You’ve decided it’s time to find a new bookkeeping firm.

Maybe you’re starting a business. Maybe your current bookkeeper is no longer a good fit. Maybe you’re taking over more of the business yourself and need additional help. Or maybe you’re simply looking for someone who can provide a higher level of accounting expertise and support.

You have your initial conversation. You discuss your business, your accounting system, your bank accounts, your bookkeeping needs, and what you’re looking for from a professional.

Then comes the request:

“Please send me your prior-year tax return.”

Maybe they ask for one year. Maybe they ask for several.

And because you’re looking for a professional to handle your books, you might reasonably think:

“I suppose they need it, they wouldn’t have asked if they didn’t.”

But before you send a document containing some of the most comprehensive financial information about you and your household, there’s a reasonable question to ask:

Why?

Not because requesting a tax return is automatically inappropriate. And not because information from a prior-year tax return can never be useful to a bookkeeping professional.

It can.

The question is whether the complete tax return is actually necessary for the bookkeeping engagement you’re considering.

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Your Tax Return Contains a Lot More Than Your Business Books

For many business owners, a tax return isn’t simply a report about the business. Depending on how the business is organized and how the owner’s taxes are filed, a return may contain information about:

• • The business’s income and expenses
  • Depreciation and other tax-related information
  • Loans, assets, and liabilities
  • Ownership and capital information
  • Other businesses or sources of income
  • Investments
  • Rental property
  • Retirement accounts
  • Dependents (and potentially their DOBs & SSNs)
  • Charitable contributions
  • Medical expenses
  • And other personal financial information

In other words, your tax return may provide a much broader picture of your financial life than the bookkeeping professional needs to perform the specific responsibilities you’ve hired them to perform.

That distinction matters.

Information that may be useful is not necessarily information that must be collected in its entirety.

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There May Be a Good Reason to Ask for Tax Information

Let’s be fair about this.

A prior-year tax return can contain information that may help a professional understand how the books should be established or how certain balances should be treated.

There may be a legitimate need to review information relating to:

• • Fixed assets and depreciation
  • Loans and other liabilities
  • Owner contributions or distributions
  • Equity accounts
  • Prior-year balances
  • Tax-related adjustments
  • Or other information necessary to establish or reconcile the accounting records.

So the issue isn’t:

“Should a bookkeeper ever look at a tax return?”

That’s too simplistic. The better question is:

“What information from the tax return is actually necessary to perform this particular engagement?”

Those are two very different questions.

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The Complete Return Is a Different Question

Here’s where things get interesting.

Suppose your new bookkeeper needs one particular piece of information from the prior year’s return.

Does that automatically mean they need the entire return?

Or could the necessary information be obtained from:

• • A specific schedule (e.g., Schedule C)
  • A depreciation report
  • A balance sheet
  • An asset listing
  • A prior-year financial statement
  • A specific tax form
  • Or information provided by your tax professional?

The answer will depend on the circumstances.

But that’s exactly the point. The request should have a legitimate purpose.

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“Because That’s What We Ask Every New Client” Isn’t Really an Explanation

A checklist can be useful. But a checklist isn’t always professional judgment.

If every new bookkeeping client automatically receives the same request for a complete prior-year tax return—regardless of business structure, engagement scope, accounting system, or circumstances—it’s reasonable for the client to ask whether the request is actually necessary.

Because there’s a difference between:

“We need this information because…”

and:

“We always collect this from new clients.”

The first explains a professional requirement. The second explains a process.

Those aren’t necessarily the same thing.

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Ask Three Simple Questions

Before sending a complete tax return to a new bookkeeping provider, consider asking:

• • What information are you looking for? Don’t be afraid to ask specifically:

1. • 1. If they need depreciation information, ask what information they need.
     2. If they’re trying to establish opening balances, ask which balances.
     3. If they’re trying to understand prior-year activity, ask what they’re looking for.
   • Why do you need it for my bookkeeping engagement? The answer should connect the information requested to an actual accounting responsibility. That’s an important distinction.

• • Do you need the complete return? This may be the simplest question of all. If the professional needs  information contained in a particular  schedule or supporting document, perhaps the entire return isn’t  necessary. And if the complete return is necessary, you should understand why.

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Privacy Isn’t an Afterthought

This isn’t about being paranoid.

It’s about recognizing what you’re handing over.

A complete tax return can contain highly sensitive personal and financial information. Once you’ve provided it to another party, you’ve potentially expanded the number of people and systems that have access to that information.

That doesn’t mean you should never provide it – you should however – understand why you’ve been asked to provide it.

Good information management isn’t about collecting everything that might someday be useful. It’s about knowing what information is needed, what it will be used for, and who actually needs access to it.

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The Scope of the Engagement Matters

This brings us back to something that gets overlooked when bookkeeping is treated as a collection of transactions:

What exactly have you hired this professional to do?

If the engagement is limited to maintaining the books, reconciling accounts, and providing financial statements, the information necessary to perform that work may be different from what would be necessary for:

• • Tax preparation or Tax planning
  • Business advisory
  • Forensic accounting
  • Financial statement preparation
  • Or another engagement involving broader financial responsibilities.

The information requested should make sense in the context of the responsibility being performed.

That’s a principle worth remembering:

The scope of the engagement should help determine the scope of the information being requested.

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At Brickhouse Ledger & Loop, It’s All About the Engagement.

At Brickhouse Ledger & Loop, we don’t believe that requesting more information automatically makes an engagement more thorough. We believe information should have a purpose.

When information from a prior-year tax return is necessary to establish or understand a client’s accounting records, we want to understand what we’re looking for and why. That may mean a particular schedule or tax form—not necessarily the client’s entire tax return.

The goal isn’t to obtain everything. It’s to obtain what the engagement actually requires.

Your bookkeeping professional should be able to explain not only what information is being requested, but how it fits into the engagement scope and why it is necessary to the responsibility you’ve hired them to perform.

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Before You Hand Over the Return…

Ask Why.

If a prospective bookkeeping professional asks for your complete prior-year tax return, don’t assume the request is inappropriate. But don’t assume it’s necessary, either.

Ask:

• • What do you need from it?
  • Why do you need it?
  • Does the engagement actually require the complete return?

Those are reasonable questions.

And a professional should be able to answer them.

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Know What You’re Providing—and Why

Your financial information deserves more than a checkbox on a new-client checklist.

At Brickhouse Ledger & Loop, we believe an accounting engagement should begin with understanding the business, the responsibilities involved, and the information essential to perform those responsibilities.

Because professional bookkeeping isn’t about collecting information simply because it’s available.

It’s about knowing what is needed—and why its needed.