Non Paying Clients

[Steve M]

Hi Everybody. All the years I have been doing taxes, I have never been stiffed by more than one person a year. This year, I must have 15 non-payers; must be the economy. I'm wondering what some of you do when this happens. It sounds almost impossible to pursue these people unless they write a bad check. Anyone have any suggestions?

Also, anyone use the ATX software option of having your fee taken from the refund and mailed to you? I haven't done it because of the $15 cost, but this year I am thinking about either not giving them their returns until payment is received or charging them the $15 and getting my fee from the refund.

I did the merchant account route for awhile, but hated all the fees and regs. Would love to hear what some of you do.

Hope you all have a great summer.

Steve M

[Lion EA]

For the most part, clients pay before I transmit their return or provide them with a copy to mail. Payment can be giving me credit card info over the telephone or paying on the PayPal link on my web site. I do accept all major credit cards. Yes, the fees eat into my profits, but I want to make it as easy as possible for clients to pay me. I had a PayPal account anyway to pay for certain things, so I put a link on my web site for clients to pay me (they can use check or credit card if they have a PayPal account; but even without an account, clients can pay me via credit card using that link and don't have to disclose their number to me or leave it on a voice mail or email.)

[rfassett]

My general policy is "payment must be made before return is released". Reality is that some returns are released before payment is received but not efiled until payment is made. The fact of the matter is that I am signing the return as a paid preparer. If I do not get paid, I do not file the return. Again, that is the general policy. And it seems that every time that I am persuaded to ignore that policy, I get burned in some manner. Case in point, I have a second year client that I was persuaded to efile the return before I was paid this year. Last year, I explained the policy to the client who still called 3 weeks after signing the 8879 to inquire about his refund. I told him the return had not yet been efiled because I had not been paid. His response was that he was sorry, did not understand the rules, and would send payment immediately - which he did. This year, in the heat of the battle, that return got efiled before I received payment. That return was efiled in March. I have still not been paid, despite my efforts. Normally, I would send the client a letter with a copy of a letter that will be sent to the IRS in ten days. The IRS letter states that I want to have my name removed as "paid preparer". I explain in the client's letter that I am not sure what sort of consequences will result from that action (and I drop in words like "audit" and "deeper scruitiny" and the like). This usually gets the payment in the mail before the ten days has expired. Only once have I had to send the letter to the IRS - and that particular return and client had some other issues from which I wanted to wash my hands. I can not strong arm the current situation because the guy is the adult son of a very good paying monthly client. So the only thing of which I am certain, is that if he comes back next year, he will prepay the return.

I have offered "fee collect" for a couple of years. I have only had two takers.

[Catherine]

The year I offered "Fee Collect", no one used it. I do have a button on my web site for PayPal payments (client does NOT have to have an account, but it's the only way I'll take a credit card).

My engagement letter says clearly "Due Upon Presentation" but of course there are always one or two that delay, and I generally efile the returns anyway. For the most part they are good clients who have forgotten their checkbook that day. The couple who, in the past, haven't, I've "tweaked" their tax letters in January to say that all past-due balances must be paid before new work can begin. That usually brings them into line.

I'd give them each a call -- or, if you can, email (or fax) them an invoice, marked "PAST DUE" (don't waste postage), and see if that shakes any payments loose. Then perhaps go the "removing my name as "paid preparer" letter" route with the ten-day response. Those would have to be mailed, so that's why I'd try the email/fax routine first.

Good luck! It is SO annoying when people don't pay.

Catherine

[jainen]

>>must be the economy<<

Nobody failed to pay me this year, but several called and said they couldn't afford it and I had to beg them to let me do it anyway. They've been good clients for years and I'll still stand behind them. Besides, one of the nice things about this business is that each job is relatively small, doesn't add much to my costs except a bit of time, and is only a few bucks lost. We all have to do what we can.

[Lion EA]

For rfassett, if a child of a good-paying client, I'd increase the paying client's fees enough that I'm content to prepare their son's tax return for free.

[michaelmars]

MY invoices state net 30 then subject to a late fee of $25 plus 18% interest. if a client doesn't pay then they get a statement including the above fees. almost instantly i get the original amount in the mail with a nice note asking if they can not pay the late fees and interest. Everyone is happy when i say sure-this one time.

[Jack from Ohio]

I have great success with Fee Collect. Problem is, with the IRS removing the debt indicators, the costs from the bank will probably become prohibitive, since they will have to use ordinary channels for approval. I am waiting for the banks to drop the shoe on this one.

[mlinder42]

I have great success with Fee Collect. Problem is, with the IRS removing the debt indicators, the costs from the bank will probably become prohibitive, since they will have to use ordinary channels for approval. I am waiting for the banks to drop the shoe on this one.

It will not change the fee at all.The bank does not pay you till it receives the money from IRS.The debt indicator has no effect on these transactions.

[Steve M]

Thanks everyone for the responses. Never thought about using paypal, but that is a winner! Also like the 10 day letter to the IRS; that is a great idea as well.

Have a great summer and fall. I have an idea that this year will be very strenuous on all of us, so enjoy while you can.

Steve M

[BulldogTom]

I don't have any non-paying clients. I shot them all!!!!!

Just kidding. Don't turn me in to the FBI.

Tom

Lodi, CA

[Lion EA]

I have some that I would pay to go away!

[taxxcpa]

I have some that I would pay to go away!

I had one like that. He was going to pay me before he picked up the return, but I persuaded him to let me e-file it immediately and he could pay later. He never came back. Doing it free was worth it just to get rid of him.

[JohnH]

I had one like that. He was going to pay me before he picked up the return, but I persuaded him to let me e-file it immediately and he could pay later. He never came back. Doing it free was worth it just to get rid of him.

I like your philosphy. It's similar to what my father-in-law (Sam) used to say about the subject. Sam bought & sold real estate in a small NC town, but he never asked for signed contracts. This was many years ago, when real estate values and commissions were much lower than they are today. My brother-in-law questioned him one time about several people who had stiffed him for $600 or so. Sam replied, "That's OK, he beat me out of $600, but he'll never get a chance to beat me out of $6,000." Sam's philosophy was that the long benefits of knowing a person's character was much more important than having a few more dollars on hand at the moment. It served him well - when he died at an old age he was very secure financially.

[Jack from Ohio]

It will not change the fee at all.The bank does not pay you till it receives the money from IRS.The debt indicator has no effect on these transactions.

Is this information you received from the bank? If so, could you post the info or send it to me? Seems that my FeeCollect clients all go through an "approval" process with the bank AFTER acknowledgment is received from the IRS. I have never had a rejection, but have not had a FeeCollect client with anything but an "N" debt code. I am of the mind that the debt indicator is part of their "approval" process. Just read the agreement the client has to sign....

[Crank]

Sorry to hear about your problems. In over 20 years I have never been stiffed by a client. Ive had some pay me over time, but very few. This year I had a long time client who's husband had lost his job and up front told me that she couldnt afford to pay me. I did the return and told her to pay me when you can and what you can, I even gave her a very good discount. She paid the bill within 90 days without me ever sending another invoice.

Basically, if the person seems honest I take the chance and try to help them out .... I know what its like to be hit by financial hardship, with me it was a medical hardship. So far it has worked out just fine. I feel if somone stiffs me then I probably wont see them again and who know's they may be embarasssed about their situation.

[SaraEA]

What's going on here is that clients don't get their refunds until the bank gets the money from the IRS. If there is unpaid federal debt or child support, the client gets less than expected or nothing at all. When that happens the bank isn't out a dime because it never paid a dime. The preparer, however, will not get paid unless there's enough of a refund left to cover the fees. The debt indicator only helped the banks decide if they wanted to advance the refund to the client. It had nothing to do with FeeCollect. The paperwork the clients have to sign is required by the Patriot Act. The bank is opening a temporary account to receive the client's refund, so all those bank account requirements apply. So the debt indicator only facilitated RALS, not products like FeeCollect. In either case, though, the hard-working preparer wouldn't get paid if the IRS was keeping the refund. FeeCollect is not a guarantee of getting paid.