Discussion:When is a PAID preparer NOT a Paid preparer
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Discussion Forum Index --> Business Growth Community --> When is a PAID preparer NOT a Paid preparer
| 6 November 2006 | |
| This question just crossed my mind while I was preparing a statement for a client that has not paid for 2005 tax prep. Even tho I signed and file the return as a paid preparer, at what point do I become the UNpaid or non-paid preparer in the eyes of the IRS? | |
| 6 November 2006 | |
| I think there is an old thread about this somewhere...some great almanac users have good ideas on how to report this....hehe | |
| 6 November 2006 | |
| I'm going from old memories here, but I think if you have an engagement to prepare a tax return for payment, you are a paid preparer, even if subsequently you never get paid. | |
| 21 November 2006 | |
| This reminds me of something I heard at a seminar many years ago. When a client doesn't pay, call & tell them that since you signed the return as the paid preparer & have not been paid, you are going to have to notify the IRS of this fact & this will invalidate the return. It's total BS but it works like a charm! I've only used it twice in 20 years. I had one client who hadn't paid for a tax season return. It was now October or November. I called many times. He even had his kid tell me he wasn't home when I knew he was there. I finally called & left the above message on his machine. He called back within an hour, apologized like crazy & said he was sorry for the "misunderstanding"; he intended to pay me all along (yea sure!) I had a money order in 2 days. He even called again to make sure I got the money order! | |
| 21 November 2006 | |
| And if the client would happen to file a complaint with the Office of Professional Responsibility, your butt would be in serious trouble. Putting your ability to practice before the IRS on the line is simply not worth it and I strongly, strongly advise against this idea. | |
Joe Btfsplk (talk|edits) said: | 22 November 2006 |
| I've heard of tax preparers who use this technique without telling the client that it will invalidate the return. Instead they tell the client they will write the IRS and tell the IRS something to the effect that they signed as paid preparer, but never received payment and would no longer wish to be regarded as a paid preparer of that return.
The IRS would probably ignore the letter and you would still be regarded as the paid preparer, but the client might think there could be repercussions--even though you made no such claim. My own method is to send one second invoice, the write it off and refuse to do any further work for the deadbeat client--with a possible exception if he pays much later and prepays, at a much increased fee for future returns. | |
| 22 November 2006 | |
| Joe, I see no problem with that tactic. Having said that, for a preparer to actually send such a letter to the IRS seems a silly waste of time. Additionally, whether the client paid the preparer isn't relevant nor would the IRS care. | |
| 23 November 2006 | |
| This brings to mind an excellent point. Usually, the reason a client doesn't pay is that s/he is deeply disatisfied in some way with the service you provided and has no intention of returning to you. This client is more than likely already badmouthing you to everyone they know. Consider carefully how your collections proceedings will add to thier litany of complaints; a gentle proceedure may even win them back.
In some rare cases, the client actually liked your work but is destitute. You usually know which ones these are and generally have some leeway to set up a payment plan or write off some of the bill. I always have a few charity cases each year whom I just don't worry about chasing up. In the very rare case that a client returns who won't pay, you can simply refuse to do any further work until they have cleared their bill (and then as Skasselea says, rasise your fees). I always take a deposit of half the fee before I start work for clients with poor payment histories. | |
