Ethics Issue

I don't know where else to post this.

We were introduced to an accountant in March of 2024, who was looking for a new TPA.  She has clients that needed annual reviews and 5500s, Schedule SBs, etc.

We quoted the numbers and typically wait until the clients' tax return are due before preparing our work.

Well, October 1st comes and this woman demanded that since she gave me new clients, I had to do her clients' work first.

I was paid in advance by 3 of these clients, and quoted contributions and prepared Form 5500 for all of these

The accountant pulled all this new business on the grounds that I wasn't fast enough; the clients that paid in advance demanded their money back.  

Now she is asking for the valuation reports and Schedule SBs for the others, that I had not billed, so they obviously didn't pay.

I consider any work I do as my work product, until I release it, which will then become the clients' once I am paid for my services.  I was not paid, I believe I am under no obligation to release anything, especially the Schedule SB, for which I pay my actuary for signing.

Any opinions?

Any written service agreement(s) that might help?

Good point, I didn’t do a servicing agreement. I prepared 5500s but withheld my valuation report and Schedule SB.

The client never asked for the information, the accountant did.

unless I get an email or letter from client stating my services are not required, I believe I do not have to hand over any documents unless and until I am paid for them.

Thing is, I have not yet billed the client and the accountant hinted I was not going to be paid anyway.

Wd must be very careful choosing those we do business with.

I’m just concerned about any lawsuit and/or any unethical practice for not turning over the requested information.

If you consider your work practice before the Internal Revenue Service, you might consider the Treasury’s rules for practice before the IRS:

§ 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.

(b)    For purposes of this section, Records of the client include all documents or written or electronic materials provided to the practitioner, or obtained by the practitioner in the course of the practitioner’s representation of the client, that preexisted the retention of the practitioner by the client. The term also includes materials that were prepared by the client or a third party (not including an employee or agent of the practitioner) at any time and provided to the practitioner with respect to the subject matter of the representation. The term also includes any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner, or his or her employee or agent, that was presented to the client with respect to a prior representation if such document is necessary for the taxpayer to comply with his or her current Federal tax obligations. The term does not include any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner or the practitioner’s firm, employees or agents if the practitioner is withholding such document pending the client’s performance of its contractual obligation to pay fees with respect to such document.

31 C.F.R. § 10.28 https://www.ecfr.gov/current/title-31/part-10/section-10.28#p-10.28(a).

Further, even when a person is not an attorney-at-law, certified public accountant, enrolled agent, enrolled actuary, or enrolled retirement plan agent (the five kinds of practitioners the IRS recognizes), some look to the Treasury’s rules for practice before the IRS as an aspirational standard.

The rule describes returning to a client (or, perhaps, a prospective client) the client-originated records delivered to the practitioner.

A practitioner unconstrained by this rule for practice before the IRS might have a greater opportunity to use a retaining lien. Or a practitioner burdened by (or voluntarily following) this IRS-practice rule might also face further restraints under State law. If you are a member of a professional association, consider those conduct rules.

If you lack a written engagement, get your lawyer’s advice about whether applicable law nonetheless sets up the prospective client’s obligation to pay a reasonable fee for your work. Likewise, get your lawyer’s advice about whether applicable law sets up your retaining lien in the papers that include your work.

If you have professional liability insurance, some insurers help an insured with practical guidance about which documents to keep or deliver.

The actuary might consider her professional-conduct rules. For example, Am. Academy of Actuaries, Code of Pro. Conduct, at Precept 10, Annotation 10-5 (2001), available at http://www.actuary.org/files/code_of_conduct.8_1.pdf.

This is not advice to anyone.