Fee dispute

[AuditorTurnedGood]

All,
I know we've knocked this topic around in parts of other posts, but I have a fresh situation, so I thought I'd see how others handle it.

What do you do when a client questions the bill? I used to cave and discount in the early days, but am now trying to figure out the diplomatic way of saying "It costs what it costs, I don't have to justify the number of hours to you, Mr. Client." I've canned clients over doing it on every bill, but I suppose one would have to nip that at the beginning.

Thoughts?

[tilt53]

It's not happened often, but when it does I weight the cost of what I can be paid vs. getting paid nothing. I figure I'm losing the client anyway, so I ask, "What do you think is fair?" I've often been surprised by the fact they quote a higher amount than I would have discounted. A few times I've tried to haggle, but then generally I've accepted the fact that at least I have a payment as opposed to months of repeated billings and possible collection actions. Once payment is received, they are no longer my client and someone else's headache.

[equinecpa]

I'd say it depends on the circumstances. If I have quoted a fee and not let the client know there will be additional time because (fill in the blank)...then I pretty much will eat the overage. I will bill for full time to let the client know I incurred extra hours but then I will discount to just about the original quote. I will let the client know next year if they don't do (fill in the blank) they will be charged for that extra work.

Now if I have only quote the client my hourly rate...I will discuss with the client why the bill is xx dollars and how perhaps they can reduce it next year by doing such and such. I won't necessarily discount the bill. My time is my time and if I feel the bill is reasonable (which I will because I only bill for what I feel is justified) I won't discount it.

If I expect a client to balk because they are cheap or the return is more complicated than they might think...I make sure I get paid before I deliver or efile.

I've also learnt that I don't want the client who questions my bill as they obviously don't think the service I do is worth much.

[Burke]

When this happened to me with a long-term client whose situation changed drastically, (moved to another state/two part-year returns, out of state tax credits, etc etc,) I calmly stated that it was a fair price, and that it was still less than what he could expect to pay elsewhere. I subsequently contacted 2 EA's/CPA's and quoted what they would have charged, plus I invited him to take it to any HRB office and ask them to give him a quote. He paid, never said anything else, and I still have him four years later.

[S T]

Billing

As there were questions and concerns regarding a few 2008 Invoicing for payment - this year I have changed my invoicing to reflect the work done, sometimes I have even included a cover letter to "justify" my charges. The cover letter worked in a few circumstances and the client did not bother to call me "questionning" the bill and a check was received.

Some line items will show an amount and then a discount or no charge, some line items will show an amount and a discount, etc. I really don't think the client is aware of what it is that "we" as tax professionals actually do for them.

Guess I am starting to think like an attorney and billing by the quarter hour and including expenses

Right now I am thinking that every other professional in other industries are getting paid for their time and services, and I should follow suit and try to collect a few extra dollars.

Keep us posted

Sandy

[BOB W]

Before I bill a client I evaluate the client's ability to pay, how easy was the client to work with, then I look at what it took to get the work done (time and complexity).

If a client is just going to be cheap and question every bill, I say good bye> after the bill is fully paid. Many clients, as you know, are referrals or friends of clients or whatever. Once you cave-in on an invoice the word will spread and you will have nothing but problems in the future.

Like I have always said> there has to be two winners in every transaction. If you are the only winner, you will lose in the end. It is not what YOU think you can get away with. Be fair and your client will "read" you as giving a fair price. Your body language says alot.

[Black Bart]

Case by case.

I've never found a good general all-around answer -- the actions and reactions are just all over the board because of time expended and temperament expressed, Most of mine end up badly because I'm frequently undercharging and the dope thinks I'm gouging -- now that makes me mad. Sometimes I drop the fee, sometimes not (if I don't like him). Either way, it's usually final.

I had a rare success story last year -- billed a guy $800 for sorting out a ton of junk, he phoned, heated argument, I hung up on him. Returned later, hat-in-hand and apologetic -- consulted out of town CPA who quoted him $2,000 for the same job . He's stayed with me .

[taxea]

My yearly cover letter includes that my fees are based on the complexity of their return; are generally lower or in line with much less educated and experienced preparers because my overhead is less than storefront businesses; and extremely lower than CPA fees.

If I have completed the return and they don't want to pay the fee, I explain that I will return the documents they provided to me and they are welcome to go elsewhere but, they will still owe me the time spent on preparing their return. And no they don't get a copy of the return without paying for it.

[erchess]

Taxea

What is the difference between what you charge as a time charge along with returning their documents and what you would want for filing their return?

Also in light of Circular 230 how can you justify withholding their documents until they pay you? In North Carolina the police or sheriff if called will give them their documents unless you have a signed engagement letter that clearly (in the mind of the responding officer) gives you the right to withhold them under the pattern of facts alleged by your client.

[David1980]

What is the difference between what you charge as a time charge along with returning their documents and what you would want for filing their return?

Also in light of Circular 230 how can you justify withholding their documents until they pay you? In North Carolina the police or sheriff if called will give them their documents unless you have a signed engagement letter that clearly (in the mind of the responding officer) gives you the right to withhold them under the pattern of facts alleged by your client.

I know in Washington State the police will also come if documents are held for money. This occured when I was working for H&R Block, who in my mind had a great system. They didn't release documents to people they could not verify the identity of - security stuff. Police came, the guy with no ID couldn't identify himself to the police either. They told him to come with ID to get his tax return.

So I guess, what I'm saying, is if you really want to hold the tax docs ransome for fee, get one of your buddies to pick-pocket the taxpayer so nobody can prove he is who he says he is!

[Black Bart]

But...but...Dave...

I know in Washington State the police will also come if documents are held for money. This occured when I was working for H&R Block, who in my mind had a great system. They didn't release documents to people they could not verify the identity of - security stuff. Police came, the guy with no ID couldn't identify himself to the police either. They told him to come with ID to get his tax return.

So I guess, what I'm saying, is if you really want to hold the tax docs ransome for fee, get one of your buddies to pick-pocket the taxpayer so nobody can prove he is who he says he is!

I don't know any pickpockets -- other than a few family drunks and bums the closest thing I've got to friends in low places is that dirty, rotten, low-down, inexcrupulous client.

[JohnH]

I try everything possible to keep my clients out of my office, especially during tax season, so when I finish the return I will mail it to them with an invoice. I do this even with new clients. If the client is the kind of person who's going to stiff me for $100 - $250 , I WANT to know that. I follow my father-in-law's philosophy: "It's important to know if the guy will cheat you of of $200, 'cause then you can be sure he'll never has a chance to cheat you of of $2,000."

[Lion]

Return his documents

Of course, you return his original documents that he needs to file his tax return elsewhere. But, you do NOT owe him the return you prepared or your notes or your work papers or anything else that was never his to begin with -- unless and until he pays you for them. You do not have to give him anything that he has not paid for or that was not his already.

[taxea]

I don't withhold their documents until they pay but I do give them a bill when I return the documents. The invoice includes a statement that the bill is due w/in 15 days and may be subject to civil action (small claims court) for which all other expenses and court fees could be added. My fee for this is the same as the tax prep fee.

[oceanlovin'ea]

collect first

I always collect for a return before I will electronically file the return. Last year I did the son of a long time client. He lives in another town and faxed me paperwork and faxed signed 8879 to me. He never sent me the money. I really believe he forgot. I sent him a bill but he had moved, separated from wife, lost his job and living in his car. It was only $50 so I am not going to sweat that.

Once in a while, someone will forget their checkbook when they come. But I know my clients and I will let them mail me a check. Some offer to go to ATM and get the cash. Of course, that is fine with me. Others mail the check and I have it in a day or 2.

Over the past 9 years, I have been treated well by my clients.

I did start putting on some people's invoices a higher amount and then discounted the price to what I wanted to be paid. That way they think you are doing something special for them.

Linda