Late bills could signal end of business relationship

Dear Bruce: I own a small parcel-courier service in the Tampa Bay (Fla.) area, and I am having a problem collecting payments on some past-due invoices from a major shipping company. From time to time, the company has freight that needs to get to its destination faster than its drivers can handle. For the past several years, my company has been handling these deliveries. Around September, they had a change of management inside this division. During this transition, only some of the invoices were paid. In the past, this company remained about 30 days past due on all invoices per an agreement I accepted with the company.

When I brought my situation up to the new manager, she said she would work with the corporate office to resolve the problem. Since then, I have received prompt payment on all invoices billed after Jan. 1, 2006. However, the company is still past due in the amount of around $5,000 for invoices billed during 2005. I have pursued the issue more and more over the past few weeks and have recently noticed a major decline in services performed for this company. I am now under the impression the company is slowly phasing me out, and it has no intention on paying the past-due invoices.

Until now, I have been fortunate enough to avoid using a collection agency or the court system, but I am unsure what to do. Thank you for your time. – P.B., Tampa, Fla.

Dear P.B.: Your instincts might be correct – they could be trying to phase you out. If that’s the case and you are not concerned about jeopardizing your present relationship, you might demand payment for the bills in 2005 and, if they are not amenable, turn them over to a collection attorney. I’m confident you recognize that, if you do that, there is a distinct possibility they will end their relationship immediately. Given that circumstance, by all means I would continue to bill them so there is demonstration you have not abandoned this claim. But as long as they’re keeping you “on the pad,” you might not wish to jeopardize that relationship. If it goes away, you can start collection proceedings.

Return of principal is generally not taxable

Dear Bruce: I have a question about my tax liability if I loan money to a limited legal partnership in which I am a partner. My brother and I are equal partners in a rental home, and we formed an LLP. The LLP owns the home and owes a mortgage and a loan totaling $590,000 for restoration work. I want to loan the LLP the money to pay off this debt and have the LLP pay me back. Rather than the 8.99 percent interest from the bank, I will loan the money at 7 percent, and the debt will be paid back in nine years. We will sign an agreement that the LLP owes me the money, should anything happen to either of us before the loan is paid off. What is my tax liability to the Internal Revenue Service? Do I have to report the entire monthly loan repayment as income? Do I have to report only the interest as income? Any advice would be greatly appreciated. – C.A., via e-mail

Dear C.A.: These are the types of questions that should be asked of a personal tax adviser, taking into account all of your relationships. However, in general, return of principal is not taxable. That’s money you already paid taxes on. For example, if you have a mortgage payment that is 90 percent interest and 10 percent amortization of principal, 10 percent is clearly return of capital, no taxes. The 90 percent is taxable interest. By all means, you should sit down with your tax accountant and be certain what you are doing is in your best interest.

Certified letter should correct company error

Dear Bruce: Where can I file a complaint? Four years ago, I was billed for an item I did not order or receive. It was an error by the company. Another family charged the item. After much aggravation and many phone calls, the company corrected its error and acknowledged there was no debt.

Now three years later, I received a letter from a collection agency demanding payment. I have tried to contact the company and the bank it is using for its credit card, but they won’t respond to my phone calls or e-mail. In the meantime, the collection agency is hounding me and won’t listen to me or give me any information. I don’t know where to turn next. – L.R., via e-mail

Dear L.R.: Yours is a relatively common problem. While the company acknowledged the debt was improper, they often forget to clean up their files. Then other companies come along, buy “bad debts” and try to collect. They purchase these accounts for pennies on the dollar. If I were in your position, I would simply send one certified letter to the collection agency, copying the company with the details you have outlined.

In the event they send further communications, photocopy your letter and send it off. There is nothing more you can do until they take a positive action, such as bringing you to court. You should include in your correspondence a paragraph stating you will hold them civilly responsible for any damage to your otherwise stellar credit. The next move is up to them. If you are obliged to go to court, hopefully you will have documentation of what has transpired. There may even be cause to move against them for damages.

Bruce Williams is a national radio talk show host and syndicated columnist. He can be reached at bruce@brucewilliams.com.