Accountant fee charging ethics

[samwoo2go]

Can accountants do this?

My family business has this accountant, he is not very good, but good enough so we been using him for a few years. Last year we were audited and my mom ended up going in and seeing him more than usual due to the audit (probably 5 hours total face time).

Our usual fee arrangement is $400 a year for 12 monthly sales tax preparations and 1 annual tax filing. This is a verbal contract and nothing was written nor signed (verbal agreements are legally binding in CA).
During 1 meeting (approx 1 hour) he complained that my mom waste too much of his time (for going in and talking to him) and he should be charging us. So my mom said OK, and he said he will charge $100 for that meeting and my mom cut him a check right there.
This is how the exact conversation went.
Accountant: "you always come and use up my time, I should be charging for these sessions."
Mom: "ok fine then, charge me."
Accountant: "Ok, then I will charge you $100 for today's session."
Mom: "Ok, heres a check."

There was no more charges for later meetings nor make up charges for before sessions.
Nothing was signed. and there was no verbal agreement IMO to a per hour charge...only for that 1 session was agreed by both parties.

After the ordeal, due to his shitty accountant skills and lack of patience, we fired him and got another better accountant. Then 3 months later (Today) we got this bill from him for $500 something bucks for 4 hours of face to face time and 1 hour of phone call time.

Can he do that? with nothing signed nor agreed? does this situation equal implied permission? If we don't pay him and tell him to go fuck himself, will he have to sue us for the money or can he just hand it to collections?
How should we deal with this? Don't want to go thru attorney because attorney fees will be just as much if not more.

[angrybaker]

i will ask my dad and brother (both cali lawyers)

[jaiman]

Originally Posted by samwoo2go

(verbal agreements are legally binding in CA)..

I'm no lawyer, but simple logic says that a verbal contract can't be binding as there is no record of the conversation or the terms agreed to, to reference in a dispute. It basically turns into two people acusing the other of lying.

[samwoo2go]

Originally Posted by angrybaker

i will ask my dad and brother (both cali lawyers)

sweet appreciate it man.

Originally Posted by jaiman

I'm no lawyer, but simple logic says that a verbal contract can't be binding as there is no record of the conversation or the terms agreed to, to reference in a dispute. It basically turns into two people acusing the other of lying.

false, I know because I took a business law class in college where the professor spend half a lecture talking about the validity of verbal contract in California.

http://www.lawguru.com/legal-questio...ny-133998266/a

[Kroy]

i'm guessing he cashed your mom's $100 check, so isn't there a record for payment?

[samwoo2go]

Originally Posted by Kroy

i'm guessing he cashed your mom's $100 check, so isn't there a record for payment?

ya but that payment was for that session only and no other payments were agreed for other sessions. That's why I want to ask if that $100 check sets up an implied consent for $100 per hour rate?

[lucas.kent]

There's really no such thing as implied permission. Even if an oral contract is valid in the state of CA, there are certain components of any contract that have to met; these include consideration and mutual assent of the terms. While some could argue that consideration was given because she agreed to be charged and pay the $100 for that one session, it does not appear that the second half (mutual assent) has been met because he didn't spell out the exact terms of the (oral) contract.

In any event, I would hope that this guy wouldn't get too bent out of shape and try to take you guys to court of $500, especially when his case isn't very strong.

[MontegoGoGoGo]

I don't know anything about taxes, but, assuming you are honest with your business, isn't it the accountant's fault and responsibility if you get audited and it's not random?

Was it a random audit, or did they give a reason?

[jaiman]

Originally Posted by samwoo2go

sweet appreciate it man.



false, I know because I took a business law class in college where the professor spend half a lecture talking about the validity of verbal contract in California.

http://www.lawguru.com/legal-questio...ny-133998266/a

Maybe I should have said enforceable rather than binding. Best of luck enforcing an oral contract when the parties to the contract can't agree on what was said.

So in your situation, your Mom says she never agreed to a fee of $100 per face to face meeting, the accountant says she did and provides the first check as proof. I have no clue how a judge would rule, but this situation illustrates pretty clearly why you should get things in writing.

[samwoo2go]

Originally Posted by MontegoGoGoGo

I don't know anything about taxes, but, assuming you are honest with your business, isn't it the accountant's fault and responsibility if you get audited and it's not random?

Was it a random audit, or did they give a reason?

It was like a targeted random audit, kind of racist IMO. It was during last year when CA couldn't pass the budget for shit and they really needed money. It was a state equalization board audit, not federal. We have a store inside of a plaza and in that plaza, over 95% of the businesses are owned by Chinese, and over 80% of business owners received audit notice within the same week because Chinese businesses are known to be cash businesses and cash is like audit magnet. So you tell me if its targeted or random.
I don't know if you ever got audited but even if you run a honest operation, its fucking complicated and shitty. You gotta dig out bank records, mortgage records, car payments, business expenses and shit and then you gotta explain this, explain that and remember this amount from 3 years ago, this date from 2 years ago, it sucked. The fact that we kept a pretty shitty record of stuff didn't help either, it was a mess.
So to answer your question, no its not the accountant's fault...per say. But we still needed accountant's help to put the audit response together hence the meetings.

[Seminole]

The title of this is kinda misleading, since this really isn't an issue of ethics.

Anyways, if what you typed below is exactly what your mom said to him, then IMO it sounds like she was agreeing to pay for the meetings, which as you said, by CA law would be binding.

Originally Posted by samwoo2go

During 1 meeting (approx 1 hour) he complained that my mom waste[s] too much of his time (for going in and talking to him) and he should be charging us. So my mom said OK, and he said he will charge $100 for that meeting and my mom cut him a check right there.
This is how the exact conversation went.
Accountant: "you always come and use up my time, I should be charging for these sessions."
Mom: "ok fine then, charge me."
Accountant: "Ok, then I will charge you $100 for today's session."
Mom: "Ok, heres a check."

To me, I read that as your mom agreeing to pay for the meetings. He specifically says that, "he should be charging her for these sessions" which is plural, as is more than one session. She reply's with "OK", agreeing to this.

Not only that, but from the way I read this:

Originally Posted by samwoo2go

Our usual fee arrangement is $400 a year for 12 monthly sales tax preparations and 1 annual tax filing.

It doesn't appear he even had to provide you with help during the audit. Your arrangement with him is just to prepare 12 monthly tax preps. and 1 annual filing, that's it. Not all that PLUS provide assistance should you be audited. He was helping you guys out at first on his own good will, but after a while he probably got fed up with wasting his time on something he wasn't being paid to do. Now, if he made a mistake and caused you to be audited, then yes, he shouldn't charge you, but since the audit wasn't due to him, and he had no agreement to provide you with help, he wasn't obligated to.

So long story short, yes, the accountant can do this. Nothing he is doing is illegal/unethical. It sucks, but that is how I interpret it as an independent party.

[hhkim]

just as a side note: you have mad drama in your life man! i feel like something terrible happens once a week or so for you or a relative.

best of luck with everything though!

[samwoo2go]

Originally Posted by hhkim

just as a side note: you have mad drama in your life man! i feel like something terrible happens once a week or so for you or a relative.

best of luck with everything though!

lol I see you been following my threads. I got a flat tire last night too, just throwing it out there.

[samwoo2go]

Originally Posted by hhkim

just as a side note: you have mad drama in your life man! i feel like something terrible happens once a week or so for you or a relative.

best of luck with everything though!

holy shit I shit you not, my mom just called me and said she got in a minor accident in the parking lot outside of work not 5 mins ago. Some1 backed out too fast and hit her. I just went out and took some pics, I'll put it up later tonight.

[Kroy]

Originally Posted by samwoo2go

holy shit I shit you not, my mom just called me and said she got in a minor accident in the parking lot outside of work not 5 mins ago. Some1 backed out too fast and hit her. I just went out and took some pics, I'll put it up later tonight.

Not to threadjack, but been having a pretty crappy start to the year too. Hope our fortunes take a turn for the better soon.

[angrybaker]

just got my dads answer to your question ( cut and pasted your post and emailed it to him)

Hey Matt, (thats me)

Sorry, but this is the first chance I've had to reply to this. Been a busy couple of days.

Yes, verbal agreements are enforceable (in California and pretty much everywhere else) though there are often problems proving exactly what the "agreement" was.

The mother's agreement to pay $100 for one meeting would not, by itself, constitute an agreement to pay extra for anything else.

However, the accountant could argue that the exchange: "... I should be charging for these sessions" and "ok, fine then charge me" constituted an agreement that he could charge for all extra sessions. Then, the payment of $100 could be considered an agreement as to the amount that would be charged for each such session.

On the other hand, the fact that he did not charge (or even bill) for the subsequent sessions or telephone conversations until after he was terminated would be evidence that even he did not consider those sessions/calls to be separate and apart from the underlying agreement that he was to be paid $400 for the year's services.

Can he do this? Of course, he can send out anything he wants. And, if it is not paid, could conceivably sue in small claims court, hoping that the judge would agree. However, small claims judges generally side with the client in disputes between professionals and non-professional clients (particularly where the professional, who ought to know better, does not get his agreement in writing).

It is not necessary for the accountant to sue before turning the account over for collection. He can do either or both.

Hiring an attorney would not be cost effective. On the other hand, if the accountant sues in small claims court, he cannot use an attorney, either. And no lawyer is going to take his case at a cost that would be reasonable for him, so if there is going to be a lawsuit, it will almost certainly be a small claims case.

Your friend's Mom could then just go to the small claims hearing and explain her side of the case. Even a small claims case would not be practical for the accountant, so maybe he'll just let it go if she refuses to pay. And if he does sue, I would say the chances are good that she would win anyway.

[Seminole]

Originally Posted by angrybaker

...
However, the accountant could argue that the exchange: "... I should be charging for these sessions" and "ok, fine then charge me" constituted an agreement that he could charge for all extra sessions. Then, the payment of $100 could be considered an agreement as to the amount that would be charged for each such session.
...

Hot damn, I should go to law school.

[samwoo2go]

Originally Posted by angrybaker

just got my dads answer to your question ( cut and pasted your post and emailed it to him)

Hey Matt, (thats me)

Sorry, but this is the first chance I've had to reply to this. Been a busy couple of days.

Yes, verbal agreements are enforceable (in California and pretty much everywhere else) though there are often problems proving exactly what the "agreement" was.

The mother's agreement to pay $100 for one meeting would not, by itself, constitute an agreement to pay extra for anything else.

However, the accountant could argue that the exchange: "... I should be charging for these sessions" and "ok, fine then charge me" constituted an agreement that he could charge for all extra sessions. Then, the payment of $100 could be considered an agreement as to the amount that would be charged for each such session.

On the other hand, the fact that he did not charge (or even bill) for the subsequent sessions or telephone conversations until after he was terminated would be evidence that even he did not consider those sessions/calls to be separate and apart from the underlying agreement that he was to be paid $400 for the year's services.

Can he do this? Of course, he can send out anything he wants. And, if it is not paid, could conceivably sue in small claims court, hoping that the judge would agree. However, small claims judges generally side with the client in disputes between professionals and non-professional clients (particularly where the professional, who ought to know better, does not get his agreement in writing).

It is not necessary for the accountant to sue before turning the account over for collection. He can do either or both.

Hiring an attorney would not be cost effective. On the other hand, if the accountant sues in small claims court, he cannot use an attorney, either. And no lawyer is going to take his case at a cost that would be reasonable for him, so if there is going to be a lawsuit, it will almost certainly be a small claims case.

Your friend's Mom could then just go to the small claims hearing and explain her side of the case. Even a small claims case would not be practical for the accountant, so maybe he'll just let it go if she refuses to pay. And if he does sue, I would say the chances are good that she would win anyway.

Hey thanks that's exactly what I was looking for. However I am not particular concerned about small claims as I know he won't waste the time. But I am really concerned about collections because that takes no time for him and if we don't pay collection, isn't it auto credit score hit?
How should we deal with this if he goes the collections route?

[ideliver]

ALL (and I mean ALL) reputable accountants work with an annual "engagement letter." This spells out the terms and limits of their work. This is for the benefit of both parties.

I also own a business and I switched (fired) my third party administrator (TPA) a few years ago. I gave him written notice. He kept trying to bill me. I asked him to produce the engagement letter, and haven't heard from him since.

In your case, since there is no written agreement, it becomes a "he said/she said" deal. I wouldn't pay out of priciple, but may be more hassle than its worth. This is what he is hoping...