Discussion:Puzzling over Tax Fees

I am becoming more convinced than ever that accountants/CPAs (particularly) are sheeps and lambs. No offence intended, but I'm trying to put some of the standard fees in perspective. There was some poster on here the other day who was proud of the fact he did over three hundred fifty business and personal returns by himself, which probably is low for some of you. He should be proud in my opinion, especially if he considers himself the modern equivalent of a low skill assembly line worker. Now really, why be proud of working yourself to death in a business that requires a lot of brain power and education: and you're proud of what? volume! Give me a break. Volume is a commodity pricing measure, not a brain power measure.

I don't understand why a business owner should respect an accountant's advice about cost accounting, and/or how to run a business profitably when most of them are screwing themselves. What does KPMG charge for an itemized 1040, say with a couple of rental properties? $2,500.00? They might actually be charging what it takes to make a living and have a quality of life. Wouldn't you be happy with $1,500.00 <G>? I'm serious.

The PC has made tax pro's out of novices who also under cut many preparers. How many times have you gotten a prior year 1040 from a new client and saw problems with basis, 179 not properly deducted, SEP deductions on a schedule C etc....

I believe, through observation of mentors and seminars, you should market yourself as an expert, raise your fees and if that doesn't work, get a job. That is my philosophy. I tell my clients that a big firm would pay me 150K. So I need to earn at least that plus over head, accordingly my billing rates are similar to a mid size firm. They either stay or go. Their choice. My rate is 200 an hour minimum 1040 is $500. Block is only slightly less.

In 1990 while working for my tax lawyer boss, I interviewed with a 'white shoe' Philadelphia law firm, which needed a person in their tax department. I overheard the head hunter tell the hiring partner "I'm sending over this guy who looks like a 60's refugee, but knows his stuff.' They offered me the same money I was making at the time. The number of returns I would prepare at that firm was about 25% of the number I was doing for my boss, but I was to understand that these would be DM returns (I think that was the firm's initials) and that when I made recommendations or suggestions to the clients, the client would know DM was behind them. Having been handling the lawyer's equipment leasing audits, I'd seen in so many cases the fact that the clients had no idea what was going on, but took the shelters because 'professionals' said to do so, and never liked this approach.

I turned down the offer. Ten years later one of my clients collected a large wrongful death settlement when a prominent person murdered his sister....the money was paid in installments. That law firm handled the settlement and told him to 'net' it on Line 21 of the return. I told my client this was a loser (SCOTUS finally settled this but several years later). He was told to use ambiguous wording, tire talk more or less, to fog the issue. I gave my opinion to him and he had me do it my way, though the rest of his family followed the DM example. No one was ever audited, but when I saw that, I was so glad I had run away from them.

Not to mention that now the IRS goes before Congress and brags about their free tax preparation program links! Tax people are getting killed from those at the bottom (bottom feeders) of the profession, and from lack of guts at the top, IMHO.

David: don't you imagine the carpenter had at least $500-600 profit? Well, let's say $400-500?

Don't know where Fixer got the idea I did those returns manually? Actually we use Pro Series. All Hail this Forum's Blessed Sponsor!

Now those production figures are through this month and resulted in slightly over $122K in billings. Total hours to produce that was about 1,250 hours, or just shy of $100 per hour billing rate. So, its not like I'm banging "me and my old lady, we got one W-2 and an EIC" type of return at $65.00 a pop.

Considering this is in the Tampa, FL area, where cost of living is nowhere near what it is in the Northeast or Cali, so life ain't too bad. If I can get $100 per hour for my work, why wouldn't I grab all that I can get?

Regarding Crow's comment of what a Final Four firm would charge for a 1040, I can say that I have been there and done that, having been a Tax Manager at a Big Six Firm. Yes, the Big Firm billing is pretty impressive, but in terms of what I get to take home now in terms of the bills I send out, I get to keep a lot more of what I bill than I used to, both in terms of absolute dollars and percentage.

It is very true that I wear my overtime like a hair shirt and I am dang proud of the work I put out. Rhetorically speaking, don't you wish all your employees had that attitude? The Boss tilts his head to one side and sez "Arf?"

P.S. There is definitely something to be proud of the mental and physical stamina to do a lot of returns (I could not do it), but the image of a hot dog eating contest still enters the mind. You ate how many? Congratulations, but why, you idiot?

PPS: Me and the Boss: you are not a low level grinder, I'm sure you are an extremely valuable member of your firm. I was pointing out some absurdities endemic to the profession.

A few years ago, the specter of Amex Tax and Business was riding the waves, with a couple other contenders. Could that happen again? Could a new franchise be built around outsourced labor and $25 per hour fees and if on a large scale, be profitable? And then put the rest of us out of business? Don't say no too quickly.

So when services get commoditized, if I have to make up a word, it's bad news for the old elephants who've ruled the jungle, but great news for the young pack moving in. We best keep moving quickly, stay sharp, roll with the markets, and be careful about pricing ourselves out of business.

But yes, Crow, every time my copier guy comes (yeah, I still have one of those), I'm shocked that his hourly rate is nearly as high as mine. Not that copy repair doesn't matter....

By the way, in spite of the all the newspaper/magazine/web articles I keep handy to show that there are no adverse effects from filing Form 4868, you just try and pull that one on a 75 year old guy who insists that he has "never been late for anything in his entire life." "But sir, you are not late, you have an Automatic Extension..." That one goes over like a concrete zeppelin. The Boss wants a bone. WooF!

The regular middle class lawyers like me are going thru the same thing the pharmacists did. I was talking to a younger female lawyer the other day who is a certified elder law attorney (not easy to get). She should rightfully charge $1,500.00 for two estate plans in our market. Legal insurance reimbursement (a lot of big corps. and school systems offer this) is $175.00 apiece.

By the way, the insurance company told her she should "upsale" her services to increase her profits, now that's a lot of upsale to get to $1,500.00, lol.

P.S. Agree on the 4-15 deadline. I understand a committee of AICPA has been trying to work with IRS and even Congress on this. It would make a lot of difference if some way could be figured out to spread the work out (it's not working). Of course, many just build extensions into their practice, if they can.

By the way, JR, I had a call from a copier servicing outlet: the outfit I gave $700+ to cover 15,000 copies suddenly went out of business after 30+ years, leaving employees three weeks behind in pay. I should have known; they usually insisted on C.O.D. when shipping supplies.

A 3 year CPA in large firm today makes about 75K to 90K. here in NC, the big firms start them at over 50K, in NY at over 70K. So if you are on your earn, I believe you should net minimum about 125K after you put away 15K in a pension.

We as accountants should have minimum fees, establish minimum character of client types etc... and try to specialize.

she is my favorite singer

and her dentist's favorite set of teeth

Did you see this post by some unprofessional geezer at "How to Become a Tax Preparer"

"The key to staying in the tax game is keeping the overhead low. Do not waste money on software. Get yourself an old reconditioned IBM Selectric (they are worth their weight in gold), some blank IRS forms, some carbon paper, and one of those special erasers to correct your carbons. I type all my returns. No copy machine or software expense. If it's really complicated, I will use the client's program. If they ask about Efile, tell them it's not secure, give then a knowing wink, and keep typing. That usually shuts them up." <g> Oh, the sillinesses inflicted upon the young.

In case that was not clear - I was not talking about YOU!

Now very few people know how to hang a door.