A CPA letter is a professional document prepared by a Certified Public Accountant (CPA) to communicate or confirm specific financial, tax, or business information. Individuals and businesses in the United States may be asked to provide one when applying for financing, verifying income, documenting self-employment, or completing certain business transactions.
However, there is no single standard CPA letter that applies to every situation. The information included depends on the purpose of the letter, the organization requesting it, the records available, and what the CPA can appropriately confirm.
Understanding what a CPA letter typically includes can help you provide the right information and avoid delays.
What Is a CPA Letter?
A CPA letter is a formal statement prepared by a Certified Public Accountant for a specific purpose.
The letter may confirm information based on tax returns, accounting records, financial statements, or other documentation reviewed by the CPA.
Common subjects addressed in a CPA letter include:
Income or earnings
Self-employment
Business ownership
Business activity
Tax information
Financial records
Revenue or business information
A specific tax year or reporting period
The CPA should only make statements that are accurate and appropriately supported by the records available.
What Does a CPA Letter Include?
The exact contents can vary, but a professional CPA letter commonly includes the following information.
1. CPA or Accounting Firm Information
The letter generally identifies the CPA or accounting firm preparing the document.
This may include:
CPA's full name
Accounting firm's name
Business address
Telephone number
Email address
Other professional contact information
This information allows the recipient to identify the professional responsible for the letter.
2. Date of the Letter
The date the letter is prepared should normally be clearly stated.
A current date can be particularly important when the recipient is requesting recent financial or income information.
3. Client Information
The CPA letter should identify the person or business to whom the information relates.
This could include:
Full legal name
Business name
Address
Relevant tax identification information when appropriate
Tax year or reporting period
The information should match the records and the documents being submitted to the requesting organization.
4. Purpose of the Letter
A CPA letter should make its purpose clear.
For example, the letter might be prepared for:
Income verification
Mortgage or loan documentation
Business verification
Self-employment confirmation
Financial documentation
A business transaction
A specific third-party request
Clearly identifying the purpose helps the recipient understand what information the CPA is confirming.
5. Relevant Financial Information
If the letter is being used to verify financial information, it may include specific figures or information supported by the CPA's records.
Depending on the purpose, this could involve:
Gross income
Business revenue
Net income
Taxable income
Business expenses
Financial statement information
Income for a specified period
The CPA should determine what information can appropriately be stated based on the records reviewed and the nature of the engagement.
6. Applicable Tax Year or Reporting Period
A CPA letter should identify the period to which the information relates when relevant.
For example, the letter could address:
A particular tax year
A calendar year
A fiscal year
A recent month or quarter
A specified period of business activity
This is especially important when a recipient is comparing financial information from different periods.
7. CPA's Name, Credentials, and Signature
A professional CPA letter should identify the CPA who prepared or signed it.
Depending on the purpose and recipient's requirements, this may include the CPA's:
Full name
CPA designation
Signature
Firm information
License information, when required
CPA licensing in the United States is administered at the state level, so specific credential requirements can vary by jurisdiction.
What Information Can a CPA Confirm?
A CPA's ability to confirm information depends on the professional relationship with the client, the records available, and the nature of the request.
A CPA may be able to address information relating to:
Income
A CPA may be able to confirm income information that is supported by tax returns or accounting records.
Self-Employment
A CPA may be able to confirm that a client operates a business or is self-employed when appropriate documentation supports the statement.
Business Ownership
Depending on the records available, a CPA may be able to confirm certain business ownership information.
Tax Information
A CPA may be able to discuss tax information associated with returns or other tax-related records they have prepared or reviewed.
Financial Information
A CPA may be able to address financial information based on accounting records or financial statements.
The exact scope should always be determined by the CPA.
Common Uses of a CPA Letter
CPA letters are used in a variety of situations in the United States.
1. Income Verification
One of the most common uses is documenting income.
Self-employed individuals may have more complicated income documentation than employees who receive a regular W-2.
A CPA letter may provide additional professional confirmation of financial information, depending on the requirements of the organization requesting it.
However, a CPA letter does not necessarily replace tax returns, tax transcripts, or other documentation.
2. Mortgage and Loan Applications
Banks and lenders may request additional documentation from self-employed borrowers or business owners.
A CPA letter may be requested alongside:
Tax returns
Bank statements
Financial statements
Tax transcripts
Profit and loss statements
Whether a lender accepts a CPA letter depends on its own documentation requirements.
3. Self-Employment Verification
Independent contractors, freelancers, and business owners may sometimes need to document their self-employment status.
A CPA letter may address information such as:
Business name
Type of business
Length of business activity
Income information
Relevant tax period
The information included should be based on appropriate records.
4. Business Ownership Verification
A business owner may be asked to provide professional documentation showing an ownership interest in a company.
A CPA may be able to confirm information supported by the business's accounting or tax records.
5. Business Transactions
Businesses may use CPA letters as supporting documentation during certain commercial transactions.
For example, a third party may request professional confirmation of financial information before entering into a business relationship.
The exact requirements will depend on the transaction and the organization making the request.
6. Financial Applications
A CPA letter may also be requested as part of a financial application.
The organization may want professional confirmation of income, business activity, or another financial matter.
Always ask the organization exactly what information it requires before requesting the letter.
CPA Letter vs. Tax Return
A CPA letter and a tax return are different documents.
A tax return is an official tax filing submitted to a tax authority, such as the IRS.
A CPA letter is professional correspondence prepared by a CPA for a particular purpose.
For example, a tax return reports financial and tax information for a particular tax year, while a CPA letter may confirm or explain selected information for a third party.
If an organization specifically asks for a tax return, do not assume that a CPA letter will be accepted instead.
CPA Letter vs. IRS Letter
A CPA letter should also not be confused with an IRS letter or notice.
An IRS letter is official correspondence sent by the Internal Revenue Service. Depending on the circumstances, an IRS notice may request information, explain a tax adjustment, request identity verification, or provide other instructions.
A CPA letter is prepared by a private accounting professional.
If you receive an IRS notice, follow the instructions and response deadline contained in that notice rather than assuming a CPA letter will satisfy the IRS request.
What Documents Does a CPA Need to Prepare a Letter?
The documents required depend on the type of CPA letter.
Common documents may include:
Federal tax returns
State tax returns
W-2 forms
1099 forms
Profit and loss statements
Balance sheets
Bank statements
General ledgers
Payroll records
Business formation documents
Accounting records
Other relevant financial documents
For an income verification letter, for example, the CPA may need to review tax returns and current accounting information.
Providing complete and accurate records can make the process more efficient.
Does Every CPA Letter Have the Same Format?
No.
There is no single format that applies to every CPA letter in the United States.
A letter prepared for a mortgage lender may contain different information from one prepared for a business transaction or income verification request.
The best approach is to obtain the recipient's requirements before asking a CPA to prepare the document.
Does a CPA Letter Need to Be Notarized?
Not necessarily.
There is no universal requirement that every CPA letter be notarized.
However, a particular organization may require notarization as part of its documentation process.
If notarization is required, tell the CPA before the final letter is prepared.
Does a CPA Letter Need a CPA License Number?
Not always.
The requirements depend on the recipient and the purpose of the letter.
The CPA should clearly identify themselves and their professional credentials. If the requesting organization specifically asks for a license number, that requirement should be addressed.
Because CPA licensing is handled at the state level, requirements can vary.
How to Request a CPA Letter
Getting a CPA letter is usually easier when you prepare the requirements in advance.
Step 1: Identify the Purpose
Determine exactly why the letter is needed.
Step 2: Ask the Recipient for Requirements
Find out what information must be included and whether there is a specific format.
Step 3: Contact Your CPA
Provide your CPA with the recipient's instructions.
Step 4: Gather Supporting Documents
Prepare tax returns, financial statements, accounting records, or other documents the CPA requests.
Step 5: Review the Letter
Before submitting it, check the names, dates, figures, reporting period, and recipient information.
Step 6: Submit the Letter
Follow the organization's instructions for submitting the completed document.
How Concept CPA Can Help
If you need professional assistance with a CPA letter, Concept CPA can help you understand what information may be appropriate for your specific documentation needs.
Before requesting a letter, make sure you have the requirements from the organization that will receive it. This helps the CPA prepare a document that addresses the relevant purpose without including unnecessary or unsupported information.
Working with an experienced CPA can also help ensure that the information presented in the letter is consistent with the underlying tax and accounting records.
Frequently Asked Questions About CPA Letters
What is normally included in a CPA letter?
A CPA letter commonly includes the CPA or firm's information, date, client information, purpose of the letter, relevant financial information, applicable reporting period, and CPA identification and signature.
Can a CPA letter verify income?
A CPA may be able to provide income-related information when it is supported by appropriate tax or accounting records. The organization requesting the letter determines whether it will accept it.
Can a CPA letter prove self-employment?
A CPA may be able to confirm self-employment or business activity when the information is supported by appropriate records and falls within the CPA's professional relationship with the client.
Can a CPA letter replace a tax return?
Generally, no. A CPA letter and a tax return serve different purposes. If a recipient specifically requests a tax return, ask whether it will accept a CPA letter as supplemental documentation.
Does a CPA letter need to be notarized?
Not automatically. Notarization depends on the requirements of the organization requesting the document.
How long does it take to get a CPA letter?
The turnaround time varies based on the complexity of the request, the availability of records, and the CPA's workload. Simple requests may be completed more quickly when all required information is readily available.
Is a CPA letter an IRS document?
No. A CPA letter is prepared by a CPA or accounting firm. An IRS letter or notice is issued by the Internal Revenue Service.
Final Thoughts
A CPA letter is a flexible professional document that can be used to communicate or confirm specific financial, tax, or business information. What it includes depends largely on why the letter is needed and what the requesting organization requires.
The most important step is to obtain clear instructions from the recipient before asking a CPA to prepare the letter. Providing accurate supporting records can also help the process move more efficiently.
For individuals and businesses looking for professional accounting assistance, Concept CPA can help with CPA-related documentation and provide guidance based on the specific requirements of your situation.
