How to Tell Your Accountant You Are Leaving

Switching accountants is a significant decision that can impact your financial management and business operations. Whether you’re seeking better service, lower costs, or specialized expertise, handling the transition professionally ensures a smooth process and maintains goodwill.

A well-planned approach helps avoid disruptions and keeps your financial records in order. Taking the right steps when informing your current accountant will make the change more efficient and minimize potential issues.

Reviewing Any Current Engagement Agreements

Before notifying your accountant, review your engagement agreement to understand any obligations or restrictions. Many firms require advance notice before termination and may have clauses related to outstanding fees or document retention. Overlooking these terms could result in unexpected costs or delays.

If your accountant is in the middle of preparing a tax return or conducting an audit, leaving before completion can create complications. The IRS requires tax preparers to sign returns they prepare, and switching mid-process may require additional documentation. Similarly, an ongoing financial review could be disrupted, affecting regulatory compliance.

Engagement letters often specify how client records are handled upon termination. While accountants must return original documents, they may retain copies for their records. Although professional standards prohibit withholding client records for unpaid fees, accountants are not required to provide internal work papers. Understanding these provisions ensures you receive necessary documents and prevents disputes over access to financial data.

Planning Your Exit Communication

A professional and clear approach when informing your accountant helps maintain a positive relationship and ensures a smoother transition. The timing of your notice is important, especially if your accountant handles recurring tasks like payroll, tax filings, or financial reporting. Informing them well in advance reduces the risk of disruptions.

For example, if your accountant prepares quarterly tax estimates, notifying them after the most recent filing rather than mid-quarter can prevent confusion. If they assist with financial reporting for lenders or investors, ensuring necessary reports are completed before disengagement helps avoid delays.

An in-person meeting or phone call is often the most professional approach, but following up with written notice provides a clear record of your decision. This letter should include the termination date and instructions for transferring responsibilities. If you need their assistance in coordinating with your new accountant, specifying this in writing can help streamline the process.

Gathering Relevant Financial Records

Organizing your financial records before leaving your accountant ensures a seamless transition and prevents compliance issues. Having complete and accurate documentation allows your new accountant to assess your financial position and continue necessary filings without delays. Missing or incomplete records can lead to errors, penalties, or additional costs to reconstruct lost data.

Secure copies of prior tax returns, including federal, state, and local filings for at least the past three years. The IRS has a general three-year statute of limitations for audits, but substantial underreporting of income extends this period to six years. If you’ve claimed depreciation deductions, cost basis adjustments, or carryforward losses, ensure you have supporting schedules and worksheets.

Retrieve financial statements, including balance sheets, income statements, and cash flow statements, particularly if your business applies for loans or undergoes financial reviews. If your accountant prepared these statements using Generally Accepted Accounting Principles (GAAP) or another framework, obtaining the final versions along with adjusting journal entries ensures consistency. Additionally, gather payroll records, 1099 filings, and sales tax reports to prevent compliance gaps.

Resolving Outstanding Billing Matters

Settling any outstanding financial obligations with your departing accountant avoids disputes and maintains professionalism. Many firms operate on a retainer, hourly billing, or fixed-fee structure, so reviewing past invoices helps identify unpaid balances or upcoming charges. If your accountant charges based on work completed rather than a fixed contract, requesting a final invoice clarifies what remains due.

Some firms bill in stages, particularly for complex services like forensic accounting or multi-year tax planning, meaning there may be outstanding fees for work performed but not yet invoiced. Clients sometimes assume a service was included in a prior payment when additional fees actually apply. For example, IRS correspondence or amended returns are often billed separately. Late payment policies vary, with some firms imposing interest charges on overdue balances. Ensuring all invoices are accounted for prevents penalties and potential legal action for nonpayment.

Coordinating Transition With Your New Accountant

Once you have informed your current accountant and settled any outstanding matters, ensuring a smooth handover to your new accountant prevents disruptions in financial reporting, tax compliance, and advisory services. The transition process involves transferring access to financial systems, clarifying expectations, and ensuring continuity in critical filings.

Transferring Financial Data and Access

Providing your new accountant with access to financial records, accounting software, and tax filings allows them to take over responsibilities without delays. If you use cloud-based accounting platforms like QuickBooks Online, Xero, or NetSuite, updating user permissions ensures they can retrieve historical data and make necessary adjustments. Some firms use proprietary software or client portals, so confirming data export options prevents compatibility issues.

Review bank and payroll integrations. If your previous accountant had access to business bank accounts for reconciliation, updating login credentials or revoking third-party access prevents unauthorized transactions. Payroll providers such as ADP or Gusto may require formal authorization changes to allow your new accountant to manage tax withholdings and filings. Ensuring all integrations are properly transferred avoids errors in financial reporting and tax submissions.

Ensuring Continuity in Tax and Compliance Obligations

Your new accountant should be fully informed of any pending tax filings, regulatory deadlines, or financial reporting requirements. If your business operates in multiple states, ensuring they are aware of state-specific tax obligations, such as sales tax nexus rules or franchise tax filings, prevents penalties. For example, California’s minimum franchise tax of $800 applies even if no income is generated, and missing this payment results in automatic penalties.

If your previous accountant handled IRS or state tax correspondence, confirming whether any open matters exist ensures they are properly addressed. The IRS allows taxpayers to designate a new representative using Form 2848 (Power of Attorney), which authorizes your new accountant to communicate with the agency on your behalf. If your business is undergoing an audit or has unresolved tax disputes, ensuring a seamless transition in representation prevents delays in responding to tax authorities.