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Discussion:Setting Fees for clients especially new ones

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Discussion Forum Index --> Tax Questions --> Setting Fees for clients especially new ones


Wkstaxprep (talk|edits) said:

24 January 2007
Over the years i have tried to determine what a fair fee is for tax returns. Recently, i have attempted to establish flat fees based on the compexity/type of return. I am hoping to establish fees in the flat range of $200, $300, $400, $500, etc. ranges. It's amazing that there is very little literature on what is the appropriate fees to charge or what is the fair market value to charge. Of course, most of us on this board seem to be very professional and we should charge higher than the average preparer. However, what is the average fee for a preparer?

also, do most of you let new clients know upfront what the approximate fee will be , and if yes, do you tell them before you meet in person based on the conversation or do you wait to meet with them in person and first look over all their documents and then give them an estimate at the initial interview ? I also as a general rule when i get a referral for an existing client, if the new client's return is similar, i always charge them higher fee than the person who referred them.

Thanks again for anyone's input.

Chris2lane (talk|edits) said:

24 January 2007
William, I charge by the form. If I get a phone call from someone phishing for prices, I obviously can't tell them what their fee would be without having their info in front of me. Therefore, I tell them roughly $175. an hour. There are a few posts on this site in regards to fees.

Guya (talk|edits) said:

24 January 2007
I like the "Rule of 1,000". This is based on the concept that you'll have 1,000 actual billable hours each year (after making the coffee, attending education, checking emails etc etc).

If you want to make $100,000 a year then take $100,000 and divide by 1,000 so you get an hourly rate of $100. If you want to make $200,000 a year then take $200,000 and divide by 1,000 so you get an hourly rate of $200; you can adjust this as needed (and of course it is gross turnover before costs) but it should give you a rough rule of thumb for figuring out an hourly rate to set.

Natalie (talk|edits) said:

January 24, 2007
Guya, are you working an average of 40 hours per week for about 50 weeks per year. If so, you're suggesting 50% billable hours? That seems extremely low to me. How many others out there would say that's about right?

JR1 (talk|edits) said:

January 24, 2007
How hard I work doesn't matter, it's the value of it that matters. For me, and I'm in a metro area (Chicago, not far enough away...go Colts!) I start homeowners at 300-350 range. Corps at 500-600. Add on for added work...but that's my beginning. I used to give a break to first timers, but have been burned too often by one-timers! So forget it, they all pay the freight. And if I did give break and they came back, it took years to get their fees up to what they should be...

KENDRICK (talk|edits) said:

24 January 2007
For a 1 person show, I would say that 1000 hours billable is about right. But then again, working is not my priority. I don't have kids, and the girlfriend is frugal.

As for billing, I tell new clients I charge by the hour based on my hourly rate, but I also tell them I discount it since they are a new client. When asked for an estimated price, I do my best on what information I can gather from them, and then tell them that, after I get their stuff in front of me, if it looks like I will have to charge more than my estimate, I will call them and let them know before I begin work.

My regret is that I usually lowball the estimate. I am trying to learn to highball the estimate, since I don't really want any new clients, unless they are relatively uncomplicated.

Chrisk (talk|edits) said:

24 January 2007
Guys, please give some thought to upping your minimums. Why would you do anything for less then $1,000? OK,OK, not everyone will pay $1,000 for a return but keep in mind, they are in pain, they come to you to get out of pain. What is that worth? Forget about the hours you work. What about all the hours of school, the CPA exam, continuing education, etc? Its the old story about the surgeon. You pay him $100,000 for the surgery, not because he can cut you open but because he knows WHERE to cut. Metro Chicago and you charge $500 for a corp? That does a disservice to the profession! Why not make it $1,500? What is that as a percentage of the corporations gross? More then trash collection? Be bold! and watch your income triple!

Deback (talk|edits) said:

January 24, 2007
Chrisk - How much would you charge for a simple 1040, one W-2, single, no dependents, Sch A, State and City--four forms that took 11 minutes from the time the client walked in until he walked out? I just had one like this. $100 I wouldn't feel right about charging him much more than that. And if I did start charging double or triple of what I've been charging, I would lose a lot of clients, and then, next year, I would be sitting here doing nothing for a lot of the time. I'd rather be busy constantly than just sitting here.


I had a few days in late March last year, when I was caught up and sat around for a few hours for a few days, waiting for returns to be brought in. It drove me nuts, but I still did 736 returns and could have done many more. If it wasn't for the availability of filing on the Internet and the fact that many of my prior clients no longer need to file returns, I probably would have had several more clients. Keep in mind that I live in an area with a lot of GM factory workers and State workers. I also don't do many corps and am not interested in having any more.

JR1 (talk|edits) said:

January 24, 2007
I am bold, Chris, believe me. The only way a corp is getting a 500 return done is if I kept the books...in which case it'll take me 30 minutes tops. Based on surveys at tax seminars, I'm mid-priced...my regular clients pay a year end fee, which for most is 1200-1500 including year end payroll, biz and personals...

Gosix (talk|edits) said:

24 January 2007
<The only way a corp is getting a 500 return done is if I kept the books...in which case it'll take me 30 minutes tops. Based on surveys at tax seminars, I'm mid-priced...my regular clients pay a year end fee, which for most is 1200-1500 including year end payroll, biz and personals...>

Agree. What do you charge for keeping the books? Example 3 employees, 150k sales, good records, etc.

Or does the year end fee include keeping the books, plus the related tax returns?

CrowJD (talk|edits) said:

24 January 2007
Wkstaxprep: many preparer professional associations do a fee survey, I'm sure. I belong to NSA, National Society of Accountants. NSA does an annual survey, and breaks it down geographically.

JR1 (talk|edits) said:

January 24, 2007
Oh, heck, no, I don't include mo or q accounting in that. It all depends on what I do. Ranges from $200/mo for a smaller client where I do all of it....to over a thou a month for my large client...and in between are the QB clients where I review the file quarterly and do payroll tax filings, usually 300-350 range each qtr.

Natalie (talk|edits) said:

January 25, 2007
I was just meeting with another CPA today during lunch. He related that he had a conversation with someone a while ago about having too much work to do. The other person he spoke to asked him what would happen if he doubled his fees. CPA responded that he would lose half his clients. Yea, and then the other person smiled. He doubled his fees.

Bottom Line (talk|edits) said:

26 January 2007
New clients are good at a "bait and switch". They give you a summary of what they have and you give them a price range. But when they bring in the stuff, you find out there's more. Had one last year that gave me a copy of a prior return. I did the new return and client complained about the amount of tax due. Upon further discussion found out he had adopted two children that he had neglected to tell me about in the initial interview!

Birdman (talk|edits) said:

26 January 2007
I need a little more of Chrisk's mentality. I could handle working 1/2 the hours for the same revenue.

FSteinCPA (talk|edits) said:

26 January 2007
Chris is entirely right. It has long been the thought that if you raise your fees, you will lose less than the percentageof the increase. I've always learned to categorize my client base into A, B, and C clients. In the beginning, we take all comers, then as we progress and mature as a preparer/firm we can start weeding out the C clients. The way to do this is to either fire them because they are C clients or to raise their fees enough to the point where you are being compensated enough to hold their hands, listen to their bitxxing, or to deal with their late payments. C client work that you would charge an A client $500 for, charge the C client $1,500. I never fire clients, I let them decide what they want to do. Pay me the PIA fee or seek counsel elsewhere.

As I said in a recent post, I just acquired a new practice. One of my first clients was a divorcing couple that can't speak civilly. MFS would have cost them about $3,500 in refund. Due to my excellent counseling abilities <g> I was able to talk them into filing MFJ. They were able to get their T/R done but their fee went from $130 to $200 for a simple 1040 Sch A and 3 line Sch C. I told them when I gave them their bill that there was a divorce counseling fee included. they had no problem.

Now, yes, the fee above is very low, but the old school guy I bought the place from charges tremendously low prices. Annual billings of about $100,000. some 1040's were priced as low as $45. There is a minimum 20% increase for all clients until I get them into what I feel is an appropriate fee range. $45 automatically goes to $65. $65 to $85 and so forth. so many returns will be increased by 30% and more, but a minimm of 20%.

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