Tucson Tax Team LLC + 6111 East Grant Road + Tucson, AZ 85712 + (520) 777-7844
Our Responsibilities:
Our responsibility is to accurately prepare your Federal and State Corporation income
tax returns including all supporting schedules. We are not responsible for the preparation of other business taxes
such as state use tax, payroll tax, etc. We will complete income tax returns using the information you provide to
us. Although we may ask for explanations regarding certain items, we will not audit or verify any information. If
we encounter a situation in which the tax laws are unclear, we will advise you of it and use our professional
judgment as to the correct handling of the situation. Our work in connection with the preparation of your Form
1120S filing does not include any procedures designed to discover defalcations or other irregularities, should any
exist. Information you provide will be kept confidential but is not protected from the IRS. We cannot disregard
the implications of any information you provide in the process of preparing the return. Your returns are subject to
review by taxing authorities. Should an examination occur, we are available to represent you at an additional fee.
Any additional tax, penalties or interest assessed are your responsibility.
Fees and Deadlines: Our fees are based upon the complexity of the tax return and the completeness of
information you provide. S Corp returns are due on March 15
but may be extended until September 15
Income: The IRS requires you to report all income received in a trade or business including bartering, cancelled
debt, kickbacks, etc. The IRS receives income information from merchant cards and may test to make sure you are
reporting all your income based on credit card sales reported.
Losses: The amount of loss each shareholder can take on their personal tax return is limited to that shareholder’s
investment in the S Corp. If is each shareholder’s responsibility to maintain and keep a record of their basis.
Bookkeeping: The IRS places a higher burden of responsibility on business entities. It is important that you have
proper bookkeeping procedures in place to support the income/expenses claimed on the business tax return. In
most cases, you should be able to produce a year-end balance sheet; this is one of the first items requested in an
audit. If you provide your own bookkeeping, we highly recommend that you have your books reviewed by a
professional bookkeeper before you provide us with a P&L and balance sheet.
Deductions: A 2% or higher shareholder must include the cost of premiums paid by the S Corp as wage income if
the S Corp deducts the premiums Mileage from a non-company vehicle is subject to reimbursement from an
accountable plan in order to be deductible. 50% of the cost of business-related meals is deductible. 50% of meals
just for yourself are deductible only if you are away from your tax home. Meal expenses must be documented
with the date, the client or associate, and the purpose of the meal. Travel is deductible if you can demonstrate a
substantial business purpose. These expenses may include ground/air transportation, lodging, meals as described
above, incidental expenses. If your travel is mixed business and personal, your deduction may be limited. In
order to deduct expenses that the shareholder and employees pay personally, the S Corp must have a written
accountable plan that states how and when employees will be reimbursed for expenses that are paid outside the S
Corp. All employees must follow the plan’s guidelines.
S Corporation Engagement Letter Tax Year 2020
Thank you for using Tucson Tax Team for your tax preparation needs. Clear
communication is key to a successful business relationship. The purpose of this letter is
to ensure sure we share an understanding of the services we provide.
Tucson Tax Team LLC + 6111 East Grant Road + Tucson, AZ 85712 + (520) 777-7844
Employees and Contract Labor: The S Corp is required to pay reasonable compensation in the form of wages to
all shareholders who provide a service to the corporation. If the IRS determines that compensation was
inadequate, they may re-categorize some or all of the S Corp profits as wages; in that case, the S Corp is
responsible for all penalties and interest for late-filed payroll taxes and reports. W-2s must be provided to
employees by January 31
. Independent contractors need not have payroll taxes withheld; you must file Forms
1096/1099-MISC by February 1
for any contractor you paid more than $600.
Your Responsibilities:
Your responsibility is to provide us with all the information needed to prepare your
return. You need to keep substantiation documentation for the income and expenses that you are claiming on
your return in the event such items are requested by a taxing authority. These records include income
statements, bank and credit card statements, travel expenses, business mileage, business utilities, home utilities
and other expenses for an office in home. You may be asked to prove that your expenses were reasonable and
necessary; excessive or inappropriate expenses may be disallowed.
You are responsible for keeping personal and business funds separated; personal expenses should not be paid
from the business account and vice versa.
Because an S Corporation is an entity whose tax attributes generally flow through to its shareholders, the penalty
for substantial understatement of tax relating to S Corporations items may be imposed at either the corporate or
shareholder level. Management is responsible for the proper recording of transactions in the books of accounts,
for the safeguarding of assets, and for the substantial accuracy of the financial records. You have the final
responsibility for the income tax returns; review them carefully before you sign them.
Please initial below.
_____ You agree to provide us all income and deductible expense information.
_____ You agree that you have written records of all items included on your return in the event of an audit.
_____ You agree that if all information required to complete this return are not received by us by March 1
, we
will automatically file an extension.
_____ Yo
u understand that documentation is kept on the portal for no longer than one year; it is your
responsibility to download portal information before we remove it.
_____ You understand that signing the tax return c
onstitutes your agreement with it.
_____ You understand that we will provide simple tax planning at no additional cost between May and
October; complex tax planning and tax planning required after November 1
will be billed at our hourly
rate of $150 per hour, minimum charge ½ hour.
_____ So
me forms must be paper filed with taxing authorities; it is your responsibility to have mailings tracked
to ensure proof of timely receipt.
_____ F
ees must be paid before the return is delivered/filed. If you terminate this engagement before completion,
you agree to pay $150 per hour for work completed. Work papers remain the property of our firm.
If this letter is in agreement with your understanding of our engagement, please sign below.
Signature Date
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