What do you do about unpaid invoices from T1 clients? Most of my clients pay when they get their tax return.
But every year, a few give me bounced cheques or send a screenshot of an e-transfer before pressing “send,” then say they already paid. I tell them I didn’t receive anything on my end, and after that, I don’t follow up.
I see it as a good opportunity to stop working with bad clients. Chasing small T1 fees is not worth it. I’m curious what others do in this situation.
i don’t file until paid =- most do e transfer
It is good to get payment before e-file. I let my clients pay me in one month. Only exception is new client who need to file several tax years together before doing consumer proposal.
I agree – no pay, no e-file.
Absolutely no one gets filed until our invoice is paid. They also don’t receive a copy of the tax return or their paperwork back until they pay.
If clients have multiple years to file, they pay a deposit before we even touch the file.
Similar to what the others have already commented, I always provide a draft copy of the return which has a draft watermark on every pages along with the T183 to sign and my invoice. I do not file the returns until I have the payment. I also have auto-deposit setup for my e-transfers, so I know the money was deposited.
Ironically, the clients who still owe me money (now ex clients) are the ones who I took pity on, agreeing to file their return before the deadline to prevent them late-filing penalties. I don’t do that anymore lol You don’t pay, I don’t file.
I am quite willing to file returns before getting paid - most of them get the E-file confirmation and my invoice at the same time after they had emailed me the T183. I have high quality clients however as I have been stiffed maybe 3 times in the last 20 years. I only have 1 client I insist on getting paid before filing as he is somewhat flaky and broke. I do send email reminders if needed and have a few that need to reminded more than once occasionally but they always pay me.
I’d be careful with their paperwork. Refusing a copy of the return until they pay makes sense, but their paperwork belongs to them.
I don’t file unless my bill is paid, it’s in my engagement letter and on my client letter with the return (bolded) and everyone pays. Not many of my clients have not paid over the years but this way, I’m don’t have to worry about payment.
Same
I say I hold the tax return hostage until payment is received!
I wouldn’t even start returns for the current year if the prior year is not paid. They are not clients any more since they didn’t pay last year. In your case, if they are desperate they pay you upfront for last year’s fee plus this year’s normal fee times 2 for being desperate and waiting until the last minute… They need you more than you need them.
As a small firm student more than 60 years ago our standard practise was if the client couldn’t pay on pickup, we changed the address to our office. When the refund came, the client could pick up the cheque on payment. A few times, they’d say “I’ll go cash it and come back”. We’d say no, they’d reach into their sock and produce cash. Basic T1 fee - $3.50.
Wow, that sounds like it was very illegal.
I don’t like the admin side of a tax practice, I have uncollected T2 fee from 2021, I have done return with 40 billable hours, but client refused to pay as result wasn’t what they wanted. I actually think Turbo tax’s approach, maybe good, to attract those clients, leaving high quality out
It’s funny, how I just mentioned Turbo tax, and this news pops up on my screen.
I saw that earlier today. That should really help their sales going forward. Turbotax shot back with the statement that users may have declined the review function of the software. If that were capable of flagging the problem, and a customer had the feature disabled, I’d say the customer doesn’t have a leg to stand on. Had they enabled the review function, and the software flagged a problem, it could have been fixed prior to filing. The interest & penalties would be quite a chunk of cheese for Turbotax to absorb. Depends on whose at fault on a case by case basis. If the review feature was disabled, or if it was active, and the taxpayer ignored it anyway, then you can’y blame the vendor. Otherwise, Turbotax did guarantee to pay interest & penalties if the software was at fault. We’re talking about a US company anyway, so I have no pity. CRA froze my access earlier this year as my 2023 return hadn’t been submitted yet. Couldn’t efile through TaxCycle, couldn’t file through My Account, so I used WealthSimple for free. Got my NOA, called CRA and was reinstated right away. I know it was done right as it came to the same result as TaxCycle. Don’t understand why anyone would ignore the diagnostics. Strange that Turbotax allowed the returns to be filed.
I feel like I am one of the few people who do all the work and then wait at the mailbox for client payments, like my dog waiting for treats. Many clients think I am doing charity work. When I add my time for phone calls, meetings, and CRA work to the bill, they are surprised, like I should do it for free.
Believe me they do that one time and the next year I don’t take them on.
It was my understanding that holding a tax return filing hostage for fee payment is against CPA Ontario’s code of conduct but I’m having trouble finding it now. It was just something told to me and I never bothered to look it up. I’m in Nova Scotia so CPA Ontario rules don’t apply to me but if it exists for Ontario, it might exist for other provinces.
Regardless, we use Ignition for managing our engagement letters and it is also our POS. We require verified payment methods up front before we start an engagement. Then Ignition will charge the payment method when we issue the invoice. Haven’t had any complaints about it in the 4 years since we’ve gone independent from the big firms. Our A/R has never been older than a couple of weeks.
We bill after everything has been filed and finals have been sent etc.
Any client that stiffs us either needs to pay up before the next season or we don’t do their work. Again, that has never happened (yet).
Not sure if anyone tried, but maybe set up as a discounter, not sure if that’s the proper term, that should allow you legally retained the refund, but maybe it will set a limit on the fees