to charge or not to charge

[fliszt]

Following is an email from one of my long standing clients. He sends several of these a year. All my clients know that I do not charge for telephone questions/answers. I'm not going to charge for this email either, but was wondering what everyone else would do. Thanks.
Larry

QUOTE: "I am going to give you a call again about the tax implications on my cabin. We are getting closer to an agreement and I want to be sure in consideration of taxes that I understand what I'm getting into.

This is what I have putting together so far:

Sale price; $187397.59
Basis; $29000.00
Sale costs $ ?

First year I would recieve $35,000 (tax year 2008)

Over a 10 year period I would have a contract for deed for a loaned amount of $142398. At the end of each year I would have received Principle and Interest amounts. (tax year 2009 through 2018)

At the end of 10 years I will receive an additional payment of $9999.59 (tax year 2018)

What are my tax implications for this arrangement?

How are the Capitol gains calculated?

Are the Capitol gains tax liabillity amortized over the term of the contract?

Is this arrangement better (in reference to taxes) than just recieving one lump some of as in a traditional sale?

Is it correct to assume as well that the interest paid to me each year is considered income as well?"

[DaveO]

This seems well beyond a simple question as he is asking for a projection of his future tax liabilities. While I don't charge for a simple or even complex question I do charge for the preparation of a tax projection.

[JG EA]

What I do: I ask that client's approach me when these types of things happen at no charge because 1. It gives me time off season to research the issue 2. It saves valuable time during tax season figuring things out and 3. So the TP will be aware of the tax results before they come up - makes life easier for them and me.

Because it'll mean other forms on the return and more work overall I can charge more during tax season.

If a not so good client asks for help off season and then I don't see them during tax season I usually let it go. But one time when I thought they might show up in the year after that (and I didn't want them to) I charged a fee for the previous summer's work. Never was paid but also they didn't come back.

[MLINDER42]

Simple Question

I normally do not charge for simple questions either but a tax projection on a transaction like this I would charge an hourly rate.

[Jiggers]

Depends

All I sell is time.

I keep track of all questions and requests for year-end reviews or tax projections on the sale of something.

At the end of the year I extend that time by my hourly tax preparation rate and add that to my tax return fee.

If it is a large amount, such as a projection on the sale of something or a year-end review that requires a lot of time, I will bill those separate from my tax return fee.

But I do bill!

[Nashville]

I would charge

I would prepare a schedule or spreadsheet with columns for each of the years 2008-2019,
answering all his questions, and with a caveat that says the results are with the existing tax laws in effect. This might take me an hour or so, and I would charge for my time. There would be a very presentable, reader-friendly schedule prepared for him.

[erchess]

What I give away free

is an oral explanation over the phone. If I need to meet face to face with the client I go to where they are since I have no fixed location for my business and for that I charge $50 or perhaps more if I am with them more than an hour. If they want anything in writing I charge at least $300 because of the liability issues.

[opie]

What I do: I ask that client's approach me when these types of things happen at no charge because 1. It gives me time off season to research the issue 2. It saves valuable time during tax season figuring things out and 3. So the TP will be aware of the tax results before they come up - makes life easier for them and me.

Because it'll mean other forms on the return and more work overall I can charge more during tax season.

If a not so good client asks for help off season and then I don't see them during tax season I usually let it go. But one time when I thought they might show up in the year after that (and I didn't want them to) I charged a fee for the previous summer's work. Never was paid but also they didn't come back.

My policy is similar to JGs....

If, by approaching me during the off season, it saves me time or aggravation during the season, I generally give the time away. I am really more worried that they will do something without consulting me and then have me unable to unravel the mess during the season. The fee for the return usually includes some allocation for the consultation.

If I give them advice or recommendations that they don't follow and it results in even more work during the season, there is an additional fee for creating the additional complexity above what I would have charged for doing it the way I asked them to.

[veritas]

That is the question

Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles

If William had experienced our tax system, the choice most certainly would be...

not to be.

[Black Bart]

Nice quote, V

Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles

If William had experienced our tax system, the choice most certainly would be...

not to be.

but in our zeal for lit pickin' we must not lose focus -- the question wasn't "To be or not to be," but rather "To fee or not to fee?"

[veritas]

lol

You are "The Bart of Arkansas".

[Kram BergGold]

Exposure

Your client's questions contain much exposure due to the possibility of rising capital gains rates and AMT. In my opinion the questions require a telephone conversation or a face to face. In either case I would explain that there will be a charge due to the complexity of the issues (I am someone who rarely charges to answer questions but this is intense tax planning)..

[Jiggers]

Circular 230 and Covered Opinions

Don't forget the Circular 230 and "Covered Opinions" disclosure.

Always CYA by putting it in writing.

And that is another reason to charge a fee for the information.

[fliszt]

Thanks for replies. HAPPY THANKSGIVING TO ALL!!!

A very nice mixture of replies. This will make me rethink my policies.
Thanks again.
Larry

[FEDUKE404]

Summarize & bill later

I think I would tell him in general terms the following:

1 - The net (overall) capital gain is determined in year of sale
2 - The portion of that gain that is taxable each year is related to how much principal was received, and is taxed at the prevailing capital gains rate
3 - The interest is fully taxable each year and is taxed as ordinary income

Other than that, with the new administration coming in, to give definitive tax numbers is hardly worth the effort and quite frankly I could not in clear conscience make any "predictions" very far out.

At best I might plug in some "extra" cap gain/Sch B numbers to his 2007 return, and let him know the overall effect for near-term planning purposes, to include adjustments to 2008 estimated tax payments.

For all intents and purposes the "advice" would be free and adjustments for extra planning work and perhaps some administrative time would show up when taxes are done in 2009.

Personal preference - I just don't think like a lawyer and my clients fully understand why my overall fees are higher than "just" the tax prep whenever their final invoice rolls around.

FE