Writing Client Letters
Tax professionals differ in their approaches to client letters. This lesson
briefly discusses a few issues that professionals should consider to assure
that the client letter is effective in communicating research findings and conclusions.
Failure to consider these points may result in client confusion or dissatisfaction.
Worse, the client may misinterpret the research results and take inappropriate
steps (or not take appropriate actions in a timely manner). In short, tax professionals
who conduct exemplary research but do not appropriately communicate findings
and conclusions to the end user, the client, lose much of their effectiveness
and increase their practice risk.
Some tax professionals prepare short cover letters and attach executive-style
reports. Others include all their tax research findings and conclusions within
the actual letter. Generally, the lengthier the findings and conclusions, the
more likely a short letter with a separate report will be the most effective
presentation. Findings and conclusions that can be included within the body
of a two- or three-page letter often do not require a separate report.
A more important issue relates to the tax sophistication of the client and, thus, the writing style that the tax professional should adopt. Obviously, tax sophistication is a sliding scale, and the writing style should be tailored to each client. However, our discussion here focuses on clients at opposite ends of the scale.
Letters to clients (and any related report) without professional or extensive tax experience should be written in laymen terms. Tax jargon should be omitted. Often, detailed citations also will be omitted, though the failure to present some general cites may cause some clients to question the tax professionals research thoroughness and credibility. In firms without separate tax staffs, for example, the client letter might be addressed to the chief financial officer (CFO) who generally will have only general and limited knowledge of the corporate tax law. Both the letter and any related report should consider the level of tax sophistication. However, even when the client firm is not tax sophisticated, a more detailed presentation of the findings might be appropriate. For example, a CFO may request the tax research memo in addition to a short opinion letter so that the firms attorney can review the former. When the tax research issues are part of a larger transaction, such as a proposed merger, the tax professional should assume that the client will need the detailed research findings.
Letters and reports to other tax professionals or firms with separate tax departments
may more closely resemble the writing style adopted in the tax research memo.
In fact, communication with corporate tax directors may consist of a short cover
letter referencing an attached tax research memo.
The client letter (or a separate attachment that the letter references) should indicate any limitations to the tax professionals advice. At times, the expression of these responsibilities is rather brief. In other instances, it is extensive, especially for larger engagements where the risks are normally greater.
As indicated above, the advice should always be limited to the facts as stated. In addition, the letter might limit the findings to the tax law as it exists on a particular date. If the law changes, the tax professional bears less responsibility and legal exposure.
The letter should clarify that the tax researcher must use professional judgment
to resolve many issues since the tax law is not always clear. Adverse outcomes
from an IRS audit are generally not the responsibility of the tax professional
if he or she exercised due diligence and care. The letter should make this clear.
Finally, the client might communicate that separate penalties apply to the tax
professional and the client based on each partys respective responsibilities.
Begin and end the letter with brief pleasantries. Express appreciation for the client selecting your firm to complete the tax research and indicate your willingness to assist with any future issues. However, keep the pleasantries short. Avoid the temptation to ramble since the client is primarily interested in your tax results.
Professional appearance and neatness are very important. Wordiness, incorrect punctuation, lack of organization, and other distracting features may, and often does, communicate to the client that the research effort also was done carelessly. The negative results from such an impression may range from seeking professional assistance elsewhere the next time the client needs tax advice to disputing all or a portion of the current bill.
The client letter (or attached report) should contain a restatement of the facts and indicate that the findings, conclusions, and recommendations are based on the facts as stated. If appropriate, the letter might indicate the source of the facts (e.g., the CFO in a letter dated May 4 as amended in a letter dated May 20). Failure to include these statements increases the likelihood of legal liability in the event the facts are incorrect.
Tax professionals often present executive summaries in client letters (or attached reports). Summaries should emphasize conclusions and recommendations. When the client must choose between alternative actions, the tax professional should clarify the possible risks involved for each alternative. The choices belong to the client, not the tax professional.
Headings break up the written text and help to emphasize the main points. The longer the report, the more likely that headings will aid communication. Within each section of the report, tax professionals often use bullet points to emphasize findings, steps the client should take, and relevant deadlines.
Finally, the client letter should encourage the client to contact you if something is not clear.
For practice, we recommend that you read the fact pattern we provide, complete the research, formulate separate client letters for Fly and his attorney, and compare your letters with our examples.
Before leaving this web site, please remember to complete the short Exit Questionnaire. Your responses to the questionnaire will help us to evaluate this site’s usefulness and make improvements. Thanks.