Withhold filing of return until invoice paid?

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#1
CO CPA  
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I want to confirm that there is no reason why I'm unable to withhold filing of the tax return (actually hit the button) until I receive payment for my services?
 

#2
sjrcpa  
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If that's the deal you have with the client.
 

#3
CO CPA  
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sjrcpa wrote:If that's the deal you have with the client.


It's not in the engagement letter.
 

#4
HowardS  
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My client returns get filed when I get a signed 8879 and payment of my fee in full.
I don't think it's that complicated.
Retired, no salvage value.
 

#5
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I thought you had to file an 8879 within three days of receipt. Surely that takes precedence over getting paid?
 

#6
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SumwunLost wrote:I thought you had to file an 8879 within three days of receipt. Surely that takes precedence over getting paid?

I believe that is the irs's position
Dave

Taxation is the price we pay for failing to build a civilized society. ~ Mark Skousen
 

#7
CathysTaxes  
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I'm with Howard. I'm signing as a paid preparer. Wouldn't that be considered as perjury if I efile before payment?
Cathy
CathysTaxes
 

#8
HowardS  
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I believe that is the irs's position

The IRS doesn't guarantee that I will be paid and will not backstop me if I'm not paid. As Cathy says, I'm not a paid preparer until I'm paid.
Retired, no salvage value.
 

#9
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We're just playing with semantics. If you have an understanding, written or verbal, that you'll be compensated for the tax return prep you're a paid preparer.

If you're concerned that a client is going to prep and dash just write it into your engagement letter that you must be paid before the return is filed and don't send the 8879 until payment is received. Or charge a 100% retainer.
 

#10
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CathysTaxes wrote:I'm with Howard. I'm signing as a paid preparer. Wouldn't that be considered as perjury if I efile before payment?


I think that is taking "paid preparer" out of context to fit the situation. ManVsTax posted the correct interpretation of "paid preparer."

But you can certainly make that the terms of the engagement letter. I state it all over the place that returns will not be filed without final payment. I only make a few exceptions because they're clients I 100% trust.
 

#11
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Agree with above interpretations of IRS rules regarding the CPA inability to hold e-files before sending in the returns once a signed 8879 is received.
If you are worried about getting paid, issue the invoice before releasing the tax returns and signature documents.
I imply to clients that the returns won't be filed (and thereby the refunds will be delayed) until I am paid, but I don't push the IRS published timeline on this.
 

#12
CathysTaxes  
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I sent the 8879s with the invoice. The majority of the time, I get payment via Zelle, PayPal, or client says 'check is in the mail.
Cathy
CathysTaxes
 

#13
JAD  
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What I learned long, long ago when working at PW is that we cannot withhold returns for lack of payment. My impression is that that was due to IRS or regulatory agency rules. What we did was simply stop work until the account was brought current if there were ever collection issues. The return of a large client was $30k, a fortune back then, and they were always very late paying. We just stopped work and told the client we would not do any more work until the say, $25k, in the WIP was paid off. We would include a statement about the deadline, such as, "if we don't have payment by 4/1/2023, we will not be able to complete the return in time for the 4/15 deadline.

Dialing all that back to reality, where we are here with our smaller returns, I don't think we can refuse to file as we wait for payment.
 

#14
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If it's a known client payment issue, you can certainly withhold your own work until you receive payment, but once the 8879 is signed and received, you cannot hold back the e-files.

(You also cannot hold back the client documents, ie: you say the return is done and you need payment to send the returns, then they ask for their documents back... you have to send them back, but all of your work papers etc you can refuse to provide)
 

#15
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Thanks all for your thoughts - - this was helpful to read through.
 

#16
Taxaway  
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Way back when, and very likely still, HRB had a 'child-proof' (fraud-proof maybe) system that would not allow efiling until the return was paid. On the flip side the drawback was returns were efiled very quickly once paid and you had to put it 'on hold' if for example you wanted to review it one more time.

My ProSeries doesn't have that annoying feature so when contacting a late-paying client, I can just say I'll able to transmit the return once payment is received. That's true.
 

#17
Frankly  
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Let's hear some stories about how a tax pro was sanctioned for failing to file a return within 3 days of the 8879 being signed, or about delinquent clients that have sued.
 

#18
CathysTaxes  
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Frankly wrote:Let's hear some stories about how a tax pro was sanctioned for failing to file a return within 3 days of the 8879 being signed, or about delinquent clients that have sued.

Just once I was able to collect by writing a ten day demand letter. After a year of no responses to my requests.
Cathy
CathysTaxes
 

#19
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Frankly wrote:Let's hear some stories about how a tax pro was sanctioned for failing to file a return within 3 days of the 8879 being signed, or about delinquent clients that have sued.


none in my world, but I have the opposite where a colleague filed a return on 10/15, at the 11th hour, without the signed 8879. He had been paid and they owed a lot and wanted to avoid a FTF penalty.

He narrowly avoided a lawsuit as they went to another tax preparer to have it changed to "make up" some more Schedule C deductions. They started a lawsuit against him (he was served for the signed 8879) and wanted potential damages and a fee refund because of the increase in audit risk due to it being an amended return. He said that's fine, when you are testifying let's show the judge your supporting documentation. Case dropped and he never heard from them again.

But it's a reminder that I would rather get an abatement of the FTF then file without a signed 8879.
 

#20
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RazorbackCPA wrote:none in my world, but I have the opposite where a colleague filed a return on 10/15, at the 11th hour, without the signed 8879. He had been paid and they owed a lot and wanted to avoid a FTF penalty.


It sounds like their new CPA was about to drop the ball, unless they made up so many expenses that they swung from owing a lot to a refund.
 

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