3rd Party Verification Policy
Martin & Associates understands that client applications for loans, health and life insurance coverage, government subsidy programs and even child adoption are predicated on verifying certain critical information. To gain some assurances that the information you provide is accurate, lenders, providers, regulators and various other government and nongovernment agencies will often request third-party verification letters from our firm. These letters might ask our firm to verify certain information that you have previously provided or that you are simultaneously providing. These verification letters are typically asked to be signed by us before they commit to providing a loan, a government subsidy or health insurance, to name a few examples. When these requests to you are made, we encourage you to seek our assistance.
Confidential Information and Matters of Solvency
Martin & Associates is eager to address third-party requests, but there are two types, which come with important caveats: those requiring we provide confidential client information and those related to matters of solvency and assurance.
If we receive a request from a lender or another third-party seeking verification of your information, you should understand we cannot provide any confidential client information without your signed, written consent. Likewise, obtaining our clients’ consent to share tax return information creates an added complication because using a standard client consent form is not sufficient. In fact, it’s a crime. Internal Revenue Code Section 7216 dictates that tax preparers use a specific format to obtain consent to disclose client tax return information to a third party. Please be aware that Martin & Associates follows the Code when asked to provide copies of tax information, tax returns or other information used in the preparation of a client’s tax return.
Additionally, we are precluded from responding to a requestor seeking any assurance on matters relating to solvency—or the ability for an individual or business to service its debt and meet its other long-term obligations. Matters relating to solvency are subject to legal interpretation under the Federal Bankruptcy Code and various state fraudulent conveyance and transfer statutes. Because these matters are not clearly defined in an accounting sense and are subject to varying interpretations, tax preparers don’t have suitable criteria to evaluate a subject matter or make an assertion. Lenders are often concerned with legal issues on matters relating to solvency; however, tax preparers are generally unable to evaluate or provide assurance on these matters of legal interpretation. The attestation standards preclude tax preparers from giving any form of assurance on matters relating to solvency.
Determining the Proper Response
We can provide a response that states factual information based on verifiable information. Martin & Associates may respond verbally or via email, form letter or other written channels.
Since our tax return and bookkeeping services are prepared based on unverified information provided by our clients, we are unable to provide the following:
Request from a lender to verify, certify or otherwise validate information presented on a tax return to a 3rd party (such as mortgage lender asking the tax preparer to certify self-employment income on a tax return)
Request for verification that upon liquidation the fair salable value of assets exceeds liabilities.
Request for a signed letter from the preparer addressing the issue of client withdrawing money from the business and its effect on the business going forward
Request verification of self employment or independent contractor status
Request for signed certification from preparer to attest a professional opinion based on review of XX Company records that XX Company is complying with applicable governmental requirements and meets the terms in the subcontractor/supplier agreement.
Request for letter from the preparer to certify to the lender how long the borrower has been self-employed.
Request a statement from the preparer that the client is not insolvent at the time the debt is incurred or would not be rendered insolvent thereby.
Request a letter from the preparer confirming that the client has the ability to pay debts as they mature.
Request for a signed letter from preparer explaining that use of cash from an S-Corporation’s bank account does not impact the viability of the company
If your lender or other third-party requests or makes an inquiry and/or you’re not clear on the type of information they are requesting, please contact Martin & Associates / 714.842.1234 and one of our staff will help you determine the best response or course of action to take.