non-paying clients

[Acownt4it]

I have a business client that owes me $458 for their 2010 tax return that I completed on 3/29/11.The total invoice amount was $890, he paid me $450 on 5/2/11. I finally heard from him when I threatened to send the balance to collections. He emailed me this weekend to tell me he is disputing my bill because he doesn't agree on a few items on the 1120-S and has found a new tax preparer. They never contacted me with any questions or concerns. I am fine that they found a new preparer, but I want the rest of my money.
What would you do in this situation? Do I have to give them any depreciation schedules or workpapers?

[BOB W]

Take him to Small Claims Court. Cost is minimal to you. Many states require legal representation in Small Claims Court when a Corporation is sued.

[DTS]

Agree with Bob.

[Jiggers]

I have a business client that owes me $458 for their 2010 tax return that I completed on 3/29/11.The total invoice amount was $890, he paid me $450 on 5/2/11. I finally heard from him when I threatened to send the balance to collections. He emailed me this weekend to tell me he is disputing my bill because he doesn't agree on a few items on the 1120-S and has found a new tax preparer. They never contacted me with any questions or concerns. I am fine that they found a new preparer, but I want the rest of my money.
What would you do in this situation? Do I have to give them any depreciation schedules or workpapers?

1. I would ask if he has amended the 1120-S that you prepared. If not, why not, and tell him you want payment.
2. If he has amended the return, I would ask to see what the changes were. I would tell him that if they were legitimate that you will drop the balance due. If not, I want payment.
3. I always include the depreciation detail with the return copy. As far as my work papers, he doesn't get them. Period.

[taxmandan]

Since tax season is here and you probably don't have anything else to do, go ahead and chase him in small claims court. Me, I don't bother, the only thing court does IF you prevail, is say that you are owed money which you then still have to try and collect. The court does not collect the money for you. Not worth the effort IMHO. Then again, my clients pay in full at the time of delivery so I don't have this problem.

If this was a new client in 2011, I would have gotten the first $450 as a retainer, and the balance at the time he picked up the completed return.

[ttbtaxes]

I would not pursue collection efforts. I would document your conversation and put it in his file. Nothing positive can come of threats to collect.

Do you want to report this incident to your malpractice carrier because you stirred up a hornet's nest over a paltry $458? The after-tax cost to you is what...$250-300?

I'd let it fade into the sunset.

[AZ-Tax]

I sort of agree except

Then again, my clients pay in full at the time of delivery so I don't have this problem. If this was a new client in 2011, I would have gotten the first $450 as a retainer, and the balance at the time he picked up the completed return.

I sort of agree with Taxmandan that my clients also pay in full at delivery but that does not stop me from worrying if the check will clear. I have already talked to my clients over the years about obtaining at least a $100 down payment and all of them have no problem which I plan to implement as soon as I start accepting debit/credit cards thou for businesses, I just got hired to complete an app for non profit status and requested a 50% downpayment which was not a problem for the Corp therefore I now plan to request at least $100 dowpayment on Business tax returns.

[JG EA]

Yeah, I never go after them. It isn't worth it in the long run. If they think they've gotten away with something they'll probably leave you alone, which you'll be better off if they do. People like that who have made the decision not to pay you will come up with negative complaints just to justify their decision in their own mind.

[Acownt4it]

thank you

This board is the best. Someone always comes up with something I didn't think of or gives me a different perspective on how to look at the situation.

[BOB W]

Take him to Small Claims Court. Cost is minimal to you. Many states require legal representation in Small Claims Court when a Corporation is sued.

90% of the time when a client receives any court papers they will resolve the issue before it gets to court. Do not discount the value of Small Claims Court.

[Burke]

Also if a judgement is rendered, it is recorded and he would be hard-pressed to get any kind of credit until it is satisfied. We had one, got paid 3 yrs later when he wanted to rent an apt. (Plus interest.)

[Gretel]

I collect my fees before the tax return is filed or given to client, however other services get paid after I mail my invoice. I hired a collection firm for 3 cases and they got me the full amount minus 25% for them on two clients and nothing on the third one.

I wouldn't do this with everyone though. One disgruntled client can do damage to your reputation.

[luke]

I agree with Jiggers ideas as follow up -
also, agrre that small claims court MAY make you "feel" better but....
I would however, NOT let the matter drop - I would continue to send PAST DUE statements to the EX-client ( and add "legal" interest to unpaid balance) - idiot may relent but this one is probably a "done deal"!

[jeff501]

I had a client stiff me several years ago over a $100 fee. Sent several late notices which were of course ignored. One day this guy shows up in my office begging I print him a copy of the return (he lost his copy). I reminded him he still owed me for preparing the return, he apologized all over the place with a host of excuses. But no offer to pay.

I said an option might be to go to the local IRS office and request a copy, (he needed the return and not just a transcript) pay their fee and wait several weeks for it. He had to have it that day, couldn't wait.

He left and within an hour came back and paid the fee in cash. He then got a copy.

[DTS]

I had a client stiff me several years ago over a $100 fee. Sent several late notices which were of course ignored. One day this guy shows up in my office begging I print him a copy of the return (he lost his copy). I reminded him he still owed me for preparing the return, he apologized all over the place with a host of excuses. But no offer to pay.

I had a similar situation in 2002 or thereabouts. Client needed proof of income and that he filed the return for tuition loan for his daughter. I mentioned the matter of non-payment and that I was not doing anything else until payment, which was in my hands in a couple of hours.