How do you handle the " Non Communicating Client That Owes"

[pikester1967]

Reviewing my stack of work, I still have 1 return dropped off in Mid-March. Small Sch C with wages. Apparently one w2 form is lost or client too lazy to get from old employer. Owes taxes on the return without the lost form.

Client won't return calls or emails etc.

Always seems like there's 1 of these lazy ones with no concern of the rules etc.

Wondering should I e-file an extension? But then what if he doesn't stop in to sign the efile etc.

Just curious what everyone else does with these type clients?

[HV Ken]

We used to e-file an extension in this case, but after reading an earlier thread on this board, we will now not send an extension unless the client specifically requests it. I would offer one final communication, probably both via email and phone - "In order for me to e-file an extension, I need for you to confirm that this is what you would like for me to do for you. Please note you owe and a payment is also expected to be included with the extension. By not providing a payment with your extension, you will be subject to late filing penalties and interest." Something like that.

[frazzled]

I let it sit. The ball is in their court - if they can't be bothered, why should I be? No extension without direction (and payment).

[JohnH]

You could also mail a paper extension request to the client, with instructions that that they must send it in by Apr 15 in order to avoid FTF penalties of 5% per month. The "Amount You Are Paying" box #7 should be blank (not zero, but blank, so they can fill in any amount they are sending with the extension)

I would include instructions mentioning the fact that they are supposed to pay the estimated balance due, but a partial payment or no payment is permissible, and they will pay interest and FTP penalty of about 1-1/4 % per month on any unpaid balance.

I would also include a short disclaimer that this extension request is based on partial information they have provided, and that I will not be responsible for any subsequent penalties or interest when the return is completed.

Then I'd forget about it until they contact me.

[Jack from Ohio]

I like JohnH's process. Spend the extra bucks to send it certified, then forget it. Increase fees.

[MsTabbyKats]

I have one like that....but I got his papers early February.

I'm gonna give him a call today...and a call next Monday.

I wouldn't file an extension etc.

I know my guy will ultimately file with me....but there is a possibility yours may have gone elsewhere.

Do nothing....you are not his parent.

[SFA]

It's a tough situation when we already have the client documents in our office and have taken on the project. I think I will adjust next year's engagement letter to cover this situation. I will be adding a paragraph regarding incomplete returns in our office prior to 4-15. In that case, our letter will stipulate that at our discretion, we may (but are not obligated to) file an extension on their behalf.

Any thoughts on this approach?

[Jack from Ohio]

It's a tough situation when we already have the client documents in our office and have taken on the project. I think I will adjust next year's engagement letter to cover this situation. I will be adding a paragraph regarding incomplete returns in our office prior to 4-15. In that case, our letter will stipulate that at our discretion, we may (but are not obligated to) file an extension on their behalf.

Any thoughts on this approach?

Make that paragraph bold and one size larger font. Place it at the end right above where they sign on your engagement letter. Go for it. I am doing something similar as well.

[SFA]

I may also insert a line that says, if I cannot complete their return by the 15th for any reason, they agree to having an extension filed on their behalf by our office.

[pikester1967]

That was my initial thought's as well. Just wanting to make sure there's nothing code wise that states, we can't efile an extension on the clients behalf without his/her signature etc.

Agree with the engagement letter part as well.

This is one of those whom already exceeded the estimated price.

[ILLMAS]

We used to e-file an extension in this case, but after reading an earlier thread on this board, we will now not send an extension unless the client specifically requests it. I would offer one final communication, probably both via email and phone - "In order for me to e-file an extension, I need for you to confirm that this is what you would like for me to do for you. Please note you owe and a payment is also expected to be included with the extension. By not providing a payment with your extension, you will be subject to late filing penalties and interest." Something like that.

I guess I missed the thread you are referring too, can some please post it.

Thanks

[JohnH]

It's a tough situation when we already have the client documents in our office and have taken on the project. I think I will adjust next year's engagement letter to cover this situation. I will be adding a paragraph regarding incomplete returns in our office prior to 4-15. In that case, our letter will stipulate that at our discretion, we may (but are not obligated to) file an extension on their behalf.

Any thoughts on this approach?

I like that idea. Maybe it should be used with all new clients and with any existing clients (if any) who have a tendency to let things slide. Any time info is accepted, just assume it's incomplete and get written permission to file the extension at your discretion. I think I'll do that next year, and I think it will be a separate statement altogether. Maybe it should have their phone numbers and email address as well.

[Terry D EA]

What about the fee the client owes you? I like John's approach as well as SFA and will probably do likewise. But I use a different approach for the client that owes me. I send them a friendly reminder letter of their balance due, then send a certified letter with interest calculated that includes a demand for payment upon receipt. Then and this depends on the amount, a decision is made as to whether to use smalls claims court or not. Only have had a couple over the years do this. But, I am getting ready for one this year who is already two weeks late paying me. I know all about the bank producs and try to save my clients money but next year I will go back to them to eliminate this problem.

[MsTabbyKats]

I really don't have this problem often, but I learned a trick at an IRS conference ...which I used one time.

To write a letter stating that since your name is on the return as the paid preparer....you will request the IRS to take your name off..which will leave the return more open for audit,

It worked like a charm; I lost the client...but who wants clients that don't pay.

[KINGCHUCK1971]

What about the fee the client owes you? I like John's approach as well as SFA and will probably do likewise. But I use a different approach for the client that owes me. I send them a friendly reminder letter of their balance due, then send a certified letter with interest calculated that includes a demand for payment upon receipt. Then and this depends on the amount, a decision is made as to whether to use smalls claims court or not. Only have had a couple over the years do this. But, I am getting ready for one this year who is already two weeks late paying me. I know all about the bank producs and try to save my clients money but next year I will go back to them to eliminate this problem.

I know the feeling Terry. That's why I use Fee Collect plus it's not expensive and I pass the cost on to my clients.