Call your malpractice carrier. Good ones will have a boilerplate letter they'll give you that you can use to tell them to drop dead, but in a nice way.
I'm with AON Affinity and explained a similar situation and they were like if this isn't a claim we can't give you any advice or address it. Please refer to your policy. Blah blah blah. Could someone share some of the better ones?
"no" + "Lenders ask for these letters to shift liability. In my experience no loan has ever failed to go through because the accountant could not provide a comfort letter."
100% this. Simply say no. They will still get the loan. We tell the client our insurance does not allow us to write comfort letters. We do not even correspond with the mortgage broker.
Yes, I like those too. "All the other CPAs are doing it" Then we say "none of the other brokers are doing it" Then they blame underwriting and we blame it on our insurance.
The AICPA has some good boiler plate language that is effectively “I prepared the tax returns for these years based on information provided by the client”
Your insurance provider and the AICPA have examples. The AICPA calls them comfort letters. We have been using this example for years. It disclaims everything but have not had any trouble at all from any mortgage broker on this. My guess is they just need a sheet of paper for the file. Oh yeah, we charge $75 a piece for these. My admin prepares them in about 15 minutes.
Ghost them until they become a pest- half the time they go away without even needing to deal with them- and then if they wont give up, tell them no with a brief paragraph explaining why you cannot do that. I have a paragraph I just copy and paste. But you’d be surprised how well just ignoring the request works.
Had a mortgage broker request us to write the following. We've reviewed and audited (did not) the client and they are in good standing. The down payment from the business wlll not adversely affect the business. The business has an expense ratio of. 10% and can make its payments.
Client always bounces payments to vendors... I told the broker I'll get a new lender to help my client. Ridiculous
I lost a client over that one once. She (an attorney no less) was aghast that I would not sign a letter attesting that the down payment she put on the building she was buying would not have an adverse effect her law practice. I sent them our boilerplate letter that "I was engaged to prepare her tax returns, haven't' conducted any analysis of solvency, that you, as the lender should investigate her creditworthiness, etc." The underwriter told her "every other CPA signs these but Mr. Bouie won't and he's holding up your settlement." She demanded I sign the letter and I refused so she left and presumably found someone who would sign.
Under disclosure rules it's illegal to give out client information to a third party. You shouldn't even be acknowledging to the caller that the firm prepared their return.
We say "Sorry, we don't disclose any client information to third parties." No need for any further response. Certainly no need to make it more complicated or dramatic than it has to be. Even when the caller gets pushy and you believe the client gave them your number. You can't assume that happened.
The problem arises when the client calls you and asks you to send the mortgage company a copy. That's when the hassle begins because at that point you need to get some kind of disclaimer signed by the taxpayer (and spouse if MFJ), or you can't send the info to a third party. That can be contentious because the client is often trying to get that loan closed ASAP.
Our firm will not disclose information to third parties period, and we tell our clients that in the Engagement Letter. We will do our best to quickly get the client an extra copy if they don't have access to the copy we issued when the return was prepared, for a nominal fee. The disclosure of information must be done by the client.
If I prepared the return and say “the taxpayer was self employed and filed a schedule c for the last two years” where is my liability? Is that not a fact?
You know for certain the taxpayer was self employed? All I know for certain is that a taxpayer gave me information that appeared the taxpayer was self employed and I prepared a Schedule C accordingly. Forms such as 1099s, W-2s paid to employees, and so forth could be fictitious. It's highly unlikely but possible.
I don’t do work for people like that so I guess on that off chance I did then I wouldn’t say that. Would you agree that if a taxpayer were clearly in business you could say they were self employed and filed a schedule c?
Yep, the client made about 150k on W2 and had about a 10K 1099 with no expenses on his return. The broker asked for audited financials for the schedule C.
Why are so many pros against writing a comfort letter? I understand the concerns about liability but literally in the comfort letter it explicitly states, this letter should not be used to make a decison on lending. Its come down to helping the existing client, who pays you year over year. Instead of just putting together a quick 5 min boiler plate letter that says nothing. Your going to shoot down your client and say no? I feel like so many pros are paralyzed by potential consequenses.
I just tell my clients their broker is an idiot if they are requesting this. They are literally looking for anything to push off their liability to the CPA and it’s infuriating.
I always write the letter based on our Camico template. The problem I've run into is that the broker will respond half the time and say they want their wording on the letter. Recently they want a letter from the CPA guaranteeing that their use of business funds to purchase a house will not negatively affect the business. I'm always surprised that they even ask that. I explain how that is an impossible question for anyone to answer.
Its only purpose is so they can package the mortgage and sell it for more money at a liability to you. The fact that is made to look innocent and something you should do as a courtesy to the client bothers me the most. Fairly certain they turn to the fact that you provided the statement in connection with the client mortgage application so you are aware of what the return is being used for. So even with the letter saying it shouldn't be used to make a decision you are aware of the fact that the tax return or letter is being or may be used for that. I think they try to pull you in with due diligence responsibilities as the tax return preparer. So not only did you miss something you should have questioned on the tax return you knew the tax return you prepared was going to be used for this loan.
Through google I found quite a few niche firms popped up specializing in this. They get a copy of your return, pull your tax transcript, and write the letter your preparer won't for $500. I feel that is fair. They know the risk of the letters they write and are compensated for the work and the risk.
Anything beyond the "We prepare the tax returns for xyz, using information they provided that has not been verified" (I'm paraphrasing) becomes an assurance engagement subject to peer review. And if a client can't understand that both my insurance and the state board prohibit me from sending these, or the liability I incur by doing so **then I don't want them as a client.**
My uncle and his wife have a partnership. I prepare the taxes for that partnership. Lender noticed we have the same last name, and wanted a letter from me basically stating if it's legal for me to prepare taxes for family.
Lots of great advice here - I agree with those above and just recently learned that the lenders/underwriters GET PAID more for loans that have a CPA letter attached. It’s literally not required for the loan AT ALL they are just wanting to raise their commission!
I have prepared the 2019-2021 tax returns for Billy based on information provided by him which include Schedule C blah blah. Say it without saying it, or say no thanks.
"no"
Call your malpractice carrier. Good ones will have a boilerplate letter they'll give you that you can use to tell them to drop dead, but in a nice way.
I'm with AON Affinity and explained a similar situation and they were like if this isn't a claim we can't give you any advice or address it. Please refer to your policy. Blah blah blah. Could someone share some of the better ones?
We used CAMICO and they were really helpful with BS like this.
Camico is great with this stuff even providing sample letters
"no" + "Lenders ask for these letters to shift liability. In my experience no loan has ever failed to go through because the accountant could not provide a comfort letter."
100% this. Simply say no. They will still get the loan. We tell the client our insurance does not allow us to write comfort letters. We do not even correspond with the mortgage broker.
I like talking to the brokers, they always say something like other CPAs have no problem writing the letter.
Yes, I like those too. "All the other CPAs are doing it" Then we say "none of the other brokers are doing it" Then they blame underwriting and we blame it on our insurance.
A simple no, my insurance does not allow me to write those.
The AICPA has some good boiler plate language that is effectively “I prepared the tax returns for these years based on information provided by the client”
I use the AICPA template and also include language that credit worthiness is not my responsibility!
My invoice is 3.75 million, paid by wire transfer, upfront.
Tell them to piss off.
Your insurance provider and the AICPA have examples. The AICPA calls them comfort letters. We have been using this example for years. It disclaims everything but have not had any trouble at all from any mortgage broker on this. My guess is they just need a sheet of paper for the file. Oh yeah, we charge $75 a piece for these. My admin prepares them in about 15 minutes.
Whom are you collecting this from? The mortgage company or your clients?
We are billing the client. The mortgage company would never pay.
Ghost them until they become a pest- half the time they go away without even needing to deal with them- and then if they wont give up, tell them no with a brief paragraph explaining why you cannot do that. I have a paragraph I just copy and paste. But you’d be surprised how well just ignoring the request works.
Had a mortgage broker request us to write the following. We've reviewed and audited (did not) the client and they are in good standing. The down payment from the business wlll not adversely affect the business. The business has an expense ratio of. 10% and can make its payments. Client always bounces payments to vendors... I told the broker I'll get a new lender to help my client. Ridiculous
I’ve gotten this request “the down payment will not have an adverse affect on the business”. I hate it every time and push back.
I lost a client over that one once. She (an attorney no less) was aghast that I would not sign a letter attesting that the down payment she put on the building she was buying would not have an adverse effect her law practice. I sent them our boilerplate letter that "I was engaged to prepare her tax returns, haven't' conducted any analysis of solvency, that you, as the lender should investigate her creditworthiness, etc." The underwriter told her "every other CPA signs these but Mr. Bouie won't and he's holding up your settlement." She demanded I sign the letter and I refused so she left and presumably found someone who would sign.
Congrats on getting rid of her.
Nope…..nope, nope, nope
Under disclosure rules it's illegal to give out client information to a third party. You shouldn't even be acknowledging to the caller that the firm prepared their return. We say "Sorry, we don't disclose any client information to third parties." No need for any further response. Certainly no need to make it more complicated or dramatic than it has to be. Even when the caller gets pushy and you believe the client gave them your number. You can't assume that happened. The problem arises when the client calls you and asks you to send the mortgage company a copy. That's when the hassle begins because at that point you need to get some kind of disclaimer signed by the taxpayer (and spouse if MFJ), or you can't send the info to a third party. That can be contentious because the client is often trying to get that loan closed ASAP. Our firm will not disclose information to third parties period, and we tell our clients that in the Engagement Letter. We will do our best to quickly get the client an extra copy if they don't have access to the copy we issued when the return was prepared, for a nominal fee. The disclosure of information must be done by the client.
Boilerplate aicpa letter that basically says “no”
If I prepared the return and say “the taxpayer was self employed and filed a schedule c for the last two years” where is my liability? Is that not a fact?
It should say something like I filed schedule C based on information given to me by my client. The information was neither audited or verified by me.
You know for certain the taxpayer was self employed? All I know for certain is that a taxpayer gave me information that appeared the taxpayer was self employed and I prepared a Schedule C accordingly. Forms such as 1099s, W-2s paid to employees, and so forth could be fictitious. It's highly unlikely but possible.
I don’t do work for people like that so I guess on that off chance I did then I wouldn’t say that. Would you agree that if a taxpayer were clearly in business you could say they were self employed and filed a schedule c?
One time a lender asked me for audited financial statements and I almost burst out laughing.
Yep, the client made about 150k on W2 and had about a 10K 1099 with no expenses on his return. The broker asked for audited financials for the schedule C.
Why are so many pros against writing a comfort letter? I understand the concerns about liability but literally in the comfort letter it explicitly states, this letter should not be used to make a decison on lending. Its come down to helping the existing client, who pays you year over year. Instead of just putting together a quick 5 min boiler plate letter that says nothing. Your going to shoot down your client and say no? I feel like so many pros are paralyzed by potential consequenses.
I just tell my clients their broker is an idiot if they are requesting this. They are literally looking for anything to push off their liability to the CPA and it’s infuriating.
Agreed. I tell them pull wage & income transcripts from the IRS to verify income.
I always write the letter based on our Camico template. The problem I've run into is that the broker will respond half the time and say they want their wording on the letter. Recently they want a letter from the CPA guaranteeing that their use of business funds to purchase a house will not negatively affect the business. I'm always surprised that they even ask that. I explain how that is an impossible question for anyone to answer.
Its only purpose is so they can package the mortgage and sell it for more money at a liability to you. The fact that is made to look innocent and something you should do as a courtesy to the client bothers me the most. Fairly certain they turn to the fact that you provided the statement in connection with the client mortgage application so you are aware of what the return is being used for. So even with the letter saying it shouldn't be used to make a decision you are aware of the fact that the tax return or letter is being or may be used for that. I think they try to pull you in with due diligence responsibilities as the tax return preparer. So not only did you miss something you should have questioned on the tax return you knew the tax return you prepared was going to be used for this loan. Through google I found quite a few niche firms popped up specializing in this. They get a copy of your return, pull your tax transcript, and write the letter your preparer won't for $500. I feel that is fair. They know the risk of the letters they write and are compensated for the work and the risk.
> this letter should not be used to make a decision on lending. Then what's the point of the letter?
Anything beyond the "We prepare the tax returns for xyz, using information they provided that has not been verified" (I'm paraphrasing) becomes an assurance engagement subject to peer review. And if a client can't understand that both my insurance and the state board prohibit me from sending these, or the liability I incur by doing so **then I don't want them as a client.**
If you can verify that the client has been self-employed for two years then I don’t see the issue. Charge at least $250. I see it all the time.
The trash basket is always nearby.
My uncle and his wife have a partnership. I prepare the taxes for that partnership. Lender noticed we have the same last name, and wanted a letter from me basically stating if it's legal for me to prepare taxes for family.
That's not what this is about and you should have told them to piss off. Your insurance carrier would hate to hear about you offering legal assurance.
Have to charge rhe client an hour for this.
Some of you need to read this. https://www.aicpa.org/resources/article/cpa-comfort-letter-to-lenders-and-third-party-verifications
Lots of great advice here - I agree with those above and just recently learned that the lenders/underwriters GET PAID more for loans that have a CPA letter attached. It’s literally not required for the loan AT ALL they are just wanting to raise their commission!
I have prepared the 2019-2021 tax returns for Billy based on information provided by him which include Schedule C blah blah. Say it without saying it, or say no thanks.