AICPA Provides Guidance on FSA Certification Letters

In response to a Farm Service Agency (FSA) initiative requesting that CPAs certify some clients’ income, the AICPA has worked with the FSA to create a certification letter CPAs can use and is providing its members with sample engagement and disclosure letters to be used in connection with providing a certification letter for clients.

In April, the FSA, a branch of the U.S. Department of Agriculture, sent 15,000 letters under the Food, Conservation, and Energy Act of 2008, P.L. 110-234, requesting persons who receive payments through certain farming programs to certify their income. To qualify for these programs, the persons need to prove that their adjusted gross income (AGI) does not exceed specified limitations found in 7 U.S.C. Section 1308-3a. The persons can prove compliance with the limitations by furnishing three years of their federal income tax returns or by providing a certification letter from a CPA or attorney. The person is required under Section 1308-3a(d) to provide “certification” from a CPA or other third party as an alternative to providing the actual tax returns.

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AICPA members have been questioning whether they can respond to the letter, given that they prepare tax returns based on information provided by the taxpayer and do not audit or otherwise verify the information used in the preparation of the returns. Furthermore, professional standards prescribe what CPAs can and cannot do in these circumstances, and there are professional risks to signing such letters.

To answer these member concerns, the AICPA created a new dedicated webpage coordinated with the FSA’s release of a sample certification statement for average AGI compliance verification. The webpage provides issue-specific resources as well as additional guidance. The AICPA worked with the FSA to craft a resolution that meets both the FSA requirements and the professional standards of its members.

The AICPA is encouraging participants who receive the FSA letter to provide the last three years of their federal income tax returns for compliance purposes. However, in some limited situations, those tax returns will not provide sufficient information to meet the compliance initiative—e.g., where the person qualifies individually for the farm program but files tax returns using married filing jointly status. In that case, the only remaining option would be the certification letter from a CPA or attorney.

The certification letter of average AGI compliance was agreed on by the FSA and the AICPA for CPAs to use when they cannot avoid providing certification. The AICPA is also providing for its members a sample engagement letter and sample disclosure letter, which it suggests CPAs use in connection with providing the statement for average AGI compliance verification. The engagement and disclosure letters should be signed by the client before the member signs the certification.

— For more information, contact Henry Grzes (henry.grzes@aicpa-cima.com), Lead Manager, Tax Practice & Ethics — Public Accounting.