Discussion:Preparer compensation

In the past, I've just paid an hourly rate. I'm leaning towards a percentage of bill method this year. Either that or an hourly rate plus commission.

Questions

What percentage of tax fee would be considered fair. Is 5% 10% or 15% a fair rate. I know that they should be able to spit out four to six $100 returns an hour easy. This is straight data input.

Should they be responsible for printing and stapling as well? I am planning on having a full time clerical staff around as well.

My thought on the commission standpoint is that the return should be substantially complete and that I am only doing a final review. If the return is given back to me and I have to do substantial work on it, then commission should be reduced, and if so, by what amount?

wondering what the thoughts are. I want to pay my staff well enough so that I am first choice for tax season work, but I also want to make money too.

Thanks,

Fred

I am actually in the process of negotiating this with a member of my firm. My old firm paid commission only @ 35% of billing, staff put everything together and president/founder signed everything. My new help came from a firm which did the same but at 60% of billing. Neither of the previous firms paid an hourly rate, you make what you bill.

That seems fair to me. An incentive to work both quickly and accurately - too slow or too much re-work, and the person's average hourly pay will drop considerably.

I would dearly love to hire someone who has some administrative skills and interest in taxes and accounting work. My assistant is a really sweet lady, but sometimes I wish she would just go that extra step. Had a great assistant for years in California, she's sitting for the CPA exams in Florida now, and I think I keep comparing them without meaning to do so. I keep thinking I'll prepare a procedures manual, because I think she would follow it if I did, but I never seem to have time. Does anyone have an outline for their administrative help?

That is why I ask if you sign the return, or do they? Makes a big difference to me.

I can't believe that there are those of you out there who do returns for $100. What is your time worth?

I just won't touch a return for less than $200 unless it is a child of a client who is only filing in order to receive a refund of FIT withheld.

Believe me, you have to value your work. Tax preparation is easy to you. It's not to the person for whom you are doing the work, that's why they are there.

For those who hire out your lawn care...how much do you pay for that service. It's the service you are paying for, not the value of the physical work. You're talking about mowing a lawn.

Let's say for argument, they mow 40 weeks per year. They spend 20 minutes at your property. That is 13.3 hours per year. How much do you pay them. $150/per month? $1800 per year. That's $135 per hour. Are you getting $135 per hour? Then they go to your neighbor and do it again. And again if they are fortunate enough to have 3 houses in a row.

Is this flawed? Now compare that with your knowledge and know how and how much you are earning per hour.

I did see on another thread, that someone suggested the idea of doubling billing rates, in effect losing half the client base, but still making just as much with half the work. I'm seriously thinking of putting that into practice a year from now.

I am not sure what kind of returns you are talking about here. Returning clients with just a few W-2's and no kids? Or are my people just much slower???

I have found that if a hard copy of the return is not printed and double checked there are often problems.

As always thanks for the food for thought.

Fred

And I sign and review every return.

Cobleskill grad off to California. Wow, there's what I call a jump. lol. I think back in 1989 was one of the few last years where the college kids could really party. the town has clamped down big time since then.

Thanks again everyone. I appreciate the input.

Fred

John Huddleston Seattle Bellevue Tax Accountant

BTW, I pay the lady who cleans over $150 each time she comes, she's here for about 6 hours, and she shares in the retirement plan benefit. Some of that may be due to regional differences in hourly rates, but some of it is simply due to inefficiencies in a large practice and partners/owners who have no end to their own need and no idea of what good service is worth.

Respect thyself and those that work for you....good luck to all.

John Huddleston Seattle Bellevue Tax Accountant

http://fsnews.findlaw.com/cases/ca/caapp4th/slip/2006/b178246.htmlLink title

interesting commentary

http://www.aterwynneblog.com/oregon_business_litigatio/2006/09/california_cour.htmlLink title

I consider Ray a friend, although we haven't spoken in ages. He told me he was going to sue....I didn't believe that he would really do it.

See AICPA article:

http://www.aicpa.org/pubs/jofa/may2004/stump.htm

One section mentions paying by commission is one way to indicate independent contractor status

Milt Baker CPA

Common-Law Factors Indicating Employee Status

Milt Baker CPA

2) Pay for work by the job instead of by the hour, the week or the month. 3) Have all workers submit invoices for work before paying them. 4) Don’t forget to complete IRS Form W-9 (Request for Taxpayer Identification Number) when you first start working with a contractor (you’ll need this info. for your year-end tax filings).

Milt Baker CPA

Extra kudos to you JAD for posting that case. That was some valuble information, I had no idea that CA prohibits non-competes. Your friend Ray did well.

I confess I have not read thw whole thread but i would like to bring up the preparer penalty situation for this year. This will take more time since more explanation will be needed on many or nearly all of the type of returns this firm prepares. I do not see how we could prepare a return of any substance for under $300 and the last firm I was with would say it would be at least $500.

If you go to the mechanic he looks at the "book" to see what amount of time it is "supposed" to take to fix something and they charge based on this. If preparers charged based upon what the IRS places on the forms for time to prepare---wow---we could all make some coin!

The person who mentioned the lawn mowing has it right. We should be charging way more than what we are charging. Everyplace I go people with skills that I do not possess are chrging a bunch. Even though I have tons of experience (no not by weight--smart guy!)I confess that sometimes when someone with what seems to be a minor skill (albiet I don't have it but could learn it) charges a bundle for 20 minutes of work or less.

Just bought a home in July and my wife and I locked ourselves out while working in the garage. Called the locksmith, waited 90 minutes in the heat and he took about 3-4 minutes to open the door and charged us $95. Was this a fair price? maybe, maybe not. but I paid it.

I am sorry if my comments contributed to causing bad feelings. If I were you, I would contact many other CPA firms looking for help during tax season. I keep reading how there is a shortage of workers. If that's true, you should be in demand. There are annual surveys that provide compensation information. Try Accountemps, Robert Half, the CPA MAP survey. Ask for compensation on the high end.

Talking to other associates they pay based on commissions only..35 to 40%...

His duties also would be handling my Qiickbook clients such as preparing their YE adjustments, and assisting them with setting up new client's books on Quickbooks. He is not a certified QB advisor at this time however has several years working with mid size accounting software packages.

Under FLSA you can't pay straight commission, you have to have hourly minimum (Which can be a draw against commission).

JAD, it's been a few months, but if I recall correctly, your friend won.