Getting paid first

[erchess]

Several responders on this site have recommended that original posters "get paid first". I was wondering if anyone really asks clients to pay before work is done. I never electronically file returns or give them their file copies until I have been paid. But I never ask for pay until I have completed the return and discussed it with them because I choose to "guarantee satisfaction". In other words if I prepare the return in what I think is the correct way and tell them the fee, I will delete my work and demand no payment if they are unhappy. As I understand the laws of North Carolina, if I want to have any other policy I have to start by collecting a signed engagement letter that specifies the terms under which they are hiring me.

[Girard Van De Lay]

getting paid

I only have one client that is required to pay upfront. When I purchased hime from another preparer she informed me that he stiffed her for a fee once and then always promised to come in and pay her. Ofcourse he never did so he pays upfront. By the way this year I told him his fee goes up or he pays her what he owes her. He paid her the full amount and she was very surprised to recieve the money in the mail. ALways try to look out for each other and it will come back to you 10 fold.


Girard

[S T]

I collect

I collect fee at time of appointment regardless of whether the work is completed and they have a copy to file or it is efiled.

A lot of my mail ins (which is about 30% of my practice), will mail a check for last years fee, and then I bill additional as needed.

Sandy

[taxmandan]

The only up-front fees I collect are for representation work or multiple prior years for new clients. They pay half of the estimated total as a retainer, the balance is paid before any return leaves the office. For current year returns, they pay when they sign the 8879 and pick up their copy of the return.

[JG EA]

I told a client this year that they had to send me last year's payment before coming in for their appointment this year. I was very proud of my self for being firm and commanding.

They didn't pay or show up for their appointment.

[erchess]

Retainers

I have been given to understand that if I accept a retainer I need to deposit the money in a no interest checking account and keep adequate records so that at any given time I knew how much of the money in the account belongs to whom. The point would be to transfer funds to another account or spend them as I earned the fees. I don't know whether this requirement is imposed on me by the state or the IRS but I was not an EA when I learned about it. I might have remembered who imposed the requirement but at the time I was employed by a firm that did not ever ask for payment until the work was done.

[Luis Mopeo]

As has been cited by many, you have about about a zero chance of collecting your fee from a client who is bringing in multiple back years if you don't get it up front. The information and the return will just clutter your office for many more years. What do you do with it?

I worked for an office where a perennial non-filer, very nice charismatic guy, would drop off his W2s and promise to be back on Tuesday to pay for and pick up all the back returns. Everybody in the office did the guy's return for a couple years each, and he ended up with seven years of completed tax returns laying there. I believe they all had refunds too. That was 20 years ago, and I wouldn't be surprised if those returns are still laying around the shop somewhere.

I also had a guy who was terrified of the IRS for some reason, even though he had never even been audited. He brought in four years of returns. I "knew" he'd be back to pay, because the return that was about to run out on the statute of limitations had almost $2,000 worth of refunds. I remember calling his house on April 15th, desperate for him to come pick up the returns, I couldn't stand the thought of letting two grand evaporate. Somebody answered and after a long pause said "No, he's not here."

Those returns are probably still sitting around somewhere. The point is that those folks usually have some kind of quirk that means the best they can do to comply with tax law is to make an appointment every few years to drop their stuff off. Coming back in a few days to pick up the returns and finish the job isn't gonna happen.

[taxmandan]

Lawyers have escrow accounts

I have been given to understand that if I accept a retainer I need to deposit the money in a no interest checking account and keep adequate records so that at any given time I knew how much of the money in the account belongs to whom. The point would be to transfer funds to another account or spend them as I earned the fees. I don't know whether this requirement is imposed on me by the state or the IRS but I was not an EA when I learned about it. I might have remembered who imposed the requirement but at the time I was employed by a firm that did not ever ask for payment until the work was done.

I've never heard of tax practitioners being required to have an escrow account. Maybe your state has some law, but nothing from the IRS requires it. My engagement letter states that any retainer is non-refundable and the minimum payment for my services, if client decides to cancel the engagement I keep the retainer.

[ChEAr$]

retainer

I have been given to understand that if I accept a retainer I need to deposit the money in a no interest checking account and keep adequate records so that at any given time I knew how much of the money in the account belongs to whom. The point would be to transfer funds to another account or spend them as I earned the fees. I don't know whether this requirement is imposed on me by the state or the IRS but I was not an EA when I learned about it. I might have remembered who imposed the requirement but at the time I was employed by a firm that did not ever ask for payment until the work was done.

Now that may be the North Carolina law for attorneys, but remember, we're not "them".

If someone gave you a retainer on December 30th, do you think IRS would not want that
included in income?