same end result. Either route, I’m afraid, will be chaotic and confrontational.

I recall the former Secretary of Agriculture in Maryland saying “If it were up to me, I’d open the border and close down the Mason-Dixon line”. Clearly he was right in that the range of differences among United Stated citizens, including our political beliefs about immigration, are greater than the differences between us and the citizens of other countries.

Some of this ties into my professional work for immigrants as detailed at

What I learned this week ending 12/6/2014

Local issues

I learned that the weapon cache firepower of my South Jersey neighbors greatly exceeds the weapons cache of our local police forces. There was never much cause to think about this issue in the past but with all the talk about riots this week…

It looks increasingly like something is not right with Kildare’s in Manayunk where Shane Montgomery partied before disappearing last week.

Attitude of gratitude in this season of giving

Comments from Philadelphia neighbors posted on an article about our lack of a ‘giving attitude’ caught my attention. A local newspaper said Philadelphia area people give less to charity than in other areas. Apparently we are not very generous around here. I may be in the minority who try to follow Luke 6:30 “Give to everyone who asks of you, and whoever takes away what is yours, do not demand it back” and Walt Whitman “This is what you shall do…give alms to everyone who asks”.

I am hugely impressed by the many Penn State students who stayed out in the rain yesterday for THON canning. I am inspired!

Online marketing vs. business building

I see that my long-term online strategy of ‘putting relevant, timely and valuable information in front of people who can use it’ actually works for building readership but not for developing business.  Those are separate issues. “Fame” and “fortune” don’t always walk together.

Health care reform implementation

Bankrate wrote that 82% of Americans who recently shopped for health insurance say that it’s just as bad as or even worse than doing your own taxes.

I responded that as a tax accountant who provides health insurance advice, I’m not getting a warm fuzzy feeling! I continued to receive many questions from consumers and professionals. Oddly, some of the questions from CPAs and financial professional seemed to convey less understanding of ACA than the questions from consumers.

I concluded that more than a million small businesses might be using non-compliant employee reimbursement tax accounting for 2014 and then had to explain that position in a separate blog post. It was an educational experience but even that exercise was not exhaustive; there are even more issues yet to consider. Those most at financial risk are companies with 50-99 employees who presumed that the exemption from mandatory employee health coverage for 2015 was automatic and may not actually qualify for the exemption.

The new U.S. Health and Human Services Secretary Sylvia Burwell has a problem with quotations and “sound bytes” taken by the press. She is quoted as saying “In one year we saw 10.3 million fewer adult Americans be uninsured”. Besides the grammatical error, the fact seems to be obviously wrong. I saw other quotations with grammatical or syntax errors. I shouldn’t cast stones; I’m even worse in this regard.

Year end tax planning

I am reminded to never trust political analysis reports. After newspapers concluded that the tax extenders for 2014 would not happen, I updated all my year-end tax advice articles under this assumption. Then the House of Representatives did pass a bill. I’ll just wait to see what happens in the Senate. The bigger picture is that these tax extenders are just about a complete waste of money if businesses can’t rely on them in advance to plan for increased expenditures earlier in the year.

I’m a little surprised and disappointed that I’m not getting more calls this year to set up year end pension plans for self-employed individuals. With the economy rebounding, more people are looking for last minute tax shelters.

Other articles I updated with tax news:

“What’s left to help reduce small business health plan costs?”


“Top 10 east tax shelters” at

 I learned that the Internal Revenue Code Section 221 that deals with student loan interest deductions is much more complex than it appears. As a practical matter, few people actually qualify for the student loan interest deduction because of the strict regulations. I suspect that a lot of people take the tax deduction anyway.

What I learned this week:

Despite the short work week abbreviated by the holiday, I learned quite a bit:

Web and social media

My ability to “pull” web traffic from search engines far exceeds my ability to “push” readership through social media platforms. That even includes paid promotion on social media to the extent that budget would allow for testing. I wrote about it at


My 13 year old small business web site  is undergoing a makeover intended to organize the 300+ pages and resources into four functional management areas: 1) taxes, 2) accounting, 3) healthcare and 4) financial planning. Also, the page layout is revised and simplified to be more friendly to mobile device users. The new web page format is done, more directories will be added. I suggest that other small businesses may want to consider some of these same issues with their own web sites.


If you’ve invested time to developing content online, is it being read and does it contribute to your bottom line? A particularly good article on this topic appeared this month in Harvard Business Review, "Why No One’s Reading Your Marketing Content", by Jayson DeMers, November 14, 2014,

Here are my notes in digest version:

- "only a quarter of content marketers actually invest in distribution, even though more than half recognize that it’s a critical need. ",

- "search contributes about a third of the traffic that websites receive" (my experience has been 85% to 90% but I don’t know why other firms have a different experience)

- "The principles of good search-engine optimization (SEO) must be applied to every piece of content as you create it, not just after-the-fact, in the metadata".

- “brand journalism” = "using good writing and storytelling techniques to create high-quality marketing messages"

- Paid distribution – Press release services and tools such as Outbrain enable you to get your content onto major platforms

- Services that focus on interest group distribution:,,

- Relationships with influencers – Who are they? What do I want them to do?

- Measurement and monitoring: Google Analytics (My comment: I think this is the fox watching the hen house. I use Sitemeter for monitoring instead. Maybe this is just a CPA/auditor’s mentality).

My comment posted following the article’s web page observes that readership may only be the first step but is not the magic bullet to online marketing. In my case building online readership has been relatively easy in the sense that traffic has grown without any great effort on my part (I haven’t done any of the things suggested in the article). Converting content readers it to paid business is much more challenging IMO.

Trademark enforcement

Trademark enforcement can be an enormous challenge to a small business. I was successful in using social media’s fair use policies to put pressure on  trademark violator. Freedom Benefits went after a company in Alabama marketing under the name “my Freedom Benefits”. It’s not easy, but I am learning what works and how to use the tools effectively. In hopes of avoiding problems in the future, I expanded to include reference to all my 50 state and DC insurance licenses.

I verified that our traffic is distributed in accordance with US population, i.e. we serve all areas equally. This screenshot shows one day’s visitors.


Employee benefits

Taxation of employer-provided health benefits is a lot trickier than it used to be, thanks to the Obama administration pushing its new vision of how the landscape ought to look. I put out a summary article at

Related to this, the list of “essential” points about health reimbursement plans grew to an unmanageable 18 at I don’t know how to make the article more readable.

Tax planning

An interesting and important tax law case of interest to contractors was decided earlier this month and I just read the brief last night. A building contractor in Idaho spent about $80,000 per year sponsoring his son’s in motocross racing activities. The deductions were denied by IRS but then ultimately upheld by the tax court. The case is important for its educational value on the distinctions between allowable and disallowed Section 162 business deductions, Section 179 asset purchase deductions and Section 6662 accuracy related tax penalties. I expect that accountants who focus on these tax issues for small businesses will cite this case referred to as "Evans vs. Commissioner" in their advice to clients. I have the PDF of the brief if somebody wants to read it.

Non-profit ought to be doing more to encourage donations of boats and vehicles by helping donors with the tax donation paperwork.

FP had this to say: “

When individuals donate cars or other forms of property valued between $500 and $5,000, they must file IRS Form 8283 for tax deductions. If the client wishes to donate a car, he or she needs to describe the condition of the car and explain how its value was determined. If another form of property is being donated, the client needs to state how and when it was initially obtained.

Clients also need a receipt from the charity, along with written documentation indicating whether the property will be sold or used by the organization. Deductions of more than $5,000 require written appraisals from qualified professionals.

Donors themselves have to keep track of the documentation for such donations in the event of an IRS audit, and can’t rely on the charity”



Financial planning (an unfinished article)

Financial planning for dramatic life change

Like many of my MBA business school peers in the go-go years of the early 1980s, my personal financial goal was to generate enough net worth and income to retire at age 55. I made a plan; I followed it; and it was mostly successful. But what I failed to consider was the devastating impact of events that I did not plan for. As a result, I am restarting a financial plan at age 54 from scratch when I expected to be done by now.

The three life events that most dramatically affect personal financial plans are parenthood, disability and divorce. I experienced all three in the first decade of my working career. In addition, my financial results were even more severely impacted by two additional factors: violent crime and hurricane Sandy. I was the target of a criminal assault that resulted in a second extended period of disability in my peak career years. Then, most recently, the combined effect of sea level rise and hurricane Sandy devalued my real estate.

So the two most significant questions are: 1) What can you do to prepare for these types of events and 2) What can be done to recover from them? This is what I’ve learned so far.

Robust Mental Health

It is absolutely clear to me that the most important factor in my ability to adjust and succeed is robust mental health. Now I’m not saying that I’ve actually been a model of robust mental health but I am saying that I’ve learned that it is the most important factor to ultimate success.

In a nutshell, I’ve learned the importance of following the serenity principle: "Change the things you can, accept the things you cannot change and learn to know the difference. After my recent injury I had to learn the lesson taught by author/doctor Claudia Osborne:

I know that other people feel inspired by my story of physical, career and financial recovery. I don’t feel inspired, I just feel like I have more pressure to perform now to make up for the lost time. Beyond that, I don’t presume to have anything to share on the topic of mental health. I just know that it is the most important factor in rebounding from the impact of unanticipated events like this.

Impact of unplanned events runs both directions

The impact of unplanned events can be positive as well as negative. The fact is that our projections of the future’s finances are only guesses We really don’t know. I have been the beneficiary of a financial windfall in the past and it is reasonable to think that I might be the beneficiary of other unknown events in the future. I would definitely agree with those you say that luck favors the well-prepared. By being active, "out there" and fully engaged in life I increase the potential of benefitting from future unknown events.

Planning may be foolishness

I am willing to accept the proposition that financial planning is folly.


The marina

Things are looking up ever-so-slightly for the battered recreational fishing industry. I posted this on Facebook page:

What Money Island Marina has to be thankful for this Thanksgiving:
1. Our great customers and community
2. Bruce, simply the best marina manager around!
3. The 25% reduction in Atlantic commercial striped bass harvest for 2015. This huge reduction in commercial harvest by ASMFC is the best thing to happen to mid-Atlantic recreational fishermen in decades.
4. The ongoing success of the summer flounder management system that is improving numbers and size of catch.
5. Lower gas prices that now appear will remain low throughout the 2015 boating season.
6. Our physical capabilities to extend the boating season from March into December since the big fish seem to come early and later each year.
7. community, the best local fishing forum on the web! We will be posting more stories and photos on NJanglers and less on Facebook in 2015.


We’re still working on completing our Clean Marina Certification and I ran into Robert Smith at 757-392-3644 who might be able to help with marina safety requirements. Meanwhile, I’m working on an essential loan application with New Jersey Economic Development Authority.


Hopefully the last preparations before winter are underway with two super-strong and expensive stainless steel piling guides that will keep our fuel station docks (the most vulnerable to violent storms) from destroying the new piling.


Apparently the big stripers are still coming into the bay and might be here before Christmas! (sigh)


Personal health

I’m trying a new morning routine with 15 minutes of no screen time adding:

  1. Lemon water
  2. Set and affirm goals
  3. Stretch
  4. meditate

estimating defined benefit contributions

I was impressed by estimator for maximum defined benefit contribution. The proposal it generates is simple. The discussion that must accompany the planning for this type of strategy is not simple. I know most people who consider a new pension plan are largely unaware of the risks, cost and potential downsides.

So A tool like this lets the CPA focus more time on the planning discussion and not the number-crunching function.





How to choose a financial adviser

This blog post is revised from an article that I originally published in 2006 and is reproduced at At that time I operated as an independent Registered Investment Adviser. Since then, I’ve simplified and automated investment client advisory functions to the point where I presume that separate RIA registration is not required. Now, as then, differences of opinion continue on specific approaches to investment management.

Jonathan Clements, the former personal finance writer for the Wall Street Journal, published a memorable line in an article on May 31, 2006.  While I enjoyed all of his columns, I feel that few financial advice articles – by him or anyone else – have enough sharp edge to trigger the type of emotional response that could actually influence personal behavior.  This article was clearly different.  He hit a nerve with both advisers and their investor clients with this fabulous line:

“The problem with our business is that 98% of investment advisers give the rest of us a bad name.”

Funny, but so true.  The sad thing is that 98% may actually be generous to the advisers.  I recently returned from a gathering in Florida of more than 1,000 fee-only independent investment advisers to learn that I was the only member of the group who was 100% hourly with no asset charges.  That meant that 99.9% were primarily charging asset-based fees1 for managing clients’ money!

“Fee only” advisers are supposed to be the cream of the crop (or at least we act like this is true).  Most are experienced, successful and are somewhat immune from the production and sales pressure of an account representative at a bank or a broker at investment wire house.  All of these are commendable.  But virtually all of these advisers charge well more than they could possibly add to a client’s net worth so, in that sense, they are hurting their clients.  Fees have such am impact that Clements makes a good case that the average client of a financial planner could achieve better results investing in Treasury bonds2.

Clements concedes that most people are not fit to manage their own money and that most financial planners are not ill-intended crooks.  There is overwhelming data to support both of these starting points.  But that still leaves a lot of middle ground open for grabs in the financial planning industry.  When choosing a financial adviser, I suspect that most people are likely to be more impressed by a firm’s marketing brochure or office space than in the actual details of the service being offered.

Clements advocates that clients should heed these five principles when choosing a financial adviser (these are his criteria, not mine):

1) Use only hourly fee advisers.  Since the original publication of the column and this article, hourly advisers have become fewer but flat fee advisers have become more common. This article revision lumps hourly fees together with flat fees. Avoid advisers who charge commissions or asset-based fees. This seems like an obvious advantage to investor clients, yet few investors actually take advantage of this approach. Is it because the commission based people are more numerous or because they are better marketers? One thing that is clear: the large majority of advisers charge commissions and asset-based fees. It is easy to calculate that these fees are larger than hourly fees or flat fees.  This explains why less than 1 in 1,000 advisers charges only hourly fees.  Hourly based financial planning is not the road to wealth for the adviser, but it certainly represents the best model for the industry and at least a fair level of compensation for advisers.

2) Use an adviser with adequate formal education.   The most common designations in the industry are CFP and CPA-CFS.  I am not personally thrilled with the recent practices of the sponsoring organizations of either of these designations but this is not any reflection on the on the quality of the professional mark itself. I’d prefer to see more advisers with an advanced academic degree. I see far too many advisers who can pass online tests but not be able to develop “real world” solutions.  I would suggest that clients should look for an adviser with impressive credentials from an impressive educational institution.  IMO, an adviser with a B.S. degree from Wharton (University of Pennsylvania’s business school), for example, combined with adequate work experience, is better prepared to provide diverse advice to clients than a typical CFP earned through self-study and online testing.

3) Use advisers who act in a fiduciary capacity.  This means that the adviser acts in your best interest. Obvious, right?  Not so. Under the recently passed SEC rule known as the  “Merrill Lynch rule”, financial firm representatives are now required to disclose that they are not required to act in their clients’ best interest but rather that their primary role is to sell investments and that any advice they provide is only incidental and in support of to their main role of selling investments. The only legal requirement for financial planners regarding advice given is that they not recommend unsuitable investments. This comes as a shock to clients who actually take the time to understand this distinction but few actually do. Besides, the technicalities of this rule make it hard to grasp the issue; I am not sure that Jon Clements even understands that an adviser does not “choose” to be a  fiduciary but rather this is designated by the factual and legal climate in which the adviser operates. An Registered Investment Adviser who operates as an hourly fee is automatically required to act in a fiduciary capacity.

4) Use an adviser who is well-versed in areas other than investments. A good adviser can add value by saving money on mortgages, taxes, college costs and estate planning. In fact, over the long-term, the value of service provided in these other areas will clearly outweigh the value added in providing investment advice.

5) Keep total cost under control.  Whether you are paying a mutual fund fee, a tax preparer’s fee, a commission or a financial planner’s charge, all of these add up to reduce your net results and hinder the long-term growth of you net worth. Set a goal of keeping all of your professional charges – both the exposed and the hidden charges – to less than 1% of your total net worth. This might be too difficult a goal for some at the beginning the financial accumulation stage of life, but it is a worthy long-term goal for every investor.



1 Asset-based fees are recurring charges that come out of an investment account, usually ranging from one to two percent of the account value each year.  They may be referred to as “built-in” or “hidden” but financial firms imply that these fees are more desirable than commissions.  In fact, these fees are considerably more than ordinary investment brokerage commissions over the long-term.

2Clements uses the simple illustration that is the average balanced investment portfolio of stocks and bonds returns an average gross rate of 7% per year (in accordance with historical data) and adviser firms charge 2% (whether these are built-in fees or the adviser’s direct charges), then the net return of 5% is lower than an investor could have achieved by buying Treasury bonds without any professional help.

Editorial note added 3/9/2010: In his final column published before retiring from his position at the Wall Street Journal, Jon Clements stated that the only people likely to remember him ten years after his death are his two children. I think he underestimated the influence that he had on some of his readers. I will very likely remember Jon and appreciate the lessons learned from his column for the rest of my life.

keywords:   choosing a financial adviser

related topics:

Surprise announcement by DOL affects small business health care planning

I didn’t see this one coming either:

A small business employer who gives an employee money to help pay for the cost of Obamacare under any circumstances is considered to have set up an illegal group benefit plan that may trigger penalties under the Affordable Care Act. The warning is titled “FAQs about Affordable Care Act Implementation (Part XXII).
That’s the extreme out-take of this recent (November 6, 2014) warning by the U.S. Department of Labor. I wrote about it here:

Tax planning engagement letter for individual clients (revised)

I am working on updating and expanding my tax planning engagement letter for individual clients to encompass more complex planning situations. I’ve used a one page letter in the past but that no longer seems suitable especially for small business owners and professionals with multiple business interests. In this situation, more is better when it comes to communicating complex topics. Please consider that this engagement letter is a work in progress and that this blog post is published primarily for the purpose of seeking input from other professionals.

I don’t mind if anyone else uses the letter in whole or in part. Parts of the letter come from other professionals or were published in the public domain for the same purpose. As always, I appreciate comments and feedback.


Date, 2014




Dear xxxxxxxxxx:

I am pleased to offer my services for income tax planning including the preparation of a pro forma tax return for the calendar year 2014. This letter will confirm our understanding of the terms and objectives of this engagement and the nature and limitation of the services I will provide.

Pro Forma Tax Return

I will prepare a pro forma tax return based on information of the prior year’s tax return and estimates of the current tax year that you provide. The purpose of a pro forma tax return is to:

1) estimate your future federal and state income tax liability

2) allow us to test tax various planning proposals that may be considered using a “what if” approach to see their net impact on tax liability

3) identify the limitations posed by the interplay of different sections of tax law. For example, to identify the impact of the Alternative Minimum Tax on tax planning proposals or the different effects of state and federal limitations on deductions.

4) serve as the basis to lower the cost and time required to prepare the actual tax return filing. The cost of the actual return preparation may be less than the cost of the pro forma return.

To be most effective, a pro forma tax return should be prepared before the end of the tax year, the earlier the better.

I will depend on you to provide the information I need to prepare complete and accurate returns. I may ask you to clarify some items but will not audit or otherwise verify the data you submit. An Organizer is available to help you collect the data required for your return. The Organizer will be provided you’re your acceptance of this engagement proposal to help you avoid overlooking important information. By using it, you will contribute to efficient preparation of your returns and help minimize the cost of my services.

I will perform accounting services only as needed to prepare your tax returns. My work will not include procedures to find defalcations or other irregularities. Accordingly, my engagement should not be relied upon to disclose errors, fraud, or other illegal acts, though it may be necessary for you to clarify some of the information you submit. We will, of course, inform you of any material errors, fraud, or other illegal acts I discover.

The law imposes penalties when taxpayers underestimate their tax liability. Please call me if you have concerns about such penalties.

Should I encounter instances of unclear tax law, or of potential conflicts in the interpretation of the law, I will outline the reasonable courses of action and the risks and consequences of each. I will ultimately adopt, on your behalf, the alternative you select.

My fee will be based on the time required at standard billing rates plus out-of-pocket expenses. Invoices are due and payable upon presentation. To the extent permitted by state law, an interest charge may be added to all accounts not paid within thirty (30) days.

I will return your original records to you at the end of this engagement. I should securely store these records, along with all supporting documents, canceled checks, etc., as these items may later be needed to prove accuracy and completeness of a return. I will retain copies of your records and our work papers for your engagement in electronic format for at least seven years, after which these documents may be destroyed.

Our engagement to prepare your 2014 pro forma tax returns will conclude with the electronic delivery of the completed pro forma returns to you. No signature will be required on a pro forma tax return.

If you later select to have me e-file your returns with our office, you will be solely responsible to file the returns with the appropriate taxing authorities. Review all tax-return documents carefully before signing them.

To affirm that this letter correctly summarizes your understanding of the arrangements for this work, please sign the enclosed copy of this letter in the space indicated and return it to us in the envelope provided.

Objectives and Limitations

The objective of my engagement is to estimate your federal and state tax liability and prepare a reasonable basis to consider the impact of additional tax planning proposals that may be considered either before the year end or before the tax filing date.

Some tax planning measures must be implemented before the end of the tax year to be effective for 2014 so time is of the essence.

I will utilize information that is your representation without undertaking to obtain or provide any assurance that there are no material modifications that should be made to your financial statements and accounting records in order for the statements to be in conformity with general accepted accounting principles (GAAP) and applicable tax law.

You are responsible for:

  • The preparation and fair presentation of the financial statements and accounting records in accordance with GAAP and applicable tax law.
  • Presenting any forward-looking financial statements or projections that may affect tax planning.
  • Designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements and accounting records.
  • Preventing and detecting fraud.
  • Identifying and ensuring that any included business entities comply with all applicable laws and regulations.
  • Making all financial records and related information available to me.

You are also responsible for all management decisions and functions, and for designating an individual with suitable skill, knowledge, or experience to oversee the services I am to provide. You are responsible for evaluating the adequacy and results of the services performed and accepting responsibility for such services.

I am responsible for preparing the pro forma tax return as presented and as would be under various scenarios that we may consider and conducting the engagement in accordance with SSARs issued by the AICPA.

A pro forma tax return differs significantly from an actual tax return review or an audit of the financial statements. A compilation does not contemplate performing inquiry, analytical procedures, or other procedures performed in a review. Additionally, a compilation does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; testing accounting records by obtaining sufficient appropriate audit evidence through inspection, observation, confirmation, or the examination of source documents (for example, cancelled checks or bank images); or other procedures normally performed in an audit.

Accordingly, I will not express an opinion or provide any assurance regarding the financial statements being compiled.

This engagement cannot be relied upon to disclose errors, fraud, or illegal acts. However, I will inform the appropriate level of management of any material errors and of any evidence or information that comes to my attention during the performance of my compilation procedures that fraud may have occurred. In addition, I will report to you any evidence or information that comes to my attention during the performance of my compilation procedures regarding illegal acts that may have occurred, unless they are clearly inconsequential.

I have no responsibility to identify and communicate deficiencies in your internal control as part of this engagement.

This engagement is not meant to address tax liabilities other than the current year’s income tax. Specifically, this engagement will not consider wage tax issues, estate taxes or prior year tax issues.

Due Professional Care

A pro forma tax return does not meet the needs of other external users, who may require additional information and assurances on the tax return, internal control, and compliance with laws and regulations. You should consider whether additional testing of stated amounts and presentations, controls, and compliance are necessary to supplement the presentation of this information and to meet the reasonable needs of external users. These additional needs of external users are quite often met by:

An audit of financial statements conducted in accordance with Government Auditing Standards,

Supplemental (or agreed-upon) procedures, or

An examination of compliance or internal control resulting in an opinion.

If during the performance of my engagement I become aware that a pro forma tax return will not satisfy the requirements of all external users, laws, and regulations, I will notify you as soon as this comes to my attention. I will then submit another engagement letter for your approval that complies with the applicable requirements.

I am available to discuss the expanded needs of external report users, the nature of the expanded examinations, and the degree to which these type examinations, or other examinations, will meet the needs of the district and its report users.

Timing of Engagement 

It is my understanding that the accounting records will be available to me immediately. I anticipate that the engagement will commence no later than three days after the accounting records are provided and that the pro forma tax return will be returned to you no later than ten days after the accounting records are provided.

Reporting Package

My work product, referred to as the reporting package, will consist of the pro forma tax return including all schedules that are available at this time, one or more alternative pro forma tax returns as you may request reflecting one or more tax planning strategies. The details of the alternative pro forma tax returns are not known at this time but we expect that they may involve the inclusion of one or more tax-qualified retirement plans, non-qualified deferred compensations plan and transfer of ownership of business asset(s).

My explanation of any estimates used in preparing the pro forma return.

I will assist you in the preparation of the data collection form, management’s corrective action plan, if applicable, and the summary schedule of prior year findings, if applicable.


During the course of my engagement, it is possible that I may observe opportunities for economies of operation, for improved internal administrative and accounting controls, or I may observe variances with applicable laws and regulations or other matters that should be brought to your attention. My comments and recommendations concerning such matters, if any, will be conveyed to you in written form.

Prior Comments and Recommendations

My engagement will include a review of the prior year tax return. As to any current-year recommendations, suggestions, and/or comments, I will afford you the opportunity to respond to such matters and include your response in management’s corrective action plan.

Engagement Completion

At the completion of my engagement, I will send you one electronic copy of the pro forma tax return in pdf format.

If I find events subsequent to the issuance of my reports that would cause us to reissue the reports, I shall reissue the reports in the same fashion and to the same individuals and organizations as the original reports.


You will be notified immediately in writing if I withdraw from the engagement or if the engagement is cancelled, and will include all substantive reasons for the withdrawal or cancellation.

You will be notified immediately, in writing, if there are any changes in this agreement or if there are any restrictions placed on me during the engagement, to include failure to provide the appropriate books and records in a timely manner or denial of access to appropriate books and records, that would impact the scope of the engagement or the nature of the tests required under the previously discussed standards.


The fee for this service is $450, payable in advance.

This fee agreement is based on the assumption that you will provide assistance, anticipated cooperation from your personnel, and the assumption that unexpected circumstances will not be encountered during the engagement. If significant additional time is necessary, I will discuss it with you and arrive at a new fee estimate before I incur the additional costs. Any amendments to the not-to-exceed amount of the fees will be in writing and signed by both my firm and by you. My invoices for these fees will be rendered each month as work progresses and are payable upon presentation.

If you elect to have me e-file your actual tax return at a later date, the cost of that service will likely be less than would have been the case without the preparation of the pro forma tax return. The actual cost will be determined at that time based on the amount of additional work required and will be confirmed in a letter similar to this letter.

If a multi-year engagement is entered into, all outstanding invoices for work performed during any prior engagement will be paid in full before work commences on the current engagement.

Engagement Documentation

It is understood that my engagement documentation is confidential information. However, I will make my engagement documentation available to any successor auditor. I will follow the legal requirement regarding confidentiality of engagement documentation when giving access to engagement documentation to any parties other than those previously named individuals and organizations.

I will retain copies of the pro forma tax return and engagement documentation for at least five years.

Personnel and Privacy

I will personally handle all aspects of the engagement, and will exercise overall control and management of the engagement. I do not anticipate disclosing your information to any other person or entity or using any other personnel or subject matter experts at this time. If my work plan changes, I will notify you in advance in writing.

If I later recommend that my work should include the presentation of your personal, private or tax information to any other person or entity then this disclosure will be presented to you in writing and will not be attempted without your written approval.

Other Services

You may request that I perform additional services not contemplated by this engagement letter. If this occurs, I will communicate with you regarding the scope of the additional services and the estimated fees. I may also issue a separate engagement letter covering the additional services. In the absence of any other written communication from us documenting such additional services, my services will continue to be governed by the terms of this engagement letter.


I appreciate the opportunity to be of service to you, and believe that this letter accurately summarizes the significant terms of this engagement. If these comments and arrangements meet with your approval, please sign below and return the agreement to me.



I look forward to working with you.


Very truly yours,

Tony Novak




Accepted By:    






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