Lost Client

[Nashville]

Client with $5MM business called me not long ago and told me he was going to use someone else. He said he found someone who he felt like could save him taxes and also felt was a better fit in tax planning. He met with a lawyer who recommended a lady just putting out her CPA shingle in his small town.

Save him taxes? He didn't like having to come up with $38,000 for 2007. He gave himself a $200,000 bonus that year and refused to withhold any taxes.

His corporation bought a warehouse 3 years ago, and I had a confrontation with him about holding the warehouse in the corporation instead of owning it personally and letting the corporation pay him rent. We had this discussion at least three times.

When he met with his lawyer, the lawyer was horrified that he had real estate in his corporation and advised him to take it OUT of his corporation immediately. Lawyer told him his tax advisor was very ignorant for not advising him of the consequences of leaving the warehouse in the corporation, and recommended someone else should do his taxes.

Go figure. Why do these people think lawyers are Voice Of God and we are just plowboys? I spend dozens of hours every year cleaning up tax messes that lawyers have left undone.

[sea-tax]

Nash, I feel for ya. It sounds like you tried the best you could with a very difficult client. I know it sucks but ya win some ya loose some. Never the less as long as you have detailed notes specifying when you talked to this client and what you said about real estate in a C corp I think you are OK. You can lead a horse to water but you can't make him drink.

[BOB W]

Nash, I feel for ya. It sounds like you tried the best you could with a very difficult client. I know it sucks but ya win some ya loose some. Never the less as long as you have detailed notes specifying when you talked to this client and what you said about real estate in a C corp I think you are OK. You can lead a horse to water but you can't make him drink.

I have NEVER kept notes on conversations with clients but I am considering doing just that. I must be selective and only document advice that relate to actions that deal with something the client did without seeking advice from me first.

Other documentation can be used against me in CIR 230.

[sea-tax]

bobw I am not 100% perfect on this either. But generally in a case such as nashville. I would have simply noted in the client file that on such and such a date I advised him that purchasing real estate in a c-corp is a bad idea and that the client choose to disregard the advice.
That way 10 years from now when he realizes what he has done and comes back to yell at me I have some recollection as to what I really said and what actually transpired.
To say the least I learned my lesson the hard way.

[Nashville]

and he's a LAWYER

Sea-Tax, how many times have we heard it??

Paul Atkins told me I could claim my ex-wife's stepson, and he's a LAWYER!!!

Boy, that means it has to be right, doesn't it??

[DaveO]

I just lost a client because he had a big balance due two years in a row. Never mind the fact that he neglected to make the quarterly estimated tax payments on the coupons I had prepared for him. He is some other accountants headache now.

[Nashville]

Triumphant Return of Sova

Matt, good to have you back! We thought you had moved to Lansing and eloped with the Governor.

Many of us enjoy reading your posts tremendously. You are usually right, and you spice up your information with foot-stomping twists from time to time.

When you fired this client, he probably had the mindset that he was buying you off, and thinks CPAs are just hired help, instead of highly-trained economic advisors. Sad fact about it -- he will find another sucker somewhere.

"There's a sucker born every minute" - P.T. Barnum

[BOB W]

In November I fired my biggest client. Retainer was $2,600/month (gulp). My job was to go out there once a week, review information for 3 companies, make recommendations, advise the owners on various situations, etc, etc.

Why would I fire this client? Well number 1 they were a slow payer. Number 2 too many times I'd tell the owners to do or not do something and they would do the exact opposite (like your warehouse situation) and 3 the more I look at their stuff the more I realized they were doing all kinds of crazy things - by crazy I mean not quite legal.

I could not hang my CPA license on the line for them after I found out some of the stuff they were doing (like paying cash to employees for overtime to the tune of about $7500/week on average). Also the fact that they would not follow my reccomendations on things I realized it would only be a matter of time that they blamed me for their poor decisions and fired me any way.

I am better off without them.

You were correct to get rid of them. For the fees they were paying you it would APPEAR that you were the one allowing them to do everything they did. To boot< they would swear you told them how to operate their business that way. Then they would say " I paid the accountant to make sure I wasn't getting into trouble. I felt somethig was wrong but he told me it was OK".

In cases like this, I think a letter sent to the client for each failure to conform to your direction should be issued. It is too late now but is food for thought going forward.