Collecting Tax Prep Fees

[ETax847]

I have a handful of clients that I have already E-File for, but have yet to be paid for my services. I have sent emails, mailed invoices, and left vm's but not response. Anyone have suggestions on best practices to collect outstanding receivables? Thanks

[mcb39]

The best case scenario is not to let them happen in the first place. But, since I also have a handful, I can't call the kettle black. In my case, I know that it is always the same ones and eventually they will all pay. However, I want the money NOW. I narrowed the problem this year by refusing to file until I had a check in hand, even if I had to hold it for a week or two. I just had a call from one of the laggards who is picking his up after lunch.

[MAMalody]

I had a few like that years ago, I simply raised their fee the next year by 15% and then gave them a 15% prompt payment discount if paid at pickup and 10% if paid within 10 days. Of course, printed on the invoice was also a statement indicating the return would not be filed until I received their payment.

[mrichman333]

My policy is I file your return and give you a copy AFTER you pay me

[Elrod]

Send invoice with 1&1/2% interest charge each month past due.

I usually get paid 1st. month.

[Catherine]

We all get those -- the same folks year after year who "forgot their checkbook" or something. And for the most part, they pay up. For a few years I put on my yearly letter "no new work can begin until past balances are paid in full" along with a copy of the invoice. That usually got fast payment with embarrassed apologies.

This year for the very few who owe, I am being much more stringent about billing them. First reminder goes by email before the client has even left the street. Second goes by US Mail and includes a $15 late payment fee. Third (haven't had to do this yet!) will add 1-1/2% interest to the total with a note that interest will be billed monthly.

[TAG]

_{Years ago I came up with the idea of collecting a check for my services when the clients came in to sign & pickup. I allowed them to postdate their check until their refunds got to their banks. This has helped trememdously}

[ILLMAS]

This worked for me this year, I told the TP I was embarrassed to be asking to get paid and to be calling people to remind them they owe money. And it worked.

[michaelmars]

Send invoice with 1&1/2% interest charge each month past due.

I usually get paid 1st. month.

by law you can't do that unless your original invoice included the terms. mine say due net 30, or a late charge of $25 plus interest at 18% per annum will apply. Doesn't mean you have to charge it if you don't want to but once I send out a statement with the late fee and interest, I usually receive a check dated 1-2 days before the statement for the original amount. othertimes i get the late fee and interest, a nice bonus since these are usually the under $500 clients, my late fees is a nice raise percentage wise.

[Elrod]

Yup...I know...I do.....

[JohnH]

I'm pretty sure this differs from state to state, but a lawyer friend told me years ago to be very careful with interest charge assessments on past due invoices for personal tax returns. This comes under consumer protection laws and the penalties for even the slightest deviation from what's allowed can be huge.

[Terry D EA]

I read that somewhere as well. I think here in NC we are allowed 1%. Here is something else I think some of our low end clients know. Say a client owes you 120.00 for their return. You add the appropriate interest for three months and still no payment. Finally, you decide a small claims action may do the trick. All of the trouble, filing fees, missed time from work, makes it not worth it to go after them. Then when the court rules in your favor all you have is a judgment and still no money and additional heartache trying to use the court system to collect. Been down this road a couple of times and just cut my losses and moved on. Just like retail covering losses from theft, increase fees to make up for those few who don't pay. Hate to do that to good clients but as has been stated, good clients usually don't complain about an increase. I have even had quite a few of mine think my fees are too low and insist on giving additional money.

[michaelmars]

I had one that I played with for years, gave him installments etc. at the time he defaulted with me he owed me around $12,000. By applying his payments to his recent invoices first, the interest really compounded. After interest and late charges it became over 20k. I got the judgment and the court added the statutory interest rate of 8 or 9%. Even though I already had interest in my total. the client had rental property so I was able to collect his rents until I got satisfied. in total I got wound up with close to $26k. My lawyer friend gave me good advice, even though I was mostly owed for business returns, I sued personally under the premise that I was hired to handle all of his tax issues regardless of which entity I billed as long as I billed as per my retainer agreement. So his 2 corp bills and his 1040 bills all got combined.

As for the small clients, I agree that chasing someone for under $500 is counterproductive in time and costs and chance of collection. After a while I do send invoices to the clients home rather than business address and they are stamped "past due, final notice, etc" I find that once the wife sees that I usually get paid....I know its sexist but I think men tend to lie to their wifes over how well they are doing in business and don't want them to see things like that.

[Catherine]

Has anyone used a collection agency?