Terrible Client Experience

Hello,

I had an elderly lady reach out to me because she received an IRS notice for her 2019 return which I did not prepare. It seemed pretty cut and dry because it was a CP2000 notice. She was involved in a auto accident which resulted in many moving parts of money and claims. She had a personal injury claim, short term disability, etc. The notice purported that that 80Kish in social security income was reported in 2019 and she failed to include it on her return.

My advice was that we contact all of the parties involved and the SSA to determine why and how the income was reported as she indicated she thought she was going to walk out of the situation tax free. She indicated that all the parties involved including the social security administration told her that they have no record of the payments. This tied my hands behind my back so I told the lady that I could respond to the notice but I feel they're going to request more information. She indicated she wanted me to respond to the notice, so I did.

Just in phone calls with her I've had 2.3 hours, not including calling the IRS and getting her transcripts, research, etc. I made the mistake of not doing an engagement letter (big lesson learned) but in contacting my attorney he said that I was paid for the work I did. I can definitely provide my call logs, tax transcripts, response, etc. as proof I did the work.

She indicated that her new accountant said I should issue her a refund. I contacted the new accountant to let him know what I did in case she gets further notices and I also asked him if he requested I provide her a refund to which he said no. My position here is that I am not going to send her the $300 that she paid me as I probably have closer to $750-$1,000 worth of WIP into this.

Please let me know what you would do here.

I have only had this situation once and I issued a 50% refund. I then had them pick up their documents and refund from my lawyer after signing an affidavit that they received listed items.

Just my two cents. For $300, it is not worth the hassle but hopefully your chat with the new accountant proves to be a warning to them. But, why did she leave you? What did she feel you failed to accomplish?

I have only had this situation once and I issued a 50% refund. I then had them pick up their documents and refund from my lawyer after signing an affidavit that they received listed items.

Just my two cents. For $300, it is not worth the hassle but hopefully your chat with the new accountant proves to be a warning to them. But, why did she leave you? What did she feel you failed to accomplish?

She was very difficult to work with through the entire process so I told her she would need to look else where. She wants a refund on the basis that I did not fully resolve the issue and that her new accountant figured out why and how the income was reported. Supposedly the SSA does have some kind of record of the payments and they should have been spread out over a few years. Since I did not know this and she indicated to me what she did, I was at a loss as to what to do. The new accountant was actually very helpful and polite and offered to be a resource in the future. I believe he's on my side in all reality and had nothing bad to say of what I did.

Given what you want want to do, I would just go radio silent. If she brings it up again, I would remind her that I did not prepare the return from which the error stems and that I'm already giving a discount by billing $300 instead of the $1,000 I have in WIP.

Our time is how we make money. We need to be compensated for it. And, at the end of the day we're like Evel Knievel, we get paid for the attempt not the result.

Good wording. Making an attempt has value and not all attempts will result in the desired result, which does not make it any less valuable.

Given what you want want to do, I would just go radio silent. If she brings it up again, I would remind her that I did not prepare the return from which the error stems and that I'm already giving a discount by billing $300 instead of the $1,000 I have in WIP.

Agreed.
If I were in a face to face or phone conversation with her, I might offer that: "You don't get what you don't ask for and I can respect that. However, I didn't bill you the full cost of the time I spent on this issue for you. I billed you what I felt was fair. I appreciate that you paid it promptly. Thank you."

I agree with CornerstoneCPA and ManVsTax. I only do resolution work and $300 to respond to CP2000 is low. Based on several surveys it should be closer to $1500.00. I have started providing a line on the invoice showing an hourly rate and the hours spent working on the case as non-billed time. ($450.00 hourly).

You are right (lesson learned) always get an engagement letter outlining what you will do and no guarantees or refunds.

Invoice her the Balance of your Unpaid Charges.
Do the math - show the loss to date on account.

^^ yeah...

It's a little late, however, but in these spots, in the first place, I send a bill that shows $1500 and a $1200 discount for this exact reason. It gives me more ammo.

I don't like playing games like that, but it comes in handy in times like these.

I for the amount involved, I might consider refunding the $300 anyway, even though feels so wrong.

For the small cost of $300, you can now block all contact with her and never have to work or deal with her again.

When you don't refund the money, they might come back and ask for things. The answer can be "no", but the time costs to fend them off further though.....

I think we all have learned from our past experiences dealing with difficult or ungrateful people. Lesson learned, get the terms of your engagement in writing to avoid these types of issues. Sometimes you get stung by a long time client also who for some reason stiffs you or does something totally unexpected

I want to add that 95% of these issues can be vetted out in the first place just by listening to the client for 10 or 15 minutes.

It's a little awkward, but once I sense they might be trouble, I will say something like, "I'm sorry that you are facing this stressful issue, unfortunately, I just don't have the bandwidth to take this on right now. Perhaps I can suggest that you find a tax resolution service that specializes in these things so you end up with a helpful and effective professional. I'm sorry I can't help and I wish you the best in your searches."

Now if I just would listen to my gut feeling more often, I'd be in good shape.

Now if I just would listen to my gut feeling more often, I'd be in good shape.

Ain't THAT the truth!!

but in these spots, in the first place, I send a bill that shows $1500 and a $1200 discount for this exact reason. It gives me more ammo.

I'm not a fan of doing that as my bookkeeping software reports the gross and shows the $1,200 as a refund or return, which is isn't really.

My approach would be to bill the $300 and send a concurrent email explaining that I have $1,500 in WIP but am only billing $300 and why.

Accomplishes the same thing really.

Now if I just would listen to my gut feeling more often, I'd be in good shape.

I have a fairly younger client base(Early Twenties to Forties). I'm a heavy user of technology and will charge $25-$50 for a paper copy of a return as I use Canopy to service my clients. Unfortunately this lady was older (not sure exactly how old, mid sixties maybe). Not that there is anything wrong with older clients, but they just don't fit my mold. I'll definitely use this experience as a guideline for future engagements. I've contemplated not responding to any notices for which I did not prepare the return in the future.

My approach would be to bill the $300 and send a concurrent email explaining that I have $1,500 in WIP but am only billing $300 and why.

Accomplishes the same thing really.

My attorney told me to pick a stance and send a letter with the position that I take. I haven't done that yet, but I also haven't heard from her yet either. My attorney said to only contact her via mail, no phone calls, emails, etc.

I guess to me its not about the small amount of $300, its the principal of I did the work she requested with the information she provided and now she wants her money back. My lawyer referred to her as a Karen lol

I'm not a fan of doing that as my bookkeeping software reports the gross and shows the $1,200 as a refund or return, which is isn't really.

I have mine set up to report gross revenue and a separate line item for discounts or refunds. I like to know what my potential billings were relative to discounts. I have been giving too many discounts, time to reign it in except when a client refers another client to me and I give them a nonrefundable credit on their account.

I recently ran across an invoice from another accountant showing a $1500 bill all itemized by forms and then a $1000 loyalty discount so the net was only $500. I am confused by this strategy? Does that not show over charging on purpose and them some questionable discount (based on what criteria?). Reminds me of used car salesmen saying "This discount is for you my friend"!

I recently ran across an invoice from another accountant showing a $1500 bill all itemized by forms and then a $1000 loyalty discount so the net was only $500. I am confused by this strategy? Does that not show over charging on purpose and them some questionable discount (based on what criteria?). Reminds me of used car salesmen saying "This discount is for you my friend"!

I had another children's balloon entertainment business at one point that I charged a "premium" for my services. To others in the industry I was in industry standard range, but the average consumer would not have guessed pricing before discussing. If I ever did discounted work I was always told to show my true rate and show a discount so that if someone else at the event asks how much I charge I don't have to go around explaining myself. This work was true-blue per hour.

I think as accountant's we do a poor job in general at communicating everything we need to do for a project. On top of this, it's easy for the client to how long it would take because they are usually not there to see us work. Most accountants, including myself, have a tough time billing people are true worth. Listen to the auto mechanic next time they tell you how much something costs, they don't hesitate or offer discounts...

I get the point of offering "reasonable" discounts to build client loyalty but a 67% discount? I NEVER received that kind of discount from another service provider.

I get the point of offering "reasonable" discounts to build client loyalty but a 67% discount? I NEVER received that kind of discount from another service provider.

Yup. It conveys to me that even they feel they're not worth the gross fee or that they're new and inexperienced.