If you are applying for a mortgage, business loan, or even just trying to show proof of income, you have probably been asked to provide a CPA letter. And if you are wondering, “What exactly should be in that letter?” you are not alone.
When someone asks you for a CPA letter, it can feel a little confusing at first. What exactly should it say? And how do you make sure it checks all the right boxes? Whether you are applying for a mortgage, verifying self-employment income, or confirming your business activity, a properly written CPA letter can make a big difference.
Let’s walk through what a CPA letter should include, why each part matters, and how to make sure yours checks all the right boxes.
What It Must Include in CPA Letter Checklist
Here’s everything your CPA should include to make the letter both effective and accepted by third parties like mortgage lenders or banks:
1. CPA’s Letterhead and Contact Information
Start with a professional letterhead. It should include:
- CPA’s full name and license number
- Firm name (if applicable)
- Mailing address
- Email and phone number
Why it matters: This adds credibility and ensures the recipient can verify the source of the letter.
2. Statement of Purpose
The letter should clearly state why it’s being written. Examples:
- “To confirm self-employment status”
- “To verify income for mortgage qualification”
Why it matters: It sets the tone and helps recipients understand what the letter is verifying.
3. Verification of Income or Employment
This is the core section of most CPA letters. It should include:
- Employment status (self-employed, W-2, etc.)
- Business type and duration
- Estimated annual income or revenue
Why it matters: This section is what lenders and financial institutions are really looking for. It needs to be honest, concise, and backed by data.
4. CPA’s Signature and Date
No letter is complete without a handwritten or digital signature and the date it was signed.
Why it matters: Without this, the letter could be considered invalid or incomplete.
Verifying Income and Employment: What to Include
-
Employment or Self-Employment Status
Clearly state whether the client is self-employed, a business owner, or employed by a company. For business owners, mention the type of business and legal structure.
-
Business or Job Title
Including the client’s professional role or job title this helps lenders or agencies understand the nature of their work and assess their financial stability.
-
Length of Employment or Business Operation
Specify how long the client has been working in their current role or how many years they have operated their business. Longevity can add credibility and show financial consistency.
-
Estimated Annual Income or Net Earnings
Provide a reasonable estimate of the client’s annual income, based on tax returns or financial statements. This should be presented as an approximation unless otherwise required.
Frequently Asked Questions
1. What is typically included in a CPA letter?
A CPA letter usually includes the CPA’s contact details, the client’s legal name, the purpose of the letter, income verification, business status, and a signature with date.
2. Why do lenders require a CPA letter?
Lenders request CPA letters to verify self-employment status, confirm income, and ensure the borrower has a legitimate source of funds for mortgage or loan approval.
3. Can a CPA letter be used instead of tax returns?
In some cases, yes. A CPA letter may serve as an alternative to tax returns, especially for self-employed individuals, but lenders may still ask for supporting documents.
4. Is a CPA letter legally binding?
No, it’s not legally binding like a contract. However, it is a professional verification document, and any false claims can lead to legal and ethical consequences for the CPA.
5. How recent should the CPA letter be?
Most institutions prefer CPA letters dated within the last 30 to 90 days, depending on the purpose especially for mortgage applications.
Final Thoughts
A CPA letter can open doors whether it’s securing a mortgage, getting a loan, or proving your income. But it only works if it’s done right. Make sure your letter includes all the key elements above, and don’t hesitate to ask your CPA to walk you through what they’re including.
