My accountant won't return my documents because I owe her money.?

Question

I have a client who owes his previous accountant money. She is holding his documents & he is not able to file his Corp & Individual return. He knows he needs to pay the money. Is there any legal recourse he can take because it is unprofessional & I thought accountants were not allowed to hold your documents hostage.

Answer 1

The principle is that the accountant holds a LIEN over your documents. They have every right to hold the documents until they are paid.

Answer 2

There are a few variables to this, some of which depend on the type of accountant you are dealing with. Is this a CPA, an Enrolled Agent, a State licensed preparer, an unlicensed preparer, an actuary, etc.

Different large classes have different ethics obligations. For example, I am a CPA. Under the national professional standards of conduct, a CPA must return any client provided documents to the client, even if they do not pay. All CPA product is considered the property of the CPA.

I am licensed in California. Under California's CPA ethic standards, I also must release CPA work product that is integral to financial statements, such as depreciation schedules.

Enrolled Agents and State licensed preparers also have ethical boundries that address this issue. If you are dealing with a professional, I would be surprised if they don't return the documents when pressed. If that fails, the State society or licensing board can help.

However, the unlicensed or unenrolled preparer has no ethical guidlines, as they are largely unregulated. In these circumstances, State law is usually controlling, and there is no hard and fast rule to rely as to who has what rights. It is possible that some states see this situation the same as they see a mechanics lien, in which case your stuck. Other States may not see it that way.

Answer 3

Accountants are required to return to the client any documents the client gave them. They can keep any documents schedules returns that they prepared from the clients documents.

Answer 4

I hope that you are getting your fees up front with this client! With that said the following are the IRS regulations regarding this issue. The client can file a complaint with the IRS.

Treasury Department Circular No. 230 (Rev. 6-2005)

§ 10.28 Return of client’s records.
(a) In general, a practitioner must, at the request of a client, promptly return any and all records of the client that are
necessary for the client to comply with his or her Federal tax obligations. The practitioner may retain copies of the records returned to a client. The existence of a dispute over fees generally
does not relieve the practitioner of his or her responsibility under this section. Nevertheless, if applicable state law allows or permits the retention of a client’s records by a practitioner in the
case of a dispute over fees for services rendered, the practitioner need only return those records that must be
attached to the taxpayer’s return. The practitioner, however, must provide the client with reasonable access to review and copy any additional records of the client retained by the practitioner under state law that are necessary for the client to comply with his or her Federal tax obligations.

Answer 5

Contact your CPA Society or the state licensing department. They can not legally keep your documents but they don't have to release their work product in this situation. This is a totally unethical practice.

Answer 6

Sounds like a jem of a client. Tell him to pay and redeem his docs. I also suggest you get a retainer so he pays in advance so you won't have to hold his docs hostage.

Answer 7

That is not true! They can hold any material they have prepared, BUT no firm can hold source documentation material you provide them....