Collection Letter

[Lion]

I give up. Maybe it was on the ATX board. I remember a letter (never thought I'd have a use for it) that threatened to ask the IRS to have my name removed as paid preparer if the client didn't pay. Well, I have someone that might react by paying. Now, I can't find the letter. Tried searching for collection letters, slow to pay, remove my name, and a dozen other phrases. Does anyone remember enough about that old thread to find it? Thanx.

[jainen]

I can remember

>>Does anyone remember<<

I can remember that idea coming up more than once. I was one of several posters that felt such a letter would be unprofessional and not in compliance with Circular 230.

[Lion]

I agree

I agree with the unprofessional part, which is why I ignored it when I read it. Now, I have a situation in which it might work. But, your reference to Circ 230 makes me pause. I'm an EA and have no desire to run afoul of Circ 230. Oh, well, I'll just continue to nag him.

[erchess]

My Two Cents

Like Jainen, I don't like the idea of this letter. I cannot believe that there is any simple or fast procedure for getting one's name removed as paid preparer, and I am sure that if such removal can be done at all it is necessary for the Professional to allege and present evidence that the signature was forged. I don't think it makes sense to threaten to take an action you cannot or will not take. One's credibility is at stake. I would also think that if a Professional undertook such an action, it would make the IRS look suspiciously at the taxpayer, and we Professionals cannot normally do that. On the other hand, we can take the same collection efforts that can be taken by other creditors. I would advise OP to call or write the client to state that the matter will be turned over to a collection agency if regular payments are not begun within thirty days, and then make good on the threat.

Just out of curiosity, I would like to know how it happened that a return was filed before being paid.

[thomtax]

Perhaps

Just out of curiosity, I would like to know how it happened that a return was filed before being paid.

like me. I have one that was going to have the fees withheld from the refund check processed through the bank (not RAL but Bonus check). He did not know the IRS was going to take his refund. He did not get it and since no money was coming from the IRS, I haven't gotten mine, and probably never will.:-(

[erchess]

That sounds like

the best argument I know for avoiding clients with income less than $35K and against offering bank products. However, it is normal for clients getting bank products to sign contracts requiring payment from them if the IRS does not make a timely deposit of sufficient funds. Why do you not enforce the contract? Also, I believe that all the banks tell each other about these clients and if this deadbeat ever has an IRS Deposit you will be paid before he is.

[OldJack]

Also, I believe that all the banks tell each other about these clients and if this deadbeat ever has an IRS Deposit you will be paid before he is.

A bank has no discretion as to how to allocate deposits. It would be impossible for the bank to collect for a customer without it being authorized.

As to collecting before the tax return is filed... I never receive payment for a tax return before I deliver it to the taxpayer. Yeah, sure, I have had a few not pay me but it was very few and it was well worth it to get rid of the taxpayer. On the other hand, I have lost tens of thousands of business due me when a good client I was trying to help went under, but I had made thousands off of the client in prior years. You win a few... you lose a few. Thats the way our business goes.

I only sued a client once to collect.. got judgment and the **** x-client died before I could collect. You just can't win them all.

[Gene V]

I found this in my notes from the old QF board. Posted on 7/1/04

The following was suggested by Beana Whitfield, then a presenter for NCPE tax seminars, now witty the IRS. We have used a few times with success. Having access to a good collection agency is also a good idea. ‘Pursuant to Section 10.34 of the United States Treasury Department Circular 230, Title 31, Code of Federal Regulations, we prepared the above referenced federal tax returns in anticipation payment for our services, and accordingly signed your returns as the PAID PREPARER. As of this date, we have neither received payment from you, nor have we received communications, written or oral, indicating your intent to pay our preparation fee. We, therefore, will on XXXXX notify the Internal Revenue Service of the inaccuracy in reporting of PAID PREPARER information on your tax return. Your attention to this very important matter is hereby requested and your prompt remittance of $XXXXXX* is anticipated to be forthcoming. Sincerely, Includes carrying charges @2% per month on the unpaid balance as per our Statement of Standard Hourly Rates cc: U.S. Dept of the Treasury-Internal Revenue Service-Examination Division.

[Jiggers]

Beanna's letter

Beanna is no longer with the IRS. However, she does promote the letter. At a seminar last year, she did state that this was passed by the IRS legal counsel upon her request.

I have used this letter a couple of time; however, still didn't receive payment.

[jainen]

I can hardly discuss it

>>Pursuant to Section 10.34<<

Section 10.34 is about a practitioner taking a questionable tax position and has NOTHING to do with getting paid. This deceptive use of the very rules that regulate us is so crass I can hardly discuss it.

[Luis Mopeo]

It seems to me to be a terrible idea to risk achieving the reputation as a whistle blower among clients so one can make an idle threat in order to collect a past due bill. Getting a reputation for turning clients in to the IRS is the quickest way I can think of to gain the opportunity to be successful in a different line of work.

I would suggest that any success from a letter like that is from letting the client know you're serious about collecting the amount due, not because a client is going to be terrified that you'll be taken off the return as paid preparer. The return's already been filed. Nobody's going to be frightened that your name is going to be taken off as paid preparer. What the heck difference does that make?

The only teeth the idle threat has is implying "I'm going to turn you in to the IRS if you don't pay me what you owe." I agree with Jainen that's unprofessional and in violation of ethics rules.

And, I believe, it is foolish for a tax professional. Most tax folks have built up their businesses through referrals. That means people know each other and talk to each other. If you get the reputation for turning in clients over a fee dispute, isn't that going to hurt you in the long run?

People who don't pay their bills will look for any excuse to turn things around and make it look like you're the bad guy.

If you don't require payment up front, there will invevitably be a certain amount of monetary damage from nonpayment. That's the price of doing business. Don't make the damage worse by making up a story and hurling idle threats. Try making a phone call or two instead.

[thomtax]

Easy to say

Why do you not enforce the contract?

This is easy to say - not as easy to do.
Small claims court - sure you can probably get a judgement. Judgements are running around all over the place without being able to collect. Plus there is a cost to get one and then a cost of time and money pursuing it.

Credit Bureau - If they are not concerned with the IRS collecting, then how much do they care about the credit bureau.

No clients under $35K - One of them beat me last year.

I only lose one or two a year, usually because of a sob story, and it's just not worth spending a lot of time and stress on it, at least to me. I just consider it a "cost of doing business."

LT

[Black Bart]

Say Jack,

As to collecting before the tax return is filed... I never receive payment for a tax return before I deliver it to the taxpayer. .

I know about half a dozen CPAs (besides you) and all of those guys carry accounts receivables. I assume it's because you're generally working complex returns for people that have money and, as you say, you don't lose much on them.

Do you know if your fee policy is pretty much standard for the CPAs?

[Lion]

Thank you, all

Thank you to everyone who responded. I usually get payment when a client picks up his return and collect on invoices for monthly work or projects before continuing. This was someone who needed an Excel spreadsheet to present his many trades, including mostly wash sales, as a D1 on the returns that Block was preparing. I told him the price for the first year I finished by telephone. In order to not drive into the office for only him, he offered to meet me in town where I was running errands. I managed to complete the second year before our meeting, but had not told him that or the price of it before meeting. He brought a check for HALF of the price I'd given him for the first year. I should've held back one or both packages, but I foolishly gave him both. I'd done this same project for earlier tax years for him and always been paid on the spot before handing over the workbook. He was making in excess of $250,000 per year. Oh well, one stiff in eleven years isn't too bad. I'll keep working on him. He gets a couple of years behind and then reacts to IRS letters telling him to file returns. So, he'll need me again. Thanks again everyone for all your thoughts.

[veritas]

This is easy to say - not as easy to do.
Small claims court - sure you can probably get a judgement. Judgements are running around all over the place without being able to collect. Plus there is a cost to get one and then a cost of time and money pursuing it.

Credit Bureau - If they are not concerned with the IRS collecting, then how much do they care about the credit bureau.

No clients under $35K - One of them beat me last year.

I only lose one or two a year, usually because of a sob story, and it's just not worth spending a lot of time and stress on it, at least to me. I just consider it a "cost of doing business."

LT

How can you get a judgement or turn over information to a collection agency for a tax client?