Discussion:Holding tax return until paid for services

We prepared a client's S-Corp and amended 1040 for 2006. The client came by when I was not in my office (I really hate it when clients just show up!) to sign and pick his returns. He needed copied to send to his bank for a loan. My assistant gave him the returns, but I probably would have held then until I got paid. I had a retainer but there was a large amount still due. (That will teach me to get a larger retainer in the future!) I have not sent in his returns yet. My question is this:

Can I legally wait to send in his returns until I get paid? I know that P&I will continue to accrue, but I don't want to be responsible for any P&I. Will I be okay if I send him an e-mail which explains my policy (my engagement letter states that payment is due upon presentation of invoice.) and inform him that P&I will accrue until payment full payment is made?

If you are a CPA you can get yourself in HOT water here if the client files a complaint against you. In NC where I live, CPA's are scrutinized over customer complaints. A CPA may NOT hold client records for non payment. The mistake here was allowing your assitant to feel free to release the return.

You may , and on rare occasions I do this, hold the retun for payment or credit card. I believe that is your question. You may NOT withhold their information but you can hold the 1040 waiting for the payment .

Call the client, ask for an additional payment etc... and most people will pay. This is the reason I accept credit cards. Holding the returns can be seen as unprofessional.

Good luck.

One young couple did this back in late Feb and then calls back in april saying they hadn't received their $3,500 + refund. I checked the system and then let them know that it wasn't efiled yet becuase they hadn't paid. They weren't happy, but they knew the policy and while they weren't happy, they came in paid and then they were efiled.

new clients. He was unhappy with his new CPA, who had all his records, because she had not completed his tax return and now the due date had past for filing the return. He claimed that she had the records for over a month. I told him to go to the CPA and tell her if she was not able to complete the return in the next week he wanted his documents returned. Two weeks later he walks into my office with his documents. The penalities totaled over $2,000. He filed a complaint with the state board of accountancy. The CPA hired an attorney to respond to the state board. The state board ruled that there was not enough information to determine if the CPA was at fault. She claimed the client had not provided all the information she needed to complete the return. According to the client, he says he was told by the board to sue the CPA and if a judgement was rendered in his favor, the board would reopen his complaint.He decided not to sue.You never know who or what will rise up and bite you. I wonder if she had insurance.

As others have said, we can ethically hold the return hostage as long as we give back the client's original documents. However, we can't extort the client (i.e. waiting till one day before the deadline and demanding an additional $1000).

My after the fact method to collect payment for returns filed is to send client letter indicating that I am writing to taxing authorities and requesting my name be removed as paid preparer. this usually works quite well too.

While this is what I've heard other practitioners do, and I HAVE DONE IT MYSELF IN THE PAST, I'm just wondering - what do you do when the client DOES FINALLY pay you? Do you write again to IRS to reclaim being a paid preparer?

For that reason, I have discontinued taking that approach.

There was one this year that took over a year to pay me. I just told them that I couldn't help them until I received payments for past and current dues. They understood and paid me up front for current year dues. This same person called me last week and wanted to know if she could start paying me for next years dues. I said, "sure, and if you send your payment before 12/31/07. I'll charge you 2007 fees since my fees are going up in 2008."

FYI: This is a very small problem in my practice, but it does happen occasionally.

In the case that the letter does get sent, well, that means the client is no longer a client and so be it.

I agree with tony Montana, although in his case, I think the fact that people pay him is because they do not want to "say hello to his little friend".

Those that don't pay, in the end good riddance.

There is a search function just for this purpose.

I DID use the search and didn't find much. I think it really depends on the words that we use and NOT everyone will use the same thing. My feeling is that if you are tired of reading about a topic then don't bother to read and reply.

http://www.taxalmanac.org/index.php/Discussion:If_client_does_not_pay_for_work_performed

http://www.taxalmanac.org/index.php/Discussion:Do_I_have_to_give_to_client_my_quickbooks_files%3F

http://www.taxalmanac.org/index.php/Discussion:Holding_client_documents

This is just a start. There are many more. Cluttering up TaxAlmanac is a problem especially when the same issues have come up repeatedly.