Discussion:Fees

I also would appreciate some input on fees. This is my first year as a full time preparer and bookkeeper. My fees look like this: 1040 w/ State and e-file $100 1040EZ w/state and e-file $56 Also various fees for schedules with limits and additional fees for extra entries.

Is this in line with most other first-year preparers?

Thanks,

Mike

I charge $40 for RAL's. Is this too much?

Also, I changed my ID, I'm not an EA, I'm in the application process.

Mike

Santa Fe, New Mexico, the most expensive ghetto on the planet...LOL

Mike

Mike

Tim Doyle, TaxAlmanac Moderator, Tdoyle 12:20, 20 January 2006 (CST)

1065,1120,1120s average $850 1041 average $300 706 Average $15,000 709 Average $350

I, too, am curious what others are charging.

HRB does have a price scdedule. I worked for them two years ago. There is a trick to get to that list and it is NON PRINTABLE. You (preparer) may need to write it down form by form. Last year I charged 1040 $55, 1040A $40, and 1040EZ $25. I think these rates are too low, but in my town it is a cut throat copm. This year I will charge 10% more or so.

Jokadah - I keep copies of the W-2s and 1099s (but not the Soc Sec 1099s). I make copies of lists that clients bring in, and I keep copies of brokerage statements for stock sales.

RG - Yes, usually, I charge by the form, by the number of W-2s and 1099s, and sometimes by the number of entries on the form, when a tax form has more than 3 or 4 entries. Sometimes, I charge by time, but my fees by the forms usually correspond to the time spent, unless the client is disorganized. When I'm spending time just preparing returns, with no interruptions and no breaks, it comes out to about $250-$300 per hour. But the constant interruptions brings that down to a lower average per hour, of course, especially on Mondays. Mondays are the busiest for me, especially in February, with phone calls and drop-offs.

Hourly's a bad choice, because you only have so many hours in a day. Set fees are good, because if you work faster you get more money. This incentivises you to clear your plate and bring in new clients; eventually hiring other folks to do the prep for you.

Listen to the folks who say go for value. What do you offer that no one else does? If your main selling point is "cheaper than H&R", and you're operating out of a home office with little overhead, then you'll probably run at a profit, but you'll never get rich. If your main selling point is hand-holding (that's one of mine, BTW), you can charge ten to twenty times what H&R Block would charge and folks will still come back to you. Or think of specializing in one crucial area which there is a lack of knowledge in your local community. I remember back at the tax chop shop, we had a special deal for MBA students that raked in a lot of dough. I now run a package deal for a particular market segment that brings in so many clients I no longer need to advertise. I have three related market segments that I focus on: 98% of my clients fit my market segment profile - the rest are relatives and old buddies from high school days.

After the busy season is over, this summer focus on your marketing plan. If you're looking at a low-income market segment, pick up a copy of streetfighter marketing by Jeff Slutsky; for higher-income markets, pick up The Portable MBA in Marketing. Or read both to figure out which strategy you're better suited for.

Running my own business and choosing a great marketing plan has given me financial freedom. I don't worry about whether I can afford to pay this bill, I just pay them all when they come in. I have money left over to invest, to travel all over the world, and take 10 weeks holiday per year. This is my dream life.

Yes, for the clients where I have to "building the balance sheet" setting up the assets, setting up depreciation, entering their st and lt liabilities, it takes a long time! I'm not sure how to bill this, though...if I bill by the hour, they would be getting a huge bill! How do you guys bill for tasks such as this? (building the balance sheet, checking their chart of accounts to make sure everything is being booked to the correct account....stuff like that) Is that a normal bookkeeping charge? I have a bookkeeping per hour and an accounting per hour. I would bill this under my accounting per hour rate, which, I might add, my rates are TOO LOW after reading this thread. I need to raise them.

For example, if you are in good communicatin with your clients during the year, and your client under otehr circumsatnces would have cashed out his 401k, but you are proactive and show your client he/she can borrow against the 401k and pay themself back without getting creamed in taxes, isn't that really what we should be doing. just one example.

anyway, long term clients who have been with me from the start i only raise modest every year ($25). however, new clients i charge a minimum fee of $250 (i.e. wages, basic schedule a, and schedule b) if they are referrals they are coming to you becasue u were recommedne as a quality professional. out of the 4 prospects i give them the estimate fee upfront and usually keep 3 of the 4 for (that's $750 receivables) as copmpared if u did all 4 for the low fee of $150 (receivables are only $600 and your doing more work) also, i find that the good fee cleitns respect u more when u chareg a good fee(would u wnat your heart suregon who is supposed to be grerat charging you $50 , ? wouldnt u wonder if he is so great why does he charge so little) the higher fee cleients treat u better and understand teh value of having a good tax pro, they realize that in the long run a good tax pro will help maximize their tax savings in a much greater way than tryimn to save a couple hundred bucks on the fee every year.

one last thing, if u do the entire return in front of a client, what r u telling the cleitn > that u just key puchhed really quick, dont put any tax savings thoughts behind return , u just data punch,print , sign and collect the fee, i think it refelcts a bad image. what about discussing with the clietn IRA's , how much r u puting in yoru 401k, is yoru 401k in conservative stocks agressive stocks, etc,. should they opena 529 plan for kids college savings, if they have large debts we cna recomend taxpayer to get a home equity line of credit so that when they pay back that loan at least the interest is deductible, are we discussing the new energy crdits with client, isn;t this really wherew ecan separate oursekves as porfessionals as opposed to just , one two three bang out the retune it took me 15 minutes , i mean it with greta respevct, but lets give ourselves credit for the service we can porvide, in the long run it will be good for our industry.

You can then "write down" the fees due to your inexperience or write them up if you are underpaid for a simple return.

Discounts for referrals is great, but if you aren't charging enough to begin with, then the discount will put you in a more negative situation.

Good number of returns to prepare first season? One is more than none....if you are only self employed and have no other income, then marketing may help. But the first thing I learned from clients is that they don't really care about the savings from a referral fee (bird dog). They care if I did the return correctly, gave them my attention and helped them where they are. I do give a bird dog fee of 10% off annual billings for larger clients for a referral but my referrals are generally from other accountants in my area who are too busy or my current clients who want nothing in return :)

It's easier to discount than to raise your fees. I agree completely with Sandy. Offer better service than your competitors, not lower prices. Make every client feel like he or she is your only client.

If you only want to do 1040's, then you can decide on a flat rate I suppose. This would require minimal research, bookkeeping and the like.

Good luck making the move!!

p.s and like DZ said last year,,,,, Something to think about "Double your fees and half of your clients will leave. You will make the same amount of money and work half as much as the year before" I like that idea about mid-February

The problem with requesting a estimate, even for "a 1040 w/ Sch C" is that there is a lot of added costs depending on the forms needed to file, the amounts on the forms, and other details. There are charges for EVERYTHING. My fav is the hourly charge we could add for the shoebox/PITA clients. I don't think I can go into anymore detail. Even if I could, the info could be of limited use to you since we are in different markets.

Just one point of comparison, the preperers for HR Block generally earn 13-20% of fees they generate for the firm.

Besided, you really shouldn't be pricing to the chain stores. Odds are you can offer better services and credentials, otherwise you'd probally be working for 'em.

But not having a lot of comp in the local area I have to list the chains.

I'm totally new, but I'm hearing horror stories here about several farmers with grocery sacks of reciepts.

On a serious note, I charge by the form because I work efficiently and with most of my clients doing advance preparation, can knock out most returns within an hour or so.

If you can get a retainer go for it, especially if you have clients with tax problems.

Every year, I go through my records and kick a few clients loose. Top of the list are nonpayers, next are slow payers, next are the hopelessly disorganized and chronic procrastinators. High maintenance, slow payers take up a lot of resources.

If you don't mind sharing, what school are you going to?

1. Each franchise owner or office sets their own fee structure. I believe the corporate office issues guidelines depending on the geographic location. That is why you may find such different fees from one city to the next.

2. Preparers are generally allowed to give estimates but the company prefers a standard response to the question like "Our fees generall start at $xx for the federal return. The state return is $xx extra. Fees are based on the complexity of the return so the more forms we complete the higher the preparation fee." This helps ward off the hundreds or thousands of local preparers who are trying to call each year trying to get a benchmark for setting their own fees.

3. Block and Jackson-Hewitt (probably other national chains as well) adjust their fees throughout the course of the season. This means that a taxpayer who comes in during peak season (end of January to mid-February) might pay slightly more than a taxpayer who comes in during the slow time in mid-March. They are also more likely to pay higher fees for RALs and other additional services (like e-file fees where they are used).

4. Block has diffferent fee structures for different offices. A premium office more closely resembles a CPA's office for more upscale clients. There is less rush to move people through the desks and they are staffed with a better quality preparer - EAs and senior tax advisors for example. Premium offices typically charge more than budget offices - offices based on the retail model and catering to lower income clients who claim lots of EIC and use lots of bank products. Some of these premium offices may also offer bookkeeping or other accounting services for clients with small businesses, etc.

5. The entire fee structure is kept in the main server at each Block location. This server is available for remote access by Block corporate offices so that, in theory at least, the corporate office could automatically change the entire fee structure for all offices across the country at once. They do make adjustments from time to time. Usually this is done during key seasonal changes (like at the end of peak, for example) but conceivably be done on a daily basis.

6. The fee structure is considered proprietary trade secret. No one is supposed to be able to hand someone a fee structure if they ask for it. When we got questions about a "price list" we were supposed to tell people it was confidential information but that I could give them a rough estimate.

7. A comprehensive list can be printed from the server if the user account accessing the list has management rights. This is especially helpful for a disgruntled manager who wants to take the list when they leave to start their own office. I'm not naming names or anything .... :)

Hopefully that clears up a few misconceptions about Block's fee structure and why it's so hard to pin down.

Having said all that ... don't worry about what Block is doing. You can't ever really compete successfully on price ... and I don't think you should sell yourself short that way. There will always be companies like Block and Wal-Mart who tout their low prices. And there will be clients who continue to use them no matter how low your prices are or how bad their service is. Besides, do you want to try to build a business made up of customers with little brand loyalty who are looking for the lowest prices and willing to jump ship the moment they find a better deal? Put a value on your hard work and education ... and your unique set of skills.

To be competitive in this business, you have to figure out what the big companies are doing badly and figure out how to do it better. It may be customer service, your marketing, the fact that all your customers see you as an authority on a particular topic. Find out what value you bring to the table. There are lots of tax preparers out there. Stand out, provide something extra, and don't be afraid to charge appropriate for your time and effort.

While it may be useful to compare fees with other preparers, don't let it guide your decisions entirely. The preparer who charges discount rates may be out of business tomorrow. They one that charges more than you are comfortable asking may be around a lot longer and may, in the process, build a client base of people who will never leave until they die. (And then they're doing the estate tax returns, too!)

Customers will pay you what you are worth. Provide more value and you will be able to charge more. Figure out how to provide that value without adding additional overhead or workload and you will become successful.

Just my thoughts ...