Discussion:Several years returns
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Several years returns
| 13 January 2007 | |
| A client has not filed taxes for 6 years and is a C Corporation. Once the returns are completed and he owes taxes in every year and does not have the money to pay all of them in full, what is the best way to handle the situation. Send in the returns and wait for the penalties to be calculated and then set up an installment plan with the IRS, or some other process? Thank you for your input. | |
| January 14, 2007 | |
| File Form 9465 with each tax return, requesting the installment agreement. However, I'm not sure if the IRS will agree to the installment requests for all six years. This is a little beyond what I do, because I usually don't take on that many prior years from someone, especially corporations. When I've done this in the past with individuals, there usually are problems with collecting my fees. | |
Rgtaxservice (talk|edits) said: | 14 January 2007 |
| Deb, don't you collect your fees when the client picks up their return? | |
| 14 January 2007 | |
| I thought about this. Client also wanted to know what he owed for taxes and I deferred the question knowing once he determines what he owes, he may never pick up the returns. I had one of these last year, however, he finally showed in June or July and I actually got paid. | |
| January 14, 2007 | |
| Yes. About 20 years ago, someone hired me to do about six years (or more, can't remember) of state returns. From what I remember, she had filed the Federal returns but owed on all of her state returns, so she never even prepared them. Ok, I went ahead and prepared them all (manually back then, digging out old tax forms, etc). She never picked them up. After a few calls to her, I gave up and have never seen or heard from her again.
I've had other clients who will bring in two or three years at once, and they have paid with no problem. I think I've trained those people to quit doing that and have me prepare their return every year. | |
| January 14, 2007 | |
| Skq - Try to figure out your estimated fees and let the client know. You probably should also ask for a retainer before you start the work. | |
Bottom Line (talk|edits) said: | 14 January 2007 |
| I've learned the hard way with clients that haven't filed for several years. The fact that they haven't filed for several years should be a dead give-away as to how they handle their business affairs. I now require an upfront retainer of at least 2/3 of my fee. | |
| 14 January 2007 | |
| Good idea - I didn't ask for a retainer, but will in the future, if I even take on any clients who are several years in arrears. These people seem to be thrilled that I am doing the returns. Evidently they took them to someone else and the other person didn't do anything. At this point, I have been desperate for business, so I agreed to do it. It takes awhile in this business to wake up to the facts and to get exposure to how some people operate. Thanks for the suggestions. I have had to go to the internet to download forms and type them in Adobe because I wasn't doing taxes 5 years ago and didn't have any software other than Turbo Tax. | |
Bottom Line (talk|edits) said: | 14 January 2007 |
| I've tried this and its worked too. (Did it before I got gutsy enough get a retainer.) Do the oldest two years only. Make sure the client picks up and pays before you do any more work. It will also tell you if they'll try to chew you down on your rate. | |
| 17 January 2007 | |
| You got it right about trying to get the rate decreased. I have done three years, which they have to pick up and they are already asking about the rate for the next three years. My comment is that if it takes me less time and your information is in a better format that the previous three, then we can look at a lower rate. Will have to see when they pick up the first three years. I hope it is not all for nothing. | |
Bottom Line (talk|edits) said: | 18 January 2007 |
| Be prepared for them to try to talk you down. Or they "forgot" their checkbook. DON'T let the returns leave your office without payment. (Take it from someone that's learned the hard way) | |
Chautauqua (talk|edits) said: | 18 January 2007 |
| I much prefer the retainer route. You may invest significant time in preparation and never see the client again. The retainer demonstrates the client's willingness and ability to pay your fee. Set the retainer at 110% of your expected fee, and refund the excess if necessary. | |
| 18 January 2007 | |
| I assume if they pay by check and then the check is insufficient, one has to go through a collection agency. Haven't had any experience in this yet. | |
| 19 January 2007 | |
| It's clear that most of you don't deal with delinquent taxpayers on a regular basis. That's all I deal with.
First, you MUST collect a significant amount of money to start work on the case. PERIOD. If you don't, you will not get paid. Delinquent clients are a different breed and you must treat them differently from your regular clients. Second, I strongly suggest using a flat fee. Set it high enough to make certain you will not be short changed. Get a handle on the client's record keeping and amount of business activity and set the fee accordingly. DO NOT CONCERN YOURSELF WITH SETTING THE FEE TOO HIGH. I much prefer to lose a client because the fee isn't in their price range than having a client I regret taking on. Third, if you are preparing six 1120's, the fee is going to be huge and the client darn well knows that. If you decide to charge $1,000 per return, get a minimum of $3,000 before you pick up a pen or enter your first keystroke. DO NOT TAKE PROGRESS PAYMENTS....EVER. If you aren't getting paid in full, go out no more than 30 days for the remaining half on return prep. Fourth, something in your initial paragraph struck me as being VERY unusual. If your client has a 1120 liability that he cannot pay, he may have 941 liabiities as well. It simply doesn't stand to reason that he has a profit and can't pay the tax and not owe payroll taxes, too. In 19 years in this business, I don't believe I have seen more than two cases for unpaid 1120 liabilities. So, make sure to find out if he has any payroll tax issues. If he does, you have a very different case. | |
Bottom Line (talk|edits) said: | 20 January 2007 |
| Skasselea - thanks for your insight. That's great. (Reminds me once again that I'm too cheap) | |
| 21 January 2007 | |
| Always require a retainer in cash or money order prior to working on compliance returns (back years not filed). Obviously if the client didn't file their taxes they didn't want to pay them....get your money up front and don't do anything until paid in full. Better that you refund an over payment of prep fee than not get paid for all the work done.
taxea | |
