Tax Return Fees> Recession

[BOB W]

The last time there was a recession I discounted my standard fee for those that were collecting Unemployment Insurance. I based it on the percentage of reduced income from the previous year. I let my clients know of this discount in my annual newletter.

Most appreciated the jesture and I still have many of them as clients. At the time I thought that I may lose several>many clients because of tough times for them.

What do you plan for the 2009 tax season?

[erchess]

Great Question

Times are hard for all of us but I don't see any evidence that the price of anything except gas and stocks is going down. Everything else is holding price or even going up. When I read that Subway is offering four dollar footlongs in every way identical to the ones currently sold for five and I am not surprised to see this then I will think about discounting my fees. Barring that they go up by between 5% and 20% a year. A few months ago I was thinking at the high end of that range but now I am thinking at the lower end.

[joanmcq]

Last year I discounted one of my fees a lot for someone that had been out of work for over a year, was living on her retirement (premature distributions to boot), and had given me an ad idea that resulted in a lot of new business. She was very grateful. I've also discounted for some of my tenants that I knew had tough times (but they also sent all their kids for discounted returns too, so I think I came out ahead).

[JohnH]

I'm planning to raise my fees 20% in Jan 2009. If I have clients who are unemployed or suffering financial reverses, I'll probably discount their charges or otherwise work with them just as I've always done, but strictly on a case-by-case basis.

The problem with announcing something like this in your client letter is that it can come back to bite you in unexpected ways. Of course, I can also see your point that there can be a plus side, in that it encourages people to come back who might otherwise do so, and it is good public relations. I'd lean in the direction of keeping it vague - don't stake out a policy.

[veritas]

I plan

on redistributing my clients wealth. Many have much more than me and that's not fair.

[erchess]

I charge by the form for preparation so there is usually a decline in their fees if they experience a decline in their wealth. If that doesn't hold true for a prior year client, I do discount the fee to make it hold true. I also last year did "stimulus returns" for $25 but since I do the returns in clients' homes I asked people with stimulus returns to give me another client even another stimulus return I could do in their home. Then I ran into one person who wanted her stimulus return done in her home for free and was not impressed or grateful when I used my computer to find for her the address schedule and phone number of the free site closest to her home.

[zeros]

Personal Energy Credit/T&F Deduction

Do theseis credits exist for 2008?

[taxea]

Tax Return Fees> Recession

Anyone ever seen HRB and the like lower their fees?

As for the energy question...no for 2008...comes back in 2009.taxea

[taxmom34]

HRB did lower their fees yesterday

i pre-ordered my tax software and got email yesterday, they reduced the fee by $20. i wonder if that means they will be charging higher fees for people who walk in to their offices?

[BOB W]

I'm planning to raise my fees 20% in Jan 2009. If I have clients who are unemployed or suffering financial reverses, I'll probably discount their charges or otherwise work with them just as I've always done, but strictly on a case-by-case basis.

The problem with announcing something like this in your client letter is that it can come back to bite you in unexpected ways. Of course, I can also see your point that there can be a plus side, in that it encourages people to come back who might otherwise do so, and it is good public relations. I'd lean in the direction of keeping it vague - don't stake out a policy.

My policy was very clear, "for those collecting Unemployment Insurance". I was not offering across the board fee cuts. The national average is 6.5% unemployed. Long Island NY is probably only 4% and maybe less, so my jesture can be seen as more symbolic (goodwill) than revenue reducing for my office.

[erchess]

I have no idea what year this was but I was somewhere between year three and six inclusive with a storefront firm when they jacked up their already in my opinion too high fees by a considerable margin but I think no more than 20%. Business was down in every office I knew about and the third year the company lowered the fees to little more than before the increase and wrote apologetically to all clients from the year before the big jump. At the time the fees were raised employees were told that when the economy was growing they tried to raise fees by 2 to 10 percent depending on how fast the growth was and that when we were stagnant or in recession they would hold fees steady or even cut them.

[Jiggers]

Fees for 2009

After attending recent ethics seminar and 1040/1065/1120/1120S seminars, and hearing what the IRS expects of us in regards to preparer penalties, and the new disclosure requirements, I am going to revamp the way that I bill my 1040 fees.

I charge by the form/schedule and the number of items on them.

I start with a basic fee based on line 22 income on the 1040. The higher dollar amount, the higher basic fee. I am going to reduce that amount.

I am going to increase the amounts for Schedules C, E, and F. Significantly, as this is where our exposure is the most.

I am going to decrease the base fee for Schedule D, and increase the amounts for the items on it.

I am going to decrease the base fee for Forms 4562, 4797, 4684, and increase the amounts for the items on it.

I am going to significantly increase my fee for extensions. I don't want any, and if clients want me to file returns after 4/15, they are going to have to compensate me well for them.

I am going to increase my fee for the EIC and Child Tax Credits. Spread their wealth my way!

For 1040A and 1040EZ returns, I am going to decrease my fee a little. I do so few of them.

For 1065/1120/1120S/1041, I bill by the hour. My hourly rate for those returns are going up about 10%.

Clients must complete my questionaire that I mail in late December. If I have to complete it for them while in my office, there is an extra charge for that. The same applies if they don't bring my engagement letter and mileage sheet.

I am going through my client list in the next week or so and "fire" some clients. I really want to cut back on my work and the 90 hour work weeks in March and April.

[JohnH]

You're right - you did specify that it only applies to those collecting unemployment benefits. I got caught up in the general fee discussion and didn't look back at your original statement.

[BOB W]

After attending recent ethics seminar and 1040/1065/1120/1120S seminars, and hearing what the IRS expects of us in regards to preparer penalties, and the new disclosure requirements, I am going to revamp the way that I bill my 1040 fees.

I charge by the form/schedule and the number of items on them.

I start with a basic fee based on line 22 income on the 1040. The higher dollar amount, the higher basic fee. I am going to reduce that amount.

I am going to increase the amounts for Schedules C, E, and F. Significantly, as this is where our exposure is the most.

I am going to decrease the base fee for Schedule D, and increase the amounts for the items on it.

I am going to decrease the base fee for Forms 4562, 4797, 4684, and increase the amounts for the items on it.

I am going to significantly increase my fee for extensions. I don't want any, and if clients want me to file returns after 4/15, they are going to have to compensate me well for them.

I am going to increase my fee for the EIC and Child Tax Credits. Spread their wealth my way!

For 1040A and 1040EZ returns, I am going to decrease my fee a little. I do so few of them.

For 1065/1120/1120S/1041, I bill by the hour. My hourly rate for those returns are going up about 10%.

Clients must complete my questionaire that I mail in late December. If I have to complete it for them while in my office, there is an extra charge for that. The same applies if they don't bring my engagement letter and mileage sheet.

I am going through my client list in the next week or so and "fire" some clients. I really want to cut back on my work and the 90 hour work weeks in March and April.

I think Jiggers is on the right track, while I don't bill by the form> those that are not under any financial hardship should be billed with the usual increased fees and to also take a look at some of those forms that we underbill on and place a $ value to the client and bill accordingly. Like EIC and CTC and probably many others when I think of them.

Penalty exposure is a major reason for price increases. As well as mail "line item" audits.

For those in states with high unemployment rates, Jiggers approach will become very important, least your practice will suffer financial problems at a time when preparer penalty risks keeps getting higher. Something to think about. ?????

And of course > don't forget about spreading the wealth.

[jeff501]

This may be a bit off subject, but it seems like oftentimes when we give a discounted fee to someone we'll get a call in a few days asking about what we charge and hear "but you only charged $$ to someone else!" Usually this has been the case with a new client. If a prior client is having a hard time, we'll still work with them, and usually there's no problem. Many stuck with us when we were just starting out and we don't have a problem with helping them now.

Several years ago we stopped giving estimates on the phone, only to say "our fees are resaonable and it's not possible to quote a fee without knowing your tax situation". In the past, someone would say they only had a couple of W2s, etc. then show up with all kinds of things and think they should only pay the initial estimated fee they heard on the phone. Now, usually we get a "thank you" and they hang up. From our experience, most people who call and the only thing they're concerned about are what our fees are without asking any other questions they're just shopping around and many of them turn out to be PITAs anyway. Some come in with three year's worth of returns prepared by three different firms, too.

One year someone called from the local HRB asking what we charge. I told her next time to block the caller ID if you're going to fee check. Turns out I knew her and we got a laugh out of it.