Just brainstorming on how to get paid from close-to-deadbeat status client... Got a client who owes me money for last year's tax prep fees. I'm almost finished with this year's tax prep work. The amount of tax prep fees for this year and last year is very close to the total amount that the client will receive on this year's state refund. My thought is this: With the client's authorization, assign my personal bank account for direct deposit of the state refund to pay for the tax prep fees. I would have the client first sign a document that states that they are agreeing to have the state refund direct deposited to my personal account as payment for current and past-due tax prep fees. Any concerns? Any landmines?
-
-
Circular 230
says you can not endorse or negotiate any check issued to a client for any tax liability. -
Two, no three issues
You are probably aware that you could not do this with a Federal Refund. I would bet one of my teeth that either the IRS or your State forbids it with a Sate refund as well. Look at it from the government's point of view. If this became a common practice there would inevitably be squabbles between us and clients and the government would be in the middle. It's much easier on the government if everyone gets refunds deposited into accounts with the name of the taxpayer (or both taxpayer and spouse if a joint return). (I hadn't seen Veritas' post when I wrote the above but I see he has confirmed what I suspected.)
Second, why did you give them copies of the return and or e-file it before receiving payment last year?
Third, why did you choose to work this year on a return for someone who owes you from a previous year?Comment
-
What Erchess says!
When you allow the client to dictate your business practices--he will behave just like this one has. Are you man or mouse? Be strong. Stand up for your rghts (lol).Seriously, Erchess has made good points.Originally posted by erchess View Post
PeachieComment
-
Never put yourself in a position to be criticized that you strong armed a client to agree to something they could argue they didn't want to do.
Circular 230, or not, it's just as bad idea.Comment
-
why did you prepare this years?
I don't think I would have even started this year's return. I think I would have told the client that when he paid for last year's fee, then I would start on this year's return.
Use your time to prepare return's for paying clients.
Linda, EAComment
-
I agree with the others. I would not have even started this years return before being paid for the last years. Plus I don't even efile or let returns leave my office without being paid. No matter how long the client has been coming to me.
I've made it a practice when I call for them to pick up the returns to tell them the refund/owe amount and also say bring a check or cash for my fee of $$$. Reason I started this was because a few clients say I did not tell them to bring payment for my fees....Comment
-
Disrespect for Tax Professionals
I think for most of the clients we are talking about we are the only people from whom they buy goods or services without expecting to pay in full or sign a contract to pay at or before the time goods or services are provided.Comment
-
Unpaid work
If a client delays paying me until he shows up the next year, I just tell him I won't do his return since he did not pay me for the prior year.
Even if they offer to pay for the prior return, I usually prefer to lose the fee than to continue dealing with someone like that.
Once I agreed to do it if they paid for the prior year and paid in advance for the current year. In that case the husband had not paid it, but the wife persuaded me to continue doing their return. Since then I have only dealt with the wife who pays me promptly.Comment
-
Up Front
Collect last year's fee PLUS an equal amount (at least) for doing this years.
Example: Last years' fee was $80. Collect $80 plus $85 before even starting on this year. That's $165. No late fee.
I never have a late fee on my fee schedule because that let's clients know that I put up with them being late.
It's also just occurred to me how far we've strayed from the original question. I'm assuming Hoosier already knows he can't negotiate a Federal refund, so he's asked if he could do so with the state refund. Most of what we've said (myself included) have been lecture-style reviews of various collection policies.Comment
-
Cash
Have him bring in cash to cover both year's fees when he comes in to sign this year's -- if you've finished this year's return.
If not, call him immediately to bring cash for last year's fee before you continue with this year's return AND a cash advance for this year's before you continue. Otherwise, he can pick up his original documents and you lose only last year's fee. Probably worth it to be rid of someone who takes up your time worrying about collection instead of preparing returns for promptly paying clients.Comment
-
Hmmmmm.....
I've had clients who don't have bank accounts put their direct deposits into a friend or family member's bank account and they tell me it all went through fine. If what's being said here is true, why are all these refunds going through?
I thought the wording on the 8879 gave them authorization.Comment
-
Bank
It's up to the bank whether or not they accept a direct deposit where the name doesn't match the account.
However, I'm under Circ 230 which does not allow me as an EA to receive a client's refund into my account. I wouldn't want to anyway. Imagine the hassles if something went wrong, client disagreed re fee, etc.
Stop working for them until they bring you cash.Comment
-
-
Does your software allow for fee-collect? Set that up and then you can get paid out of the refund.
But you CANNOT just have the refund deposited in to your account.Comment
Comment