When you finance or refinance a loan, your lender may ask for a “lender” or “comfort” letter from your CPA. If you’re unfamiliar with the terminology, these letters seek verification of your income or employment status and typically reference information from your tax return. A more correct name is “third-party verification” request because the lender is asking for confirmation from an independent source — specifically us, as your CPA.
The request sounds simple. After all, we prepare your tax return, so who better to ask? Yet you may be surprised to find we’re unable to provide specific details or complete a form furnished by the bank.
Why? Several issues affect our response. For example, releasing information from your return, including how much you earn or that you are self-employed, can run afoul of tax laws. Without your express signed consent, we generally cannot share your tax data, either verbally via a telephone verification or in written form.
In addition, professional ethics require — and you have every right to expect — confidentiality in matters related to your finances.
How can you work with us to satisfy your lender’s request? One solution: You can personally give your lender a copy of your tax return and we can provide a letter containing facts, such as a statement that we completed the return based on information you provided.
Other options may also be useful, including the preparation of a financial statement or projection. Please give us a call at Dye and Whitcomb LLC to discuss the many ways we can help.