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Discussion:Schedule C vs 1120S vs 1065 fees

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Discussion Forum Index --> Business Growth Community --> Schedule C vs 1120S vs 1065 fees


Wwtaxes (talk|edits) said:

2 May 2007
I know there are lots of old discussions on fees, but I have a very specific question that none of them cover.

I've seen a huge discrepancy between the average fee for a Schedule C business, vs a 1065 or 1120S. While I know there are differences like Schedules L, M1, and M2 on the 1120S, it seems like the bulk of the work is the same (especially deciphering the books, consulting on ways of doing things).

Is there really a big discrepancy, or am I just looking at the wrong fee schedules? If there is, why? For those that charge straight by the hour, do you also have a difference in the average fee between these?

I'm pushing for some fee changes, and I personally think we're doing C's too cheap (sometimes the additional fee is as low as $25).

Pegoo (talk|edits) said:

2 May 2007
thats cheap... =) Some people charge $200 / hr. That covers all their direct and indirect expenses and yeilds a comfortable profit per hr.

Kevinh5 (talk|edits) said:

2 May 2007
You learn about Sch C at the basic H&R Block course. You don't learn about Corps and Partnerships until you have some tax experience (and hopefully have taken some courses).

BobLindEA (talk|edits) said:

2 May 2007
Most tax pros also do far fewer corps and partnerships than they do individuals (Sch C or not), so the cost of the software (spread over a lower number of customers) is a factor. Whether you license the entity software directly or pay-per-use, it can easily add $50 or more to your costs of preparing a 1065 or 1120/1120S, compared to a 1040. And since the entity returns also impact on personal returns (through K-1's, W-2s, shareholder loans, etc.), that makes them more time intensive on both returns.

Personally, I try to discourage my business clients from incorporating. Although corps generate more fees for me, they create more complexity than most of my clients can deal with, require a lot of ongoing handholding (again, more in fees) that clients don't realize when they get into it. I favor unincorporated businesses or LLCs for most types of businesses and clients.

Tstolley (talk|edits) said:

2 May 2007
We charge a minimum of $85 for Schedule C. 1120S and 1065 requires more in depth reporting, balance sheet disclosures, and knowledge of tax law regarding those entities. We start them at $450 for a fairly simple return and increase it based on hourly rates.

Sandysea (talk|edits) said:

2 May 2007
I can't do a tax return for 85.00 unless I just do a simple 1040ez or 1040A from the downloaded pdf files from IRS. My software alone charges 15.00 to print the return and add to that my paper, toner, calls, copies, folders, business cards, and not to mention my rent for my office, etc. I would not break even. Of course, I also GIVE several of them away during the year.

My corporate returns ALWAYS need me to do F/S, bank recs, quarterly recaps of filings, etc. and the ongoing issues with these clients. Simple 1120S is ok for 450.00 but I then also charge for the 1040 even though I xfer the K-1 into their 1040 and only need to do a few minor things to make it work.

I am still undercharging per others in my area, but I am also still building my practice. Hopefully next year I can fire some of these problem children and keep the ones that are disciplined or at least cognizant of things :)

Death&Taxes (talk|edits) said:

2 May 2007
It is the manadatory double-entry needs that make the cost of the partnership or corporation so much greater. So many of my Schedule Cs are those whose income derives from one or two 1099 forms, and is of professional service nature, but when they incorporate suddenly all monies that go through the corporate account must be accounted for to arrive at a balance sheet. Maybe the Federal permits us to avoid this, but the states I do require the balance sheet.

Tstolley (talk|edits) said:

2 May 2007
$85 just for the form Sched C. We Charge another $85 for 1040 and so on. We need to increase our rates though. Cost of doing business in the area is skyrocketing.

Wwtaxes (talk|edits) said:

2 May 2007
Great points. We also have to pay more for corporate returns since we don't do enough to get unlimited use. Even if we did, the per return fee would be higher than for individuals. I had a hunch that the number of people doing corporate returns would play into it as well, and you are correct in pointing out that I did have to take extra courses to do them. I can really relate to Bob's comments about favoring sole proprietors just to eliminate the headaches. While I don't think this should be the major reason for choosing an entity, I have briefed my lawyer that I am referring clients to about the on-going costs of an S Corp vs others.

Then there are all the extra schedules for the 1120S. Does anyone care to comment on comparing C to 1065? I only do one 1065, so it is a real pain since I have to become familiar with it every time. Do others who do more of them find them significantly less time-consuming in general than the 1120S?

I've also thought a lot about an earlier discussion that talked about the ease of doing an 1120S if you also do the books, since the numbers are already cleaned up, verified, and the transfer is easy.

Sandysea (talk|edits) said:

2 May 2007
TS....ohhhh; well then that is a fair amount if you also charge for the 1040; do you also charge for other schedules in the 1040?

WW....naturally the 1120S is easier if you do the accounting throughout the year, but so many of these clients procrastinate and sometimes I find myself doing 6 months in one fail swoop. My S clients are so because most are construction based and they need it for W/C exemption in FL. That being said, they are also my biggest headaches. They don't know what it takes to do the work, nor do they care...they only want to spend their money like it is theirs and not corporate monies.

I had a client come in late yesterday for his prx returns (late as usual for him) and his annual report. I gave him my bill....his question "what did you do"???? He doesn't care about a b/s or i/s or anything else for that matter. He still thinks in terms of sole proprietorship...he just doesn't get it. He wondered why I put some of his money toward distributions to cut down on p/r that was too high to be considered reasonable so why pay ss taxes on money he is entitled to as a distribution?

He is on my list to "fire" as soon as he pays me. He was one that came in and oops...forgot my checkbook to pay you......

He SHOULD be a Sole Prop, but in the work he does, he can't in FL. AARRGGHHHHH!!!

Death&Taxes (talk|edits) said:

2 May 2007
Do you realize in PA there is a substantial difference between a partnership and a MMLLC defaulting to a 1065 in that for the latter you must also file the PA RCT101 for Corporations besides the partnership return? The cost of paper is ridiculous, even for only copies to send to the client.

Wwtaxes (talk|edits) said:

2 May 2007
D&T - are you saying that PA considers a MMLLC a corporation even if it is taxed otherwise?

Frankly, I don't know how everyone keeps the various state idiosyncrasies straight. Even reading about the various incorporation fees, I'm amazed. MN doesn't even charge an annual filing fee, UNLESS you forget to file. Then they charge you to reinstate the filing. But I digress. It seems like various states are having a tough time figuring out how to treat LLC's in general, instead of just treating them as the entity they choose to be taxed as.

Even given the oddities associated with LLC's, I'm still inclined to think that filing as a partnership is a great deal easier on the client than filing as an S Corp, even though I'm more comfortable with S Corps. Any comments?

Wwtaxes (talk|edits) said:

2 May 2007
I should clarify my previous statement. I understand the the 1065 is complex as is the 1120S, but not having to deal with payroll, quarterlies, etc, is a huge difference, assuming they don't have employees other than themselves.

Tstolley (talk|edits) said:

2 May 2007
SS - Yes, we charge something for virtually every form. We usually go with our forms charges to price a return, but if the time required to finish the return is excessive, we will go with our hourly rate (happens a lot w/ sched C returns).

TexCPA (talk|edits) said:

2 May 2007
Seems that the discussion is between charges per form vs. charges per form plus hourly rate vs. hourly rate. Per SS and 'I forget my checkbook' it really doesn't matter what I charge, it's what the client pays that counts. I charge an hourly rate. When new clients come in with their prior returns, my fees seem to be slighter higher than the seasonal strip center tax preparers.

WW- My Sch C fees vs. my S-corp fees; since I charge by the hour and not per form, the variation is caused by the time and the availablity of clients records, PL vs PL and BS, ect. Example Sch c clients documents a piece of paper saying this is my income and this is my expense, different Sch c client says here are my bank statements, you tell me,

TexCPA 15:50, 2 May 2007 (CDT)

Wwtaxes (talk|edits) said:

2 May 2007
Actually, part of my reason for reopening the discussion was in providing the tax implications for clients. Many attorneys don't consider the additional on-going costs of incorporating. They look at is as 'just an additional return'. In reality, there is payroll, corporate books, quarterlies, etc. When a client wants to be an S Corp to save the extra FICA above and beyond wages, I have to wonder if they are saving enough to make up for all the additional paperwork headaches. As much as I like S Corps bc I am familiar with them, I am leaning more and more toward less complicated entities. Yes, it's less money to me, but probably a much better choice for my small SE clients.

I guess I'm having a harder and harder time justifying an S Corp as an option, but that strays from this topic. I was just hoping a couple of these discussions would help me solidify my opinions. Now that I think about it, we were in the same discussions last year, and I still have the same reservations. I think what you all are saying is there are very valid reasons for the price differential, I'm not charging enough for a 'C', and for the other issues I should wait for that fast elephant discussion on entity selection :-).

Bottom Line (talk|edits) said:

4 May 2007
I prefer doing S-corps instead of sole-P's. With an S, I usually do the books or do a quarterly "look-see" when I do the payroll taxes. This allows me to help them with tax planning and helps me avoid the "why do I owe so much?" question. With the SP's, much as I beg them for mid-year numbers, I never get the info until after 1/1 when it's too late. Then I get the "why do I owe so much?" question combined with they don't understand the difference between SE tax and income tax. Then the icing on the cake is my fees. I can't charge as much for a sch C as I can for an 1120-S. The market won't bear it.

Sandysea (talk|edits) said:

4 May 2007
But then again BL...some of my S clients have a hard time justifying what they pay me to do quarterlies...why do I need that? DUHHHH....you need it because you don't have a clue where you are spending your money and you DID take p/r even though you think you only took distributions...

Myself, I would rather go back to ONLY 1040's with schedules...forget all these clients who don't have a clue and would rather not even know...

Got a new client that wants to incorporate this year....yeah, you will save on taxes, but you have to see my smiling face at least 4 times every year and you won't like what I have to say to you....

I wanna work at wallyworld....be a greeter at Walmart...hehehe

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