New Client Red Flag

The more the new client complains about their most recent tax preparer, the worse client they are going to be. It took me a while to reach this conclusion.

True that. Maybe we need to get a "Red Flag" list going. Once we take on a new client, two things can happen: Things go well or they don't. And in the "Doesn't go well" category, we have 2 buckets: We part ways, get paid and we move on. Of course, there is some anxiety, frustration, time loss in these situations, but at least we keep it to a minimum. The other bucket is when things can get dangerous and more serious...allegations of malpractice, non-payment, etc. And these things get dragged out, more time wasted, etc.

I think you're very wise to evaluate what this client is "telling you" not so much with the words, but with your characterization - a complainer. Often, these folks turn out to be very difficult clients. And the new preparer is just the next in line to receive the abuse. Also, as part of your comment, consider the obvious fact that the person is changing preparers. Preparer jumpers are a bad sign to begin with...and this can be ascertained by reviewing the preparer info on the last few years' of tax returns.

In some cases, however, complaints are reasonable...and if told to you in a non-blaming matter, unassuming manner, and with an even tone, things might be fine. Had a call the other day, "Hey, Chris. I'm with a big firm now, but I don't think I need to use them anymore since my business activities have wound down significantly over the years. They also change my preparer each year and I feel like I'm just their playground for new trainees. And, their fees haven't gone down although the complexity has."

Fair enough. Reasonable arguments in a reasonable tone.

A good indicator is why they are changing, and how they found you. If they just moved into the area, they'll need a new preparer. If they haven't moved, and just jumped, the story may be more complicated.

How did they find you? For us, if we part ways with a client on good terms, we offer them referrals to colleagues who are taking on new business. If the terms aren't so good, or the client is problematic, we usually tell them to search the state's CPA society's find-a-cpa pages, because we don't want to burn good will with our colleagues. .

Now, to be fair, sometimes clients come in complaining about their previous preparer, and the complaints are justified. Tax preparers are people too, and have things happen in their lives that may cause them to become a bad fit. Again, the tone the prospective client sets is telling. It may be the preparer was going through a divorce, and didn't file returns on time.

Fee sensitivity is a reasonable cause to change. I shop for car mechanics. If the dealer wants to charge me $500 what a respectable mechanic will charge $200, I jump. If the client went to one of the final four CPA firms and got a $5,000 bill for a tax return you know should have cost $1,000, then the fee sensitivity is reasonable. If the previous fee was $299, I would decline the engagement.

So, the story I share here is use your gut. You will know if a client is going to be a problem. Problem clients can drain much more time and energy than their fee is worth.

I think you're very wise to evaluate what this client is "telling you" not so much with the words

There are two sides to every story. Be careful to reserve judgment if you are only hearing one side. Especially so, if the "new" client is attempting a bit too much to suck you in to their side.

I also find certain clients that we have our doubts about tend to be **** magnets.

I've had a few of these, I'll admit. My gut said, "Don't take this client," but I did it anyway. I didn't necessarily regret it, but it would have been easier to have a few good clients in place of the one bad one.

One of these terrible clients had a small S-corp. First sign was messy books and an unqualified bookkeeper. Then, when the corp returns are done and mailed..."Hey Chris, I forgot to give you the stuff I paid for out of my own pocket." This client, like many bad ones, liked to use many credit cards to finance their business. That's another red flag. And this particular one actually used the blank checks that the credit card company sent to her! I'm sure she accounted for those properly...What a disaster. Of course, balances were transferred from card to card. Anyway, all that stuff got sorted out. But then there was the beach house the client couldn't afford. So she went in 1/2 w/ her sister. Attorney put sister on the deed, but sister was not put on the loan. Of course, client sued the attorney...and then sued the sister. They stopped speaking after that. Of course, Ck gets called in to court to testify as to the operating losses of the beach house. Then there's the divorce from the husband. Then there's the allegations of domestic abuse. Then there's 5 cars on the books. Then there's bad record keeping on the personal/rental days of the beach house. Then there's the foreclosure. Then there's the bankruptcy. Then there's MFS vs. MFJ returns to deal with and amended returns. Then I have to deal with the husband separately, whose a pain in the ass. Then she sues the funeral home where she bought her burial plot...Then her brother and dad both die and she inherits a windfall...we'd think it would help sort out her financial mess. But no, she has NFL PSLs to buy, more cars (that get traded in each year), etc.

This is a fine example of not going with your gut...I eventually said, "Enough is enough. You're a **** magnet and your the common denominator to all of your problems. Go fly a kite, right after you jump in a lake."

"Enough is enough. You're a **** magnet and your the common denominator to all of your problems. Go fly a kite, right after you jump in a lake."

Ha! That's a great name for these types of people. Constantly, always, forever in crisis-mode. Car broke down. Husband cheated. Kid's in jail. Kid's pregnant. Then they're in jail. Or in a fight with someone else. Now there's a new husband. Rinse. Repeat. Never a calm day in their lives. Who can live like this?

Oh, I know several of these types of people, everyone's got at least one of them in the family. Thankfully I fired all these **** clients years ago, but you can't help who you're related to--but I permanently deleted Facebook about 6 months ago and I've been able to avoid the constant crazy updates. It's liberating.

Amen. The trick is to not let the magnetism attach to you to begin with.

Sounds like my wife's sister. Nothing but drama in her life - husband #2 doesn't give her what she wants for child support, husband #3 ends up giving her close to $100K just to be rid of her. Always calling us with fresh drama and wife is afraid to tell her to knock it off.

Almost forgot - still owes us over $3K because SIL cries to wife about how she doesn't have any money (no kidding, maybe stay out of court and the mall). Of course, wife doesn't want to bring up to her how she needs to pay us back now that she has her funds from two exes, so I have to.

Sorry for the hijack - this post about PITA clients struck a nerve and Tax Writer's mention about how there's one in every family was the trigger.

If you do not believe there is a black sheep in your family, that *might* mean you're the black sheep...So, Eduardo, I'm glad the B.S. is wife's sister and not you...

Wife and I try to be drama free - each of us has a brother, and they're both drama free. Her sister has enough for everyone on this board.

I tell the wife and her brother that their sister ought to just get a job with the divorce court - she's been there constantly for the last nine or so years. She complains she can't get enough hours at her job - well, no sh!t, maybe spend less time in court and your employer may be willing to give you more hours.

Also need a good way to tell the red flag client up front you don't want their business. Your gut can tell you "no", and you can quote a much higher fee than what they say they've paid before, but what if the red flag client still comes on? Maybe this is a person who is used to being fired by the prior preparer so they've developed a thick skin.

Eduardo, you could be a stand up comedian.

@Makbo...just last week, my wife was telling me about a guy that wanted to be a client of hers. She sensed his PITA-ness, because he really didn't want to do things her way, and so she politely declined to take him on. He couldn't take the rejection and kept on and on and on, basically begging for her to accept him as a client. "I'm sorry, I just don't think it's a good fit," is how it ended up. He definitely had a thick skin, but she stood her ground.

Ckenefick, you're too kind. Thankfully, the sister lives over 100 miles away, so I don't have to see her that often.

Regarding red flag clients, don't be tempted to charge them a lot in the hope that working with them will be worthwhile. You're better off declining their business, and going after better quality clients. After you're in business a while, you get a sixth sense of who's going to be a PITA.

I used to be a home contractor and I learned that if a customer starts complaining about the previous contractor - watch out!! AND don't scare them off by charging the client more expensive rates. The more you charge, the more they expect. Instead, find a nice way to decline their business. IMO

I just thought of another one:

When someone calls you and leaves a message without any reference to what the call is about:

"Hi this is Mr. Red Flag, please give me a call back."