Should I pay for lousy tax preparation service?

Question

My tax accountant this year did lousy job - Form 8942 was not filled according to IRS instructions. Also, I had to figure out myself why ESPP, NQSO and RSUs cost basis this year was incorrect on my 1099B due to recent changes in tax law. It would have been nice, if he was sharp enough to tell me "Hey, because of recent tax law changes in 2014 you have to include back 'compensation element' in the cost basis to avoid double taxation." instead of using numbers as-is on 1099B.

I didn't sign contract or e-file authorization form that he provided to me. I simply sent him my W2 and 1099s over email and received back form 1040. Also, he did not mention the price that he would charge me for the service. Only when I told him that I already filed my taxes with TurboTax then he seemed to get upset and then told me that I owe him $220 (this is $30 more than I paid him last year for filing my taxes).

Am I obliged to pay? Is there any legal action that he can take against me if I will not pay those $220?

P.S. I already paid him $110 because I did not want to feel like jerk.

Answer 1

I really like questions about customer service and how to handle tricky situations when money, expectations, and agreements are all in play.

The simple answer is, "no, you shouldn't have to pay for lousy service." But that's not really the issue. The real question is, "what will happen if I don't pay?"

In my experience, these things are best worked out between both parties rather than get all legal on each other. Perhaps you could call the accountant and explain your dissatisfaction, that you caught several mistakes, and that's why you filed on your own. Explain that the $110 you already paid is fair compensation and that you won't be paying any more and you hope he understands. Keep the conversation super friendly. You just want him to understand why you feel this way. (That you don't have a contract with him is a consideration, but even with a contract he could be seen as somewhat negligent.) Write down a log of your conversation and note the highlights.

Best-case scenario: he agrees to drop it and life goes on.

Worst-case scenario: he goes ballistic and threatens to sue you. That's ok, too. You go to small claims court, explain your side, show your documentation of the mistakes and how you called him and tried to remedy the situation. Then let the judge decide. Based on your explanation of the situation, you have a very valid argument for not paying. And if you lose, you pay the balance plus ~$50 in small claims court fees. Not a big deal, and I think there's very, very little chance of it ever going that far.

To summarize: be nice, explain why, and you'll both be better prepared for next time.