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Context

I can provide more context to the story (question), but I also want to keep it short. I have been paying my accountant for helping with my corporate taxes for the last 4 years in Toronto. I was paying for the corporate taxes about 30-40% higher above the average for the same work my colleagues are paying. In return, this firm has offered to file my personal taxes for free. Which did successfully happen three times previously. It was a gentlemen's agreement and I have no proof of this agreement in writing. At the same time, he naturally never invoiced me for this work either.

Question

This accountant has suddenly sent me an email saying I never paid for filing my personal taxes with him for the last 4 years. The invoice is asking to pay $350-600 + HST per filing. For myself + my wife. Our taxes were really simple with simple T4 forms, nothing fancy. In fact, I used to use TurboTax and it took me 30-50 minutes to file on my own. So the invoice total is about $1600+ for four previous years of personal taxes for myself and my wife. Can I legally ignore these invoices? It does not make any sense that he sends me invoices for work done 4 years ago. Would really appreciate any advice!

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    Ask your lawyer for specific legal advice. – Nij Mar 15 at 18:30
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    Three suggestions: pay the invoice, find another accountant, and avoid handshake agreements. – Bob Jarvis - Reinstate Monica Mar 16 at 15:47
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    In particular, if you start throwing around the phrase "gentleman's agreement" (particularly in emails etc. with the accountant) then you are essentially admitting that you are liable for the invoices, so be careful. – JBentley Mar 16 at 17:48
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    @JBentley any agreement with a meeting of the minds giving both parties consideration is a contractual agreement. "Gentleman's agreement" is an informal choice and a bit imprecise but I can't see how it can be construed to contradict the rest of the text outlining their valid, unwritten, contract. – Will Mar 16 at 19:36
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    @will The phrase gentlemen's agreement, granted that it is an informal one, means that there was no intention from the parties that they were entering into legal relations. Such intention is an integral part of a valid contract. Without it, there is no contract and the agreement is non-binding. To expand on my example, if I offer to buy you a drink (consideration) if you meet me at the bar (consideration) and you accept (agreement), there is still no contract because neither of us intended for it to be legally binding. – JBentley Mar 16 at 19:39
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Can my accountant bill me for previous work he agreed to perform for free?

No. The difficult part will be for you to prove that he agreed to do the job for free. Hence the importance of having this kind of "gentlemen's" agreements in writing. You have the burden of outweighing --even by means of circumstantial evidence-- the common presumption that professional work is done for compensation, not for free.

However, just like it might be hard for you to prove the aforementioned "gentlemen's agreement", it would also be hard for him to prove that you agreed to (or knew, or should have known, you would have to) pay the amount he is billing now. In the event that you are unable to prove he agreed to work for free, you might want to dispute the reasonableness of the amounts he is pursuing so belatedly.

It is noteworthy that the work at issue being "really simple" would not be the only factor for assessing how much he may recover. Other factors such as the accountant's qualifications or the market rate for similar services would be weighed in awarding recovery (if any).

Can I legally ignore these invoices? It does not make any sense that he sends me invoices for work done 4 years ago.

You may ignore the invoices regarding older work, that is, those for which the period of limitations has elapsed. For most cases, section 4 of the Ontario Limitations Act provides a two-year period to bring a claim.

Since the accountant himself did the job, and most likely he was --or should have been-- aware of the payments due for his services, he would be unable to prove that his "discovery" of claims (see section 5 of Limitations Act) regarding older tax filings meets the period of limitations. Equivalently, see here the paragraph starting with "For example, if the courts determine that [...]".

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  • Comments are not for extended discussion; this conversation has been moved to chat. – feetwet Mar 16 at 21:44
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So the first thing would be to send an email to the accountant if that is really a road that he wants to go on, because he is going to lose your commercial business, and it is unlikely that he will get any money from you personally.

If he wants to go there, you should probably get a lawyer. Good lawyers not only know the law and can give you legal advice, they also know how to handle a situation like this in the best possible way. You want the accountant to see sense, not meet him in court, and a good lawyer can often achieve that.

If you were in court, the arguments would be that you had a verbal agreement that you would pay more for the business accounts and get the personal accounts for free. Evidence for this is that you were never sent a bill in several years. Plus, you relied on the assumption that the personal service was free, otherwise you would not have paid extra for the professional service, and would have done the personal accounts in a cheaper way.

If as the other answer says he has no rights anymore to the payment of four years ago, then that together with your argument that you wouldn’t have let him do the other three years if you had received the first bill and seen the cost likely means you won’t have to pay anything. If he takes you to court.

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  • thank you @gnashek. Yes, I am prodding my accountant via the email trying to figure out what is going on. He's not quick in replying and sends me strange emails saying "all our clients are paying for the personal tax filings". I am looking for the new CPA in Toronto now... – Zerg00s Mar 15 at 20:37
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    "Evidence for this is that you were never sent a bill in several years" - the harder evidence is that OP was sent a bill (it is implied) annually ("for the corporate tax work") for several years. A completely blank paper trail is open to arguments that the accountant was being easy-going or forgetful; a regular invoice history amounts to a written account of payments due between the parties. The accountant (especially being an accountant!) had better have a damn good reason why he'd be so diligent getting one set of payments settled but not another. – Will Mar 16 at 12:02

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