You did your job and the numbers showed that your client got zilch for a refund. Not your fault, maybe not the client’s, but numbers don’t lie. Such clients, however, sometimes refuse to pay your fee.

What then? And how can you prevent such a problem before the engagement starts?

Kerry Freeman, an Enrolled Agent at Freeman Income Tax Service in Anthem, Ariz., recalled one client who, “at the closing interview, said that he wanted to get a second opinion. We had more than a few conflicts with his understanding of the tax system and my professional knowledge of the Tax Code. So I asked him to pay for what in his mind was the first opinion. He exploded and refused and went on bantering that I couldn’t charge him because it was not the outcome that he, in his mind, deserved. There was some fear of reprisal and it was prudent to return his information and my keeping the return I prepared, and parting ways.”

“I sent the bill anyway, which they ignored,” said Tom Figgatt, an EA at
Figgatt Tax Services in Ridgefield, Conn. “Last time that person was my client. Not worth the cost or tumult to get a court judgement.”

“I have had a handful over the years who didn’t want me to file their return because they weren’t getting the refund they wanted or expected, but they’ve always paid me for the work,” said EA Pamela Burda at Burda Books, in Peninsula, Ohio.

“I’ve had clients who had a balance due, and, therefore never paid me,” said William Keats, an EA at Keats Tax & Financial Service in North Merrick, N.Y. “I’d bill them on a monthly or biweekly basis, adding a late fee to the regular fee but never getting paid. After phone calls and billings, I’d eventually send them a letter saying goodbye. There’s no other recourse. Many times I’d recommend an installment plan, but they didn’t want to hear that, either.”


No magic wands

“It’s made clear at the beginning that our fees are for services rendered [with] no basis on whether or not a refund is received. A refund is a result of all events and decisions a person makes during the tax year, not by a magic wand waved,” said Kimberely Bates, an EA in Minneola, Fla., and Money Coach founder.

Some preparers handle this situation by simply remembering that they’re the ones who hit the Send button. “I won’t e-file the return until I get paid, so I never have this situation,” said Gerry Stellwagen, a CPA at Stellwagen & Associates in Venice, Fla.

Laurie Ziegler, an EA at Sass Accounting in Saukville, Wis., has a similar policy. “I go to great lengths to explain why there’s an amount owed,” she said. “I have had a few clients over the years [who] refused to pay, but they are few and far between. In those cases, we return their original paperwork and don’t file the return.”


Managing expectations

California-based EA Crystal Stranger, author of The Small Business Tax Guide, said she’s never faced such non-payment: “Generally, I manage expectations throughout the process to prevent this. First this involves reviewing the last return of a new client and looking for places they could have gotten into trouble. I warn them about the risks of this, and then take them through the places I can legally save them money. When I work with clients in person, I like to show them the process, first add the items that generate tax, then apply discounts so they see the savings.”

And luckily, most of your clients eventually will see sense. “Although I’ve had many clients over my 30-plus-years of practice who were unhappy, even physically upset, about not getting a refund, after spending time going over what I see as the reasons for the balance due, they accept it and pay,” said Jeff Gentner, an EA in Amherst, N.Y.

“When you work with a taxpayer you need to make sure that the education process is part of the conversation,” said EA David Leidel in Sebring, Fla. “If we’ve done our job right then our client wouldn’t owe taxes or get a refund.”

“You should explain to the client that they must file regardless,” said Frederick “Rick” Reynolds, an EA in Utica, N.Y., “that you did everything legally possible to keep their tax liability as low as possible. If they still refuse to pay, I simply tell them that I will keep their return in my system, and if they change their mind they should give me a call.”

The law, too, is on your side. “I brought litigation against them in small claims court for failing the terms of our signed engagement agreement,” said EA John R. Dundon, of Taxpayer Advocacy Services in Englewood, Colo. 


Fool me once ...

One major question: Do you want to have anything to do with this client again? Said Mario Costanz, CEO of Happy Tax Franchising, “We explain our value and hope the client understands and can pay. In some cases, if a client can’t pay, we’ll just waive the fee. The work has already been done and making a client feel bad isn’t going to earn you their repeat business or referrals.”

“Many people blame the messenger for bad news,” said Diane Beverly, an EA in Fredericksburg, Va., “but I also appreciate knowing someone I don’t want as a future client.”

“As a tax pro, I don’t dwell on it,” Reynolds said. “There’s another client in the lobby who will be paying.”

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