Tax Return Fee Increases Generally

[erchess]

My first employer in this business set out to surreptitiously reward returning clients with lower fees. Here is how it worked. Every form had a price that went up every year except for times of recession when the prices would drop slightly or at least not increase. So year by year the computer generated "list" price for a given return would go up by 2-20%. However first preparers were supposed to and then the computers were made to take into account the previous year's fee and increase that by no more than ten percent plus the cost of any forms that were on this year's return but not the previous year's return. So I'm going to offer what are to me possible positions on fees and ask that people mark their choices.

[erchess]

Please leave a comment if you can think of options for the poll that would have more adequately reflected what you do. I have already thought of two more options I wish I could put.

"I disfavor with higher fees clients who for one reason or another I consider to be pains in the posterior. I do this either to try to drive them off or simply to compensate me for the pain and grief they bring."

"I favor clients in certain lines of work or having certain tax issues because I like working on their returns in particular."

[taxmandan]

What we do...

We charge by the form/schedule. I set the computer fees at a higher level than I really want to charge. This allows me to give a discount if the preparation effort was hassle free and straight forward. Probably 60% of my clients show a Discount on their bill, and everyone likes to get a discount. If the preparation effort becomes problematic I can leave the fees where they are and get paid for the effort. It's always easier to lower a fee on the bill than increase, clients don't like that even if they know it was earned.

[erchess]

taxmandan

What does it mean that the process was simple and straightforward? Is it enough that the client did their job properly in terms of giving you their information, respecting your time, controlling the kids or leaving them at home and so on? Or on the other hand is it part of the requirement that for example they use a broker who puts out good statements and is helpful on the phone or even that the return not raise any issues that you have to pause and research?

[Lion]

Saly

For continuing clients, I already promised them the same fees next year as this, for similar returns. That promise was made before the economy got so bad, and was to benefit clients who followed me from my last employ to my self employ. Even some of them who didn't have their act together or who had drastically different returns than the prior year or look to be different for 2008, didn't get my promise! My expenses are not going down; although, I did get a three-year deal from my software company, my largest expense in my home-based office. I will hold, but not lower, fees for continuing clients with similar returns. But, new clients come on at my full prices. And, if someone has a worsened economic condition and calls me about fees, I'll consider a one-time discount or payment in two parts or some concession. I'm a once/year expense and should be easier to pay than heating oil or private school tuition or custom-made suits. I won't feel bad about my fees until my clients live worse than I do! I live in the little house in town, have kids in state colleges, married a school teacher in a city who works a second job, don't belong to the country club or go on the vacations that my clients do. In fact, we haven't taken a vacation out of state or for more than a few days since we married 14 years ago. I drive a 1997 Outback and have our house's original 1961 kitchen (well, the refrigerator came with me from CA in 1978, probably bought in 1975). Now that you have me thinking about it, I really need to raise my fees and hourly rates now!

[taxmandan]

That's about it.

What does it mean that the process was simple and straightforward? Is it enough that the client did their job properly in terms of giving you their information, respecting your time, controlling the kids or leaving them at home and so on?

That's about it. High maintenance clients who don't have their act together, pay more. I've been known to add a PITA surcharge for the really annoying folks, in an effort to get them to go elsewhere next year. Some do, some stay, but at least I feel that it's worth the effort because of the extra income they pay me.

[JG EA]

It costs what it costs. But perhaps I'll keep my prices steady this year. Basic forms that is and just go up on the other forms. That way I'll give less wealthy people a break and people who have more complicated finances (and usually more money) will have a modest increase.

I can't remember which poster said this but it really struck a chord with me. Something like 'I don't give my tax preparation away free, because I have other volunteer activities, or other ways to spend my free time.'

[ChEAr$]

fees

The idea Lion mentions about charging existing clients the same year after year (all things
being equal) has been around ever since I've been in business. And I, too, followed that precept from day one. However..... along in the late 70's I noticed inflation running rampart, so it wasn't hard to see what should be done, and starting about 1980 or so I started adjusting fees every January for inflation (as measured by BLS from nov to nov). Clients
understand, esp this last year when gas prices and electricity were the culprits.
There were other business factors, too, like increase in rent, professional development.)

Anyway, this year, since I had the increase last year, I will tell tax clients no increase, due to the economy. However accounting clients will get the usual COLA adjustment; upwards.

[Lion]

Just this one year

By the way, I fully intend to increase prices every year. I did promise clients who followed me to my new business that I would hold their price steady from 2008 to 2009 for similar returns. I worked for a company that increased prices every year, so my clients are used to that. I hoped it would be enough of a treat for them to NOT see a price increase that it would make up for something I was not able to offer them. Well, 2007 at old company and then 2008 and 2009 with me. But, many already had changed situations, new forms, etc., so had price increases this year anyway due to NOT similar returns. And, new clients did not get discounts. I've done some "family" discounts when I have the parents and the kids and the kids' trust funds for five returns in a family or the widow and her two trusts or the music school where the treasurer then has me prepare his partnership also. And, I've given discounts to clients who refer new clients, which was really what the latter partnership situation was. Don't sell yourself short.