2024 Tax Filing Season Standard Terms and Conditions

(Reviewed January 2025)

These “Standard Terms and Conditions” apply to any 2024 Tax Filing Season Engagement Letters between Ludmila CPA Incorporated (the “Firm”) and our Client.

Engagement Objective and Scope – Limitations and Conditions

The objective of our services is to assist you with the calculation of your tax due and provide you with forms and schedules we believe are suitable for you to file with the Internal Revenue Service (“IRS”) and applicable state and local tax authorities and sufficient to comply with your tax filing obligations. You have the final responsibility for the filing and content of your tax return(s). We will not assist you with any tax return(s) other than those identified in the Engagement Letter, without your written request, and our written agreement to do so.

We are under no duty to review the information you provide to determine whether you may have a filing obligation with another state. If we become aware of any other filing requirement, we will tell you of the obligation and may prepare the appropriate returns at your request as a separate engagement.

Our services are not intended to benefit or influence any third party, including any entity or investment which may seek to evaluate your creditworthiness or financial strength. You agree to indemnify and hold us harmless from any and all claims arising from the use of the tax returns for any purpose other than complying with your tax filing obligations, regardless of the nature of the claim, excepting claims arising from our gross negligence or intentional wrongful acts.

Our engagement does not include any procedures designed to detect errors, fraud, theft, or other wrongdoing. Therefore, our engagement cannot be relied upon to disclose such matters. In addition, we are not responsible for identifying or communicating deficiencies in your internal controls. You are responsible for developing and implementing internal controls applicable to your operations.If, during our work, we discover information that affects prior-year returns, we will make you aware of the facts. However, we cannot be responsible for identifying all items that may affect prior-year returns. If you become aware of such information during the year, please contact us to discuss the best resolution of the issue. We will be happy to prepare appropriate amended returns as a separate engagement.

You agree to indemnify and hold our Firm and any of its partners, principals, shareholders, officers, directors, members, employees, agents or assignees harmless with respect to any and all claims arising from the use of the tax returns for any purpose other than filing with the IRS, state and local tax authorities regardless of the nature of the claim, including the negligence of any party.

You agree that you will not and are not entitled to rely on any advice unless it is provided in writing.

You may request that we perform additional services not contemplated in our Engagement Letter. If this occurs, we will communicate with you regarding the scope and estimated cost of these additional services. Engagements for additional services may necessitate that we amend the original Agreement or issue a separate agreement to reflect the obligations of all parties. In the absence of any other written communications from us documenting additional services, our services will be limited to and governed by these Standard Terms and Conditions in addition to the entity specific Engagement Letters.

Important – Corporate Transparency Act – Beneficial Ownership Information Reporting Requirement

Starting January 1, 2024, many corporations, limited liability companies, and entities created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe may have a filing requirement under the Corporate Transparency Act (CTA) including beneficial ownership information (BOI) reporting. Assisting you with your compliance with the Corporate Transparency Act (“CTA”), including beneficial ownership information (“BOI”) reporting, is not within the scope of this engagement. You have sole responsibility for your compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership information. We shall have no liability resulting from your failure to comply with CTA. Information regarding the BOI reporting requirements can be found at https://www.fincen.gov/boi. Consider consulting with legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements and issues surrounding the collection of relevant ownership information.

We will not render legal services as part of this engagement, and we will not be responsible for advising you regarding the legal or regulatory aspects of your compliance with the CTA, nor are we responsible for the preparation or submission of BOI reports to FinCEN as part of this engagement.

CPA Firm Responsibilities (all entities)

It is our duty to prepare your returns based on the same standard of care that a reasonable tax return preparer would exercise in this type of engagement. Unless otherwise noted, the applicable standard of care for a “reasonable tax return preparer” shall be based upon the following pronouncements:

• the Statements on Standards for Tax Services (“SSTS”) issued by the American Institute of Certified Public Accountants (“AICPA”);
• U.S. Treasury Department Circular 230 (“Circular 230”); and
• the Internal Revenue Code, Treasury Regulations, and any applicable state/local corollaries (collectively, “the Code”).

As tax return preparers, these pronouncements restrict our ability to sign a tax return when the tax positions you report do not comply with tax law. We will be unable to sign your return and may terminate our Agreement if you:

• request that we report a tax position on your return which we feel is contrary to published guidance, frivolous, or a willful attempt to evade tax, or provide to us a copy of a previously-filed tax return prepared by another preparer to be included in your tax return which takes a similarly questionable position;
• request that we include a deduction, credit or refund on your return that we believe you do not qualify for; or
• decline to disclose a position where in our professional judgment tax law requires disclosure.

Tax planning services

Our engagement does not include tax advice which affects the calculation of tax due or the filing of tax forms and schedules for previous or future tax years. However, we may communicate potential tax strategies to you, and you may ask questions of us. It is your responsibility to communicate to us, in writing, any interest in pursuing a tax strategy identified, or if you require more than a cursory response to your question. If you do not request our assistance in writing, we will infer that you do not wish to pursue any suggestion made to you. If you do request our assistance and we agree, we will confirm our understanding with you in a separate agreement prior to proceeding.

We shall not be liable for any forgone tax or other benefits if you fail to advise us of your desire to investigate or pursue any tax strategy communicated to or by us. Any tax advice described in this paragraph and provided to you shall be governed by our Agreement and billed at our standard hourly rates.

Government inquiries

This engagement does not include responding to inquiries by any governmental agency or tax authority. If your tax return is selected for examination or audit, you may request our assistance in responding to such an inquiry. If you ask us to represent you, and we agree, we will confirm this engagement in a separate written agreement.

Third party requests

We will not respond to any request from banks, mortgage brokers or others for verification of any information reported on these tax returns. Except where compelled by court order or subpoena we do not communicate with third parties or provide them with copies of tax returns.

This engagement does not include responding to inquiries by any governmental agency or tax authority. If you are contacted by a tax authority, either for an examination or other inquiry, you may request our assistance in responding.

Should we receive any request for the disclosure of privileged information from any third party, including a subpoena or IRS summons, we will notify you. In the event you direct us not to make the disclosure, you agree to hold us harmless from any expenses incurred in defending the privilege, including our attorney’s fees, court costs, outside advisor’s costs, and penalties or fines imposed as a result of your asserting the privilege or your direction to us to assert the privilege.

Tax advice

Any advice we may provide is based upon tax reference materials, facts, assumptions, and representations that are subject to change. We will not update our advice after the conclusion of the engagement for subsequent legislative or administrative changes or future judicial interpretations. To the extent we provide written advice concerning federal tax matters, we will follow the guidance contained in Circular 230, §10.37, Requirements for Written Advice.

We are not investment counselors or brokers. Our advice concerning a particular investment shall be limited to advising you with regard to the tax ramifications of the investment. It shall not include advising you regarding the economic viability or consequences of the investment or whether or not you should make the investment. Our advice regarding the tax ramifications of the investment shall be based on documents and information that you provide us regarding the investment.

Reliance on others

There may be times when you engage another advisor to assist you. If you wish to take a tax position based upon the advice of another advisor, before we are able to sign your tax return, we must comply with the applicable provisions of the Code and the SSTS.

We will review the other advisor’s work and may require a written statement from the advisor describing the statutory basis for the position and the suggested disclosure needed to appropriately report the position. If we believe additional research is required, we will discuss the matter with you. You agree to pay for the additional charges necessary to complete the disclosure or research as this is not included in the scope of our service.

Moreover, you understand that the IRS, state or local tax authority may disagree with the position taken on the return. If this occurs, you will be responsible for any additional tax, penalties and interest, as well as any related professional fees, you may incur.

If, after review of the work prepared by your other advisor, we determine that we are unable to sign the tax return, we will be unable to proceed and may terminate our Agreement.

Substantial understatement penalties

The IRS and many states impose harsher accuracy-related penalties for substantial understatement of tax. Substantial understatement of tax may be found where the tax that should be reported on your return is less than what is actually reported on your return, based on a statutory formula which defines when an understatement is “substantial”. In some cases, avoiding substantial understatement penalties can be achieved if the tax position is adequately disclosed in a method approved by the IRS. Similar rules may apply at the state level.

While the decision to disclose or not disclose is yours, if we conclude that your return contains a tax position which we believe you are required to disclose, we will ask that you consent to include a disclosure in a method approved by the IRS. If you decline to disclose the tax position, we will be unable to proceed and may terminate our Agreement.

If the IRS, state or local tax authorities later contest the position taken, additional tax, penalties, and interest may be assessed. You will be responsible for these amounts, as well as any related professional fees, you may incur to defend the position taken. You agree to hold our Firm harmless from any and all actual and consequential damages (including but not limited to tax, penalties, interest, and professional fees) you incur as a result of including such disclosures with your filed tax return regardless of the nature of the claim, including negligence of any party.

Unless an undisclosed tax position has substantial authority, we will be unable to prepare the return and will withdraw from the engagement. You agree to compensate us for our services to the date of withdrawal.

Abusive tax strategies

Certain tax positions or strategies, while not currently identified as “abusive” by the IRS, may ultimately be determined to be so in the future. Consequently, you agree to advise us of any transaction you have entered into that entitles you to disproportionate tax benefits (deductions, credits, or refunds), that generates significant income deferral or non-recognition, or that generates significant tax losses without corresponding cash impacts (“abusive tax strategy”). If you fail to timely notify us, in writing, of any abusive tax strategy you have entered into, you will be responsible for any liability, including but not limited to, additional tax, penalties, interest and related professional fees.

Arguable positions

If there are conflicting interpretations of tax law, or if tax law is unclear, we will explain the possible positions that may be taken in order for us to sign your return. We will follow the position you request, provided it is consistent with our understanding of tax reference materials and our professional standards. Tax reference materials include, but are not limited to, the Code, Revenue Rulings, Revenue Procedures, court cases, and similar state and local guidance. If the IRS, state or local tax authorities later contest the position you select, additional tax, penalties, and interest may be assessed. You will be responsible for these amounts, as well as any related professional fees, you may incur, to respond to the tax authority. We assume no liability, and you hereby release us from any liability, including but not limited to, additional tax, penalties, interest, and related professional fees. If we conclude that we are obligated to disclose a position and you refuse to permit the disclosure, we reserve the right to withdraw from the engagement and you agree to compensate us for our services through the date of withdrawal.

Accounting Assistance

We may deem it necessary to provide you with limited accounting or bookkeeping assistance solely for the purpose of helping you organize your information. This assistance is intended to be nominal and is not a separate accounting or bookkeeping service. In the event we conclude that bookkeeping or accounting assistance is necessary to prepare your tax returns, we will advise you in writing before proceeding. Any assistance will be billed at our standard hourly rates and will be subject to the terms of our Agreement.

Estimated tax payments

You may be required to make quarterly estimated tax payments. We will calculate these payments for the 2025 tax year based upon the information you provide to prepare your 2024 tax returns (the “safe harbor” rule). Updating recommended quarterly estimated tax payments to more closely reflect your actual current year’s income is not within the scope of this engagement, unless requested by you. These services will be billed at our standard hourly rates and will be subject to the terms of our Agreement.

CPA Firm Responsibilities (Forms 1040 only)

Absent any direction from you, we will prepare your tax returns based upon your filing status (single, married filing jointly, married filing separately, head of household or qualifying widow[er] with dependent child) as reflected in your income tax returns for last year. Your filing status may be affected by any addition or subtraction to the members of your immediate household, a change in your marital status, or a change to the support you provide to individuals not in your immediate household. If you do not alert us, we will infer that you do not wish to change your filing status absent other information you provide to us. If your filing status has changed, you wish to change your filing status, or you have questions about your filing status, please contact us immediately.

Confidentiality for filers of joint tax returns

If the tax returns prepared in connection with this engagement are filed using the married filing jointly filing status, both spouses are deemed to be clients of the Firm under the terms of our Agreement. Both spouses acknowledge that any tax return information, including supporting documents provided to us, used in the preparation of your joint return, and any communications made to us by either of you in connection with the preparation of your joint return, may ultimately be shared with either spouse, without prior consent of the other.

Pass-through Entity Tax election (Optional, applies to Forms 1065 and 1120S only)

Several states now permit eligible entities to elect to pay income tax on passed through income for the benefit of their owners (“pass-through entity tax” or “PTET”). A PTET election may be beneficial for entity owners whose maximum amount of deductible state taxes for federal income tax purposes is limited. The timing and requirements for each state’s pass-through entity tax regime varies and may be fact-specific. We make recommendations to you if making a PTET election could be beneficial to the owners of your business entity. You are responsible for deciding whether to opt in or out of any PTET which may apply to you.

CPA Firm Responsibilities (Forms 709 Only)

The IRS considers a gift to be any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return. Under federal tax law, certain gifts are taxable and subject to an annual exclusion amount. For 2024, this amount is $18,000 per taxpayer. In addition, a lifetime gift exclusion amount applies which for 2024 is $13,061,000. State law governing gift taxes may vary.

Our services are based upon the information and representations that you provide to us. We may need to ask your attorneys or advisors about issues related to the gift tax returns. By signing this Agreement, you agree to authorize us to discuss the returns with your attorneys and advisors in order to assist you. You should discuss the returns with your attorneys or advisors before filing the returns with the IRS, state and local tax authorities, as applicable.

Prior year review

Although your gift tax return requires that you include copies of any previously-filed gift tax return(s), our review of those returns will necessarily be limited and may not find errors. We will, however, bring to your attention errors that we do find. Similarly, if you become aware of any information affecting prior year tax returns, please contact us. If an error or information affecting prior year tax returns is discovered by you or us, we will discuss your options with you. If you ask us to prepare amended tax returns, and we agree, we will confirm this engagement in a separate written agreement.

Client Responsibilities

Our assistance related to your tax return is based upon tax reference materials, facts, assumptions, and representations that are subject to change. We will not update your return after the conclusion of the engagement for any reason. To the extent we provide written advice concerning federal tax matters, we will follow the applicable guidance contained in our professional standards.

You have final responsibility for the accuracy of your tax returns. In addition, you should retain copies of all previously filed gift tax returns until the date of your death to substantiate the usage of your lifetime exclusion. Your failure to file a gift tax return and/or adequately disclose gifts made during your lifetime may affect any gift and/or estate tax return your estate may need to file to report unreported gifts in the future.

We will provide you with a draft copy of your tax returns and accompanying schedules and statements for review. You agree to review and examine them carefully for accuracy and completeness. Tax authorities impose various penalties and interest charges for non-compliance with tax laws and regulations, including failure to file or late filing of returns, and underpayment of taxes. You will be responsible for the payment of any additional tax, penalties, and interest charges imposed by tax authorities.

If you fail to comply with the responsibilities as described in these Standard Terms and Conditions, your actions or your inactions may result in economic or other loss to you, such as disallowance of tax deductions or credits claimed, additional tax, penalties or interest assessed against you, loss of administrative rights, or criminal punishment. You will be responsible for any loss suffered by you as a result of your failure to comply with your responsibilities, including any professional fees required to defend or correct changes made to your tax returns or prepare previously unfiled or amend previously filed tax returns.

The responsibilities detailed in this section are not exhaustive, and our services to you may require additional responsibilities not listed.

Tax information

You agree to provide us with a trial balance and other supporting data we may request to prepare your tax returns. You are responsible for providing us with accurate and complete information, including income and activities outside of the U.S. or your home state.

We will rely upon the completeness and accuracy of the information and representations you provide to us. We will not audit or otherwise verify the data you submit to us, although we may ask you to clarify certain information.

To the extent you provide our Firm with access to electronic data via a local or online database from which we will download your trial balance or other information, you agree that the data is accurate as of the date and time you authorize it to be downloaded.

You acknowledge your responsibility to inform us of any bartering transactions, listed transactions, or transactions of interest as designated by the IRS. You agree to hold us harmless with respect to any additional taxes, penalties, or interest imposed on you by the taxing authorities resulting from your failure to timely notify us in writing of all such transactions in order to facilitate the complete and timely preparation and filing of your tax returns.

You represent that the information you are supplying to us is accurate and complete to the best of your knowledge and that you have disclosed to us all relevant facts affecting the returns.

Documentation

You are responsible for maintaining adequate documentation to substantiate the accuracy and completeness of your tax returns. Our workpapers do not satisfy your documentation responsibility. You should retain all documents that provide evidence and support for reported income, credits, deductions, and other information on your returns, as required under applicable tax laws and regulations. The IRS recommends that you maintain this documentation for as long as it may be relevant to your taxes. You represent that you have such documentation and can produce it, if necessary, to respond to any examination or inquiry by tax authorities. You will be responsible for any liability, including but not limited to, additional tax, penalties, interest and related professional fees, resulting from the disallowance of tax deductions due to inadequate documentation.

We will provide the Form 1040 filers with an income tax organizer to help you compile and document the information necessary to prepare your income tax returns. Completion of the tax organizer is highly encouraged. You are responsible for accurately completing the income tax organizer, including any activities in which you engage outside of the U.S. or your home state.

All income

You are responsible for identifying and communicating to us all income earned and received by you from any U.S. or non-U.S. source. This includes income earned from gambling and online wagers, gig or hobby work, and activity for which you should receive a Form 1099-K (online sales) whether or not you actually receive a 1099-K.

State and local filing obligations

The preparation of any state or local tax return not listed in Engagement Objective and Scope of the Engagement Letter is not within the scope of our engagement. You are responsible for fulfilling your filing obligations with any state or local tax authorities, including but not limited to, income, franchise, sales, use, and property taxes or abandoned and unclaimed property. However, if upon review of the information you have provided to us, including information that comes to our attention, we believe that you may have additional filing obligations, we will notify you.

If you are unsure if you have any other filing obligation with other state or local tax authorities, you are responsible for alerting us and requesting assistance. If you do not alert us or request assistance, we will infer that you do not have other state or local filing obligations. You will be responsible for tax due and penalties associated with the failure to file or untimely filing of any form for which we were not engaged to prepare.

Gift tax returns

The IRS considers a gift to be any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return. Under federal tax law, certain gifts are taxable and subject to an annual gift tax exclusion amount, which for 2024, is $18,000 per taxpayer. You are responsible for informing us if gift tax returns are required to be filed. If you ask us to prepare these returns, and we agree, we will confirm this representation in a separate written agreement.

The IRS can assess a gift tax liability within three (3) years after the due date of the return, or three (3) years after the return is actually filed, whichever is later. If a gift is determined not to have been adequately disclosed per Treasury Regulations, the three (3) year statute of limitations for assessment may be deemed not to have started. Adequate disclosure of non-liquid assets may require the attachment of a formal valuation to the gift tax return. Failure to disclose all asset transfers or inadequate disclosure of gifts, as required by Treasury Regulations, may result in the IRS challenging the reported value of the gift at any time, as well as imposition of penalties and interest.

Because gift tax returns may not be filed electronically, we will deliver to you a paper copy suitable for mailing to the taxing authorities. Once delivered to you, you bear full responsibility for reviewing the paper returns for accuracy, and either signing and timely filing them, along with any payments due, or notifying us of any issue which may need to be addressed prior to filing.

You have final responsibility for the payment of your taxes in whatever amount ultimately determined. We shall have no liability for any tax due, penalties, interest, or overdraft charges which may result from your failure to ensure sufficient funds are available at the time of payment.

Gifts received from foreign persons

If you received a gift or bequest from a foreign person or trust, you may be required to file a separate IRS Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts or Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner. If you ask us to prepare this return, and we agree, we will confirm this engagement in a separate written agreement.

Additionally, you should retain copies of all previously filed gift tax returns until the date of your death to support the impact of the lifetime exclusion.

U.S. filing obligations related to foreign investments and accounts

U.S. citizens and residents generally and U.S. Persons (certain trusts and business entities generally) must report income and activities related to both domestic and foreign assets (worldwide income). You are responsible for fulfilling your filing obligations related to foreign activity where required. U.S. reporting requirements related to foreign activity are very complex. Additionally, partnerships and S Corporations are required to provide to their partners or shareholders their share of items with international tax relevance (Schedule K-3) so that those partners or shareholders may fulfill their filing obligations related to foreign activity where required.

Contact us immediately if you have:

• Ownership of, investment in, or officer responsibilities for a corporation, partnership, or other business entity formed under the laws of another country;
• Fiduciary, grantor, or beneficiary relationships in connection with an entity formed under the laws of another country;
• Ownership of, signature authority over, or control over any financial account held in a financial institution located in another country;
• Citizenship or government-approved employment/visa status with a country other than the U.S. (including anyone in your immediate household, or your parents who live outside the U.S.);
• Transferred property, including cash, offshore either directly or through the purchase of or investment in an rentity formed under the laws of another country;
• Received or have legally recognizable rights to receive property, including cash, from a trust, business, or investment formed under the laws of another country or individual residing in another country;
• Conducted business with any entity or person physically located in another country, regardless of whether such business is for-profit, not for-profit, or informal/irregular; Received property, including cash, or income from a source outside of the U.S. which is not reported on a brokerage statement (such as a 1099-B or similar report); or
• Any other activity or economic arrangement which takes place outside of the U.S.

Failure by the Form 1040 filers to timely file the required forms may result in substantial civil and/or criminal penalties which you are responsible for. You agree to provide us with complete and accurate information regarding any foreign activity in which you have a direct or indirect interest, or over which you have signature authority, during the above referenced tax year.

If you are unsure if you have any other filing obligation related to foreign activity, you are responsible for alerting us and requesting assistance. If you do not alert us or request assistance, we will infer that you do not have foreign activity absent information you provide to us. In any event, you will be responsible for tax due, penalties, and interest associated with the failure to file or untimely filing of any form for which we were not engaged to prepare.

The entities other than the Form 1040 filers (trusts, partnerships, corporations, non-profit organizations) are responsible for complying with the tax filing requirements of any other country. You acknowledge and agree that we have no responsibility to raise these issues with you and that foreign filing obligations are not within the scope of this engagement.

Digital assets

There are specific tax implications of investing in digital assets (e.g., virtual currencies such as Bitcoin, non-fungible tokens, virtual real estate and similar assets). The IRS considers these to be property for U.S. federal income tax purposes. As such, any transactions in, or transactions that use, digital assets are subject to the same general tax principles that apply to other property transactions.

If you transacted in digital assets during the tax year, you may have tax consequences and/or additional reporting obligations associated with such transactions. Depending on the nature or volume of those transactions, a change to the scope of our services may be required. You are responsible for providing us with complete and accurate information, including basis, regarding any transactions in, or transactions that have used, digital assets during the applicable tax year.

Other Income, losses and expenses

If you realized income, loss or expenses from a business or supplemental income or loss, the reporting requirements of federal and state income tax authorities apply to such income, loss or expense. You are responsible for complying with all applicable laws and regulations pertaining to such operations, including the classification of workers as employees or independent contractors and related payroll tax and withholding requirements.

Personal expenses

In general, personal expenses are not deductible for income tax purposes. You are responsible for ensuring that personal expenses, if any, are separated from business expenses and that expenses such as meals, travel, vehicle use, gifts, and related expenses are supported by documentation and records required by the IRS and other tax authorities.

Compensation and withholding compliance

If you or your business compensates individuals for services performed, there are various federal, state, and/or local payroll tax and income tax obligations affecting both payor and payee. We will not provide employment, labor, or immigration law advice to you as part of our engagement, including the classification of workers as employees or independent contractors. You should seek the advice of an appropriate professional, such as an employment attorney, to address any classification or employment eligibility questions. You agree to indemnify and hold us harmless for any and all claims related to misclassification or improper eligibility of individuals whom you compensate for services, excepting claims arising from our gross negligence or intentionally wrongful acts.

Further, you acknowledge it is your responsibility to both timely comply with all payroll tax and income tax filing and remittance obligations that apply to you, and to maintain all necessary documentation to support those filings and remittances. Such forms are due as early as January 31, 2025, and significant penalties may be assessed for late filing, non-filing, or filing of incorrect information. In some cases, penalties may also be assessed against responsible individuals, such as owners and officers, in their personal capacity.

Preparation of these forms and calculation of any withholding amount due is not within the scope of this engagement.

Ultimate responsibility

You will be required to verify and sign a completed Form 8879 Series, IRS e-file Signature Authorization, and any similar state and local equivalent authorization form before your returns can be filed electronically.

You are responsible for reviewing the paper returns for accuracy, signing them, and filing them timely with the tax authorities.

You are ultimately responsible for complying with any substantive or procedural tax law which applies to you, and for ensuring your tax returns and any required tax payments are timely received by the appropriate tax authority. Notwithstanding any term of our Agreement, this responsibility cannot be delegated to us.

Our assistance related to your tax return is based upon tax reference materials, facts, assumptions, and representations that are subject to change. We will not update your return after the conclusion of the engagement for any reason. To the extent we provide written advice concerning federal tax matters, we will follow the applicable guidance contained in our professional standards.

You have final responsibility for the accuracy of your tax returns, (for the Forms 1065 and 1120S files this also includes Schedules K-1 and K-3). You are responsible for distributing a copy of the Schedule K-1s and K-3, including any attachments, to each, as applicable, beneficiary, partner, member or shareholder.

We will provide you with a copy of your draft tax returns and accompanying schedules and statements for review. You agree to review and examine them carefully for accuracy and completeness. Tax authorities impose various penalties and interest charges for non-compliance with tax laws and regulations, including failure to file or late filing of returns, and underpayment of taxes. You will be responsible for the payment of any additional tax, penalties, and interest charges imposed by tax authorities.

Once delivered to you, you bear full responsibility for reviewing the paper returns for accuracy, and either signing and timely filing them, along with any payments due, or notifying us of any issue which may need to be addressed prior to filing.

You have final responsibility for the payment of your taxes in whatever amount ultimately determined. You may choose to have funds automatically withdrawn from a designated account and transmitted when your tax return is electronically filed. It is your responsibility to provide us with correct account and routing numbers, to review this information for accuracy prior to submission of your return, and to ensure that sufficient funds are available at the time of payment. We shall have no liability for any tax due, penalties, interest, or overdraft charges which may result from your failure to ensure sufficient funds are available at the time of payment.

Filing Your Tax Returns

The obligation to file a tax return and/or extension is solely that of the taxpayer. Although we will make every reasonably prudent effort to assist you with this obligation, this Agreement is not intended to and does not create an agent/principal relationship. By signing this Agreement, you understand that actual and timely receipt of your filings by the appropriate tax authority is the duty and responsibility of the taxpayer and the taxpayer alone.

Additional Client Responsibilities for the Forms 1065 Filers

Changes in ownership

You are responsible for advising us of any changes in ownership, including the death of a partner, so that it may be accurately reflected on the tax returns. A change in ownership of a partnership interest needs to be reported on your return, and also may have unanticipated tax consequences.

Assistance with analysis of any change in ownership transaction is not within the scope of this engagement.

Partnership or Limited Liability Company (LLC) agreement

You should review your partnership or LLC agreement to ensure that it meets your goals for the transfer of ownership and distribution of income. Often, partnership agreements fail to address the transfer of ownership or may require updating as circumstances change. A review of your partnership or LLC agreement or analysis of proposed transactions under any existing or draft language is not within the scope of this engagement.

Partnerships subject to the Bipartisan Budget Act of 2015 (BBA)

The Bipartisan Budget Act of 2015 changed how the IRS addresses corrections to Form 1065 filed by partnerships that either cannot opt out of BBA, or can but have not opted out of BBA. As part of this change, “eligible partnerships” must annually consider whether they will elect to opt in or out of these BBA rules.

Analysis of BBA rules, including determining whether you are an “eligible partnership” and/or whether you should opt in or out of BBA, is complex. We will provide you with a cursory overview of how BBA may apply and any election you may need to make on your tax return. If we, in our professional judgment, believe a more detailed analysis is required, we will ask you to sign a separate consulting engagement letter with an expanded scope of service.

Although we may assist you with understanding the impact of opting in or out of BBA, you are responsible for choosing whether to make the election, and we will not make any BBA election on your behalf. If you choose to opt into BBA, we will ask that you provide us the name of your partnership representative, and, where necessary, your designated individual. The issues, procedures, and notice requirements involved in the examination of a partnership that has opted in to BBA are very specific and nuanced, and require analyses not anticipated by this Agreement.

Any partnership subject to BBA should review its partnership (or LLC) agreement with its attorney to ensure that it addresses the significant changes to the partnership audit regime that apply to affected partnerships. These changes include, but are not limited to the following:

• Replacement of a “tax matters partner” with a “partnership representative,”
• Current partners being held responsible for tax liabilities of prior partners,
• The partnership being held responsible for remittance of additional tax, rather than individual partners being taxed, and
• Numerous elections or opt-outs that the “partnership representative” may direct us to make.

Partnerships with 100 or fewer eligible partners are eligible to opt out of the new partnership rules by making an annual election on a timely filed Form 1065. Eligible partners are individuals, C corporations, S corporations, and estates of deceased partners.

By your signature, you acknowledge that your entity has 100 or fewer eligible partners, and you would like our Firm to make the opt out election on your behalf if we believe you are eligible.

Tax basis schedules

The partnership return discloses partner capital accounts and partner’s share of partnership debt on Schedule K-1. However, Schedule K-1 does not disclose each partner’s share of allocable loss which may be deducted at the individual level or track partner tax/at-risk basis. Differences between a partner’s capital account and tax basis in their partnership interest may exist which also affect allocations to the partners as presented on Schedule K-1. The IRS may examine any or all of these tax attributes to determine whether a partner is allocated the proper amount of partnership items, entitled to reduce taxable income as a result of tax losses allocated from a partnership, or avoid tax on certain distributions of cash from the partnership.

Properly understanding and calculating these attributes is necessary for preparation of both partnership and partner tax returns. We will rely upon the historical balances disclosed on last year’s Schedule K-1, as well as the most recent executed partnership/operating agreement you provide to us.

You are responsible for providing any necessary documentation to support transactions between the partnership and its partners, including sale/redemption of partnership interests and loans between the partnership and its partners. You are also responsible for providing any necessary documentation to support transactions between partners involving partnership interests, as these may impact your partnership return. Additional analysis, such as recreating historical balances or analyzing proposed partner transactions is not within the scope of this engagement.

Allocation of partnership income and expenses

You are responsible for reviewing partner Schedules K-1 and K-3 prior to filing, including verifying recipient identifying information, and agreeing to the accuracy of both the allocation of partnership income in accordance with the terms of the partnership agreement for capital account purposes, and the allocation of partnership taxable income, deduction, credit, and other allocable items presented on partner Schedules K-1 and K-3 for tax purposes.

Partner salaries

The payment of wages or compensation by a partnership or LLC to individuals who are limited partners or LLC members raises reporting issues if those limited partners or LLC members receive a Schedule K-1 instead of a Form W-2 or Form 1099. You are responsible for providing us detail of the total compensation paid to any partner or LLC member expected to receive a Schedule K-1, including fringe benefits, retirement benefits, or other in-kind value paid or provided.

Administrative Adjustments and Compliance with BBA (Forms 1040 and 1065 only)

If you are or were a partner at any time in a partnership and receive(d) Schedule K-1 (1065), you may receive a Form 8986, Partner’s Share of Adjustments to Partnership-Related Items. Form 8986 is used by partnerships to correct errors on previously filed partnership returns and to provide the IRS and partners with each partner’s share of those tax corrections. The information on Form 8986 is also reported to the IRS by the partnership. Pass-through recipients of Form 8986 must, within a specified timeframe, either: (1) report to the IRS and pass the allocable share through to affected K-1 recipients on the required forms; or (2) compute and pay any tax due at the entity level.

Our services do not include assisting you with anything pertaining to Form 8986 unless specifically identified in the Engagement Objective and Scope section of the Engagement Letter. If you receive a Form 8986 once our work has begun but prior to the filing of your tax return, you are responsible for alerting us and requesting assistance. Additionally, the impact an adjustment from Form 8986 may have on any state return you have previously filed is unclear and may only be determined with additional research. If you do not alert us or request our assistance, we will infer that you have not received Form 8986 absent other information you provide to us.

Additional Client Responsibilities for the Form 1120 Filers

Reasonable compensation

You are responsible for determining the appropriate salary or wage to pay shareholder-employees. If the IRS determines that the C corporation paid salaries or wages in lieu of an appropriate taxable dividend, the IRS may reclassify the payments. As a result of the reclassification, the shareholder may be responsible for tax, penalties and interest on the taxable dividend in addition to potential employment taxes on the reclassified amounts. You are responsible for any liability, including but not limited to, additional tax, penalties, interest and professional fees resulting from any reclassification.

Changes in ownership

You are responsible for advising us of any changes in ownership so that it may be properly reflected on the tax returns.

Additional Client Responsibilities for the Form 1120 S Filers

Changes in ownership

You are responsible for advising us of any change in ownership, including the death of a shareholder, so that it may be accurately reflected on the tax returns. A change in ownership of S corporation shares needs to be reported on your return, and also may have unanticipated tax consequences. Certain transfers of ownership may result in the termination of your S election.Assistance with analysis of any change in ownership transaction is not within the scope of this engagement.

Tax basis schedules

The S corporation return disclosures and adjusted balances in the Accumulated Adjustment Account (AAA), Other Adjustments Account (OAA) and Accumulated Earnings and Profits e(E&P). However, it does not disclose each shareholder’s tax basis in S corporation stock or tax/at-risk basis in loans made to the S corporation. The IRS may examine any or all of these tax attributes to determine whether a shareholder is entitled to reduce their taxable income by some or all tax losses allocated from the S corporation, or avoid tax on certain distributions of cash from the S corporation.

Properly understanding and calculating these attributes is necessary for preparation of both S corporation and shareholder tax returns. We will rely upon the historical balances disclosed on last year’s tax return.

You are responsible for providing any necessary documentation to support transactions between the S corporation and its shareholders, including sale/redemption of S corporation stock and loans between the S corporation and its shareholders. You are also responsible for providing any necessary documentation to support transactions between shareholders involving S corporation stock, as these may impact your S corporation tax return. Additional analysis, such as recreating historical balances or analyzing proposed shareholder transactions is not within the scope of this engagement.

S Corporation Election

You may be asked to provide proof of your S status to third parties, including taxing authorities, to confirm the proper taxation of your entity. You are responsible for retaining a copy of your S corporation election and acceptance by the IRS or the state.

S corporation shareholder agreements

You should review your corporate buy-sell agreement and other stock agreements with your attorney to ensure these documents meet your goals for the transfer of corporate stock.

Salaries and wages for S corporation shareholders

If an S corporation treats payments to a shareholder as non-taxable distributions rather than wages subject to self-employment taxes, the IRS may recharacterize those payments. You are responsible for determining the appropriate salaries or wages to pay shareholders.

If the IRS recharacterizes payments to a shareholder, the shareholder and S corporation may be responsible for employment taxes on the recharacterized amounts, as well as underpayment penalties and interest. You will be responsible for any liability, including but not limited to, additional tax, penalties, interest, and related professional fees, resulting from changes to S corporation shareholders’ salaries and wages.

S corporation distributions

Distributions should be made to shareholders on a per share, per day basis. If distributions were not made proportionately, the IRS may take corrective action, including potentially revoking the entity’s S corporation election, which may result in unfavorable tax consequences. As such, it is your responsibility to ensure that shareholder distributions are made on a pro-rata basis.

Additional Client Responsibilities for the Form 709 Filers

It is your responsibility to safeguard your assets and maintain accurate records pertaining to transactions. We will not hold your property in trust for you or otherwise accept fiduciary duties in the performance of the engagement.

Trust accounting income

You are responsible for the calculation of trust accounting income. We will not audit or otherwise verify the data you submit, although we may ask you to clarify your calculations.

Crummey notices

A Crummey trust is created for the purpose of “skipping” one level of beneficiaries to make a gift to the next generation without tax implications (i.e., grandparents “skipping” making a gift to their children and, instead, gifting directly to the grandchildren). The beneficiary recipient must be notified of the temporary right to withdraw from the trust all or a portion of the gift (a Crummey notice) at the time the gift is made. The notification letter is sent by the trustee to the beneficiary of the trust. You acknowledge that it is your responsibility, as trustee, to send and retain such notices in the event of a future examination.

Estate or trust expenses

In the year of death, certain expenses may be deductible by the estate on Form 706 or the trust on Form 1041. While we will explain the options to you, you should discuss the options with the executor, attorneys, other advisors, heirs and beneficiaries of the estate. After all discussions are completed, the decision about where to deduct applicable expenses is yours. You agree to instruct us in writing whether or not to deduct the expenses on this tax return.

Elections

Gift tax returns include elections that may affect the taxes you may owe now or in the future.

We will explain tax return elections that you may make and provide recommendations based upon the information you provide. However, you remain responsible for consulting with any necessary attorney, as needed, regarding the advisability of making such elections. After all discussions are completed, the decision of whether or not to make an election is yours.

You agree to instruct us in writing regarding the tax return elections to be made or declined by you. You agree that any elections reflected on the completed return are made at your instruction following consultation with your attorney.

Appraisals and valuations

Determining the value of property to be reported on your gift tax return, other than cash or publicly traded securities, may require an appraisal or valuation. You acknowledge that you are responsible for both engaging a qualified independent third party to determine values of assets other than cash or publicly traded securities, and timely providing us with a final, formal appraisal or valuation report to be included in your gift tax return. Appraisals and valuations may take a significant amount of time. If a required appraisal or valuation is not timely received, the gift tax returns may require an extension of the filing due date.

The IRS describes fair market value as the price for which property would sell on the open market. Taxing authorities closely scrutinize fair market valuations which appear to be excessively discounted or reduced. IRC §6662, Imposition of Accuracy-Related Penalty on Underpayments, imposes significant penalties (40%) on gross valuation misstatements. You will be responsible for any liability, including but not limited to, additional tax, penalties, interest, and related professional fees resulting from any change to an appraisal or valuation determined by taxing authorities, third party appraisers, or other valuation professionals.

In preparing the tax returns, we will rely on the appraisal you provide. However, our reliance shall not be unreasonable. If you do not provide a formal appraisal where we believe IRS rules require, or if we, in our professional judgment, determine that the appraiser used is not professionally qualified to perform an appraisal which can be relied upon for filing with the gift tax return, we will be unable to proceed and may terminate this Agreement.

Limitations on Oral and Email Communications

We may discuss with you our views regarding the treatment of certain items or decisions you may encounter. We may also provide you with information in an email. Any advice or information delivered orally or in an email (rather than through a memorandum delivered as an email attachment) will be based upon limited research and a limited discussion and analysis of the underlying facts. Additional research or a more complete review of the facts may affect our analysis and conclusions.

Due to these limitations and the related risks, it may not be appropriate to proceed with a decision solely on the basis of any oral or email communication from us. You accept all responsibility for any liability, including but not limited to additional tax, penalties or interest resulting from your decision (i) not to have us perform the research and analysis necessary to reach a more definitive conclusion and (ii) to instead rely on an oral or email communication. The limitation in this paragraph will not apply to an item of written advice that is a deliverable of a separate engagement. If you wish to engage us to provide formal advice on a matter on which we have communicated orally or by email, we will confirm this service in a separate agreement.

Brokerage, Investment Advisory or Digital Asset Statements

If you provide our Firm with copies of brokerage, investment advisor, or digital asset statements, we will use the information solely for the purpose described in the Engagement Objective and Scope section of our Agreement. We will not monitor transactions, investment activity, provide investment advice, or supervise the actions of the entity or individuals entering into transactions or investment activities on your behalf.

It may become necessary to apply for an extension of the filing due dates if there are unresolved issues or delays in processing or if we do not receive all of the necessary information from you on a timely basis. Applying for an extension of time to file may limit your ability to make certain elections, extend the time available for a government agency to undertake an examination of your return and/or extend the statute of limitations to file a legal action. Although we may assist you in the preparation of an extension to file your return(s), you have sole responsibility for the filing of any extension, and you agree to hold our Firm harmless from any consequences, including waived elections, where the extension is not timely filed. If we apply for an extension of time to file because you have not provided us with all of the information needed to prepare the tax returns by the original due date, you agree to hold our Firm harmless from any consequences arising from any election waived. All taxes owed are due by the original filing due date. Additionally, extensions may affect your liability for penalties and interest or compliance with governmental or other deadlines. Please keep in mind that this is only an extension of time to file the return; any tax estimated due would need to be paid with the extension request. We assume no liability for late filing or late penalties that result from filing your returns after the due date.

If you wish to engage our Firm to apply for extensions of time to file tax returns on your behalf, we will not file these applications unless and until we receive both an executed copy of our Agreement and your express written authorization to file for an extension. In some cases, your signature may be required on such applications prior to filing. Failure to timely request an extension of time to file can result in penalties for failure to file tax returns, which accrue from the original due date of the returns, and can be substantial.

E-filing (not applicable to Form 709)

In addition to being a return preparer, we are an Electronic Return Originator (ERO) and may prepare your return(s) and/or extension(s) in a format that permits us, if you choose to, electronically transmit (“e-file”) those forms to the appropriate tax authority on your behalf. The e-filing of any form is a separate service from the preparation of that form.

If you request that we e-file any form on your behalf, including requests for extensions of time to file, and we agree, the IRS and states require you to sign and return to us the appropriate governmental form(s) before your returns can be filed electronically. For joint returns of Form 1040 filers, both spouses must sign the e-file authorization before the return can be transmitted. If you fail to timely sign and return e-file authorization, we cannot and will not e-file any form on your behalf. In those situations, you will be solely responsible for any penalties or interest assessed against you.

If you choose not to have your return(s) or extension(s) e-filed, or if your return(s) or extension(s) cannot be e-filed, we will deliver to you a paper copy suitable for mailing to the taxing authorities. Once delivered to you, you bear full responsibility for reviewing the paper returns for accuracy, and either signing and timely filing them, along with any payments due, or notifying us of any issue which may need to be addressed prior to filing.

Once our services have concluded, we shall have no obligation to notify you of future tax law developments affecting your return(s) except as may be required by Circular 230 or the SSTS related to errors we identify.

Penalties and Interest Charges

Federal, state, and local tax authorities impose various penalties and interest charges for non-compliance with tax laws and regulations, including failure to file or late filing of returns, and underpayment of taxes. You will be responsible for the payment of any additional tax, penalties, and interest charges imposed by tax authorities.

We rely on the accuracy and completeness of the information and supporting date you provide in rendering professional services to you. Failure to disclose, or inadequate disclosure of income or tax positions can result in the imposition of penalties and interest.

Once delivered to you, you bear full responsibility for reviewing the paper returns for accuracy, and either signing and timely filing them, along with any payments due, or notifying us of any issue which may need to be addressed prior to filing.

Once our services have concluded, we shall have no obligation to notify you of future tax law developments affecting your return(s) except as may be required by Circular 230 or the SSTS related to errors we identify.

Electronic Data Communication and Storage

In the interest of facilitating our services to you, we may send data over the internet, temporarily store electronic data via computer software applications hosted remotely or over the internet or utilize cloud-based storage. Your confidential electronic data may be transmitted or stored using these methods. In using these data communication and storage methods, our Firm employs measures designed to maintain data security. We use reasonable efforts to keep such communications and electronic data secure in accordance with our obligations under applicable laws, regulations, and professional standards. You recognize and accept that we have no control over unauthorized interception or breach of any communications or electronic data once it has been transmitted or if it has been subject to unauthorized access while stored, notwithstanding all reasonable security measures employed by us. You consent to our use of these electronic devices and applications during this engagement.

In connection with this engagement, we may communicate with you or others via e-mail transmission. As e-mails can be intercepted and read, disclosed, or otherwise used or communicated by an unintended third party, or may not be delivered to each of the parties to whom they are directed and only to such parties, we cannot guarantee or warrant that e-mails from us will be properly delivered and read only be the addressee. Therefore, we specifically disclaim and waive any liability or responsibility whatsoever for interception or unintentional disclosure of e-mails transmitted by us in connection with the performance of this engagement. In that regard, you agree that we shall have no liability for any loss or damage to any person or entity resulting from the use of e-mail transmissions, including any consequential, incidental, direct, indirect, or special damages, such as loss of revenues or anticipated profits, or disclosure or communication of confidential or proprietary information.

The Firm will use third-party software providers, some who may be cloud-based, that provide services used in preparing your return. We may share your tax return information with these service providers but remain committed to maintaining the confidentiality and security of your information. Although we will use our best efforts to make the sharing of your information to such third parties secure from unauthorized access, no completely secure system for electronic data transfer has yet been devised. As such, by your signature below, you understand that the Firm makes no warranty, expressed or implied, on the security of electronic data transfers.

Other Terms of the Engagement

Form 1040 Schedules C, E, and F, ask if any payments were made during the year that would require the filing of Forms 1099. Unless notified otherwise, we will answer no on your behalf, if applicable.

The IRS permits you to authorize us to discuss, on a limited basis, aspects of your return for one year after the return’s due date. Your consent to such a discussion is evidenced by checking a box on the return. Unless you tell us otherwise, we will check that box authorizing the IRS to discuss your return with us.

Pursuant to Circular 230, we are required to advise you that any federal tax advice contained herein or in any communication resulting from this engagement is not intended or written to be used, and cannot be used, by the taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or for promoting, marketing, or recommending to another party any plan or arrangement addressed in the communication.

Certain communications involving tax advice are privileged and not subject to disclosure to the IRS. By disclosing the contents of those communications to anyone, or by turning over information about those communications to the government, you may be waiving this privilege. To protect this right to privileged communication, please consult with us or your attorney prior to disclosing any information about our tax advice. Should you decide that it is appropriate for us to disclose potentially privileged communication, you agree to provide us with written, advanced authority to make that disclosure.

Ludmila CPA has remote employees located both inside and outside of the U.S., and because we do, we have included the following statement that you consent to with your signature. Taxpayer/Taxpayers authorizes Ludmila CPA to disclose taxpayers 2024 tax return information to Ludmila CPA employees located outside of the United States for the purposes of assisting Ludmila CPA in preparation of taxpayers 2024 tax return. By signing the engagement letter the taxpayer acknowledges that its tax return information for 2024 may be disclosed to tax return preparers located abroad. Both Ludmila CPA and its employees located in the United States and outside of the United States maintain adequate data protection safeguards to protect privacy and prevent unauthorized access of tax return information. If you consent to the disclosure of your tax return information, federal agencies may not be able to enforce United States laws that protect the privacy of your tax return information against a tax return preparer located outside of the United States to whom the information is disclosed.

Any claim arising out of our Agreement shall be commenced within one year of the delivery of the work product to the Client, or no later than 12/31/2025, whichever is earlier.

We reserve the right to withdraw from this engagement without completing the returns if you fail to comply with the terms of this engagement letter, if you disagree with our recommendations regarding tax return filing and reporting obligations, tax return positions to be taken or disclosures to be made in the returns, refuse to cooperate with our reasonable requests or misrepresent any facts, or if we determine professional standards require our withdrawal for any other reason. Our withdrawal will release us from any obligation to complete your return and will constitute completion of our engagement. You agree to compensate us for our time and out-of-pocket expenses through the date of withdrawal.

At the completion of our engagement, original source documents will be returned to you. Workpapers and other documents created by us are our property. Such original workpapers will remain in our control, and copies are not to be distributed without our prior written consent.

If any portion of our Agreement is deemed invalid or unenforceable, said finding shall not operate to invalidate the remainder of the terms set forth in this engagement letter.