Billing for Research Time

[equinecpa]

So what do you do when you come across an unusual item and have to do fairly extensive research (probably total of 3 hours) on an issue. Do you bill it out when you incur the time, bill the time over a couple of years, or eat the time and call it education?

I just did a bill for about $1300.00 and am feeling like I'm beating the client up. I'm wondering if I should cut the bill back and bill for some of the time next year? The problem with that is if they don't come back...what to do...

[erchess]

Education

Personally I call it education because I am still building my practice but when I get to the point that I am either working longer than I want to or turning away work because of research time then I will bill for it. Note that I will only bill for things that rarely come up in my practice as I want it to be. For example I am not as knowledgeable about entities as about 1040s but since I want that to change I do currently take on any small corporation and I usually have to research something without charging for it.

[ChEAr$]

Research time

Hardly ever do I have to spend an inordinate amount of time researching these days.
No, not bragging, but just the nature of my practice.

However, i would only bill extra for research time if I first had an understanding with client that such was needed for me to write a formal letter for his file with the results of "my opinion."

[erchess]

Written Opinion

When I do a written opinion I charge $300 to 500 depending on how controversial the subject matter is.

[equinecpa]

This was for a return involving part-year non-residents including preparing returns in Canada, Quebec and the US. I had to call Revenue Canada and they even had to get back to me as they didn't know the answers...

[Lion]

Charge

That's pretty specific to their return only, unless you're near the Canadian border and expect more clients like that. I'd charge the full rate for your time during tax season. If they look shell-shocked, you can compromise by offering them a discount for next year (or the next two or three years) to keep them coming back. They'll feel you're giving them the extra time, and you'll get paid earlier rather than later and hopefully keep a client you went the extra mile for. They probably know that their issues involving two countries will cost them.

[taxea]

It depends on what kind of issue it is. If it is tax code for any state or other country I would chalk it up to education.
If it is something the client didn't provide that I can look up on line then I charge a fee based on the time spent on the research.
If it is something I know they can get and I can't due to confidentiality I give them the homework and put the return on hold.

[BHoffman]

equinecpa- since this was much more involved than just diddling around with Pubs or Google, I'd say you certainly should charge whatever the market in your area will bear. Of how much value will your work be to the client? Agree with erchess about the written opinion.

I don't have a lot of billable tax research because I don't want those kind of complex returns, but I do business consulting to help the owners figure out why this or that isn't working - materials planning, inventory control, job estimating, budgeting, cash flow, software training, that sort of stuff. I bill $100 per hour.

[equinecpa]

I decided to cut back the bill some. The clients are friends and didn't earn that much last year. Yes the returns were pretty darn complicated -I crunched the numbers through three different programs and yielded three different results (this time I certainly didn't bill for).

I will most likely benefit from this time spent next year when I do their return, and I also have one other client that has temporarily relocated to Canada (I'm a former Canadian hence the connection with quite a few other former Canadians).

I noted the extra time in my time and billing so if next year goes extra smoothly...I can bring it in to the bill. I do mark up some returns so I guess discounting some isn't so bad.

[oceanlovin'ea]

one on one basis

I had to spend time reconstructing basis for 2 clients this year. Actually my husband did it for me. But I billed them for it, at least some of it. He spent a lot more time than I would have,,,making excel spreadsheets, etc.

I have a new partnership return so I am spending extra time researching many issues on this. But since I haven't done that many partnership returns, I figure it is my learning time.

I don't know your situation, but since I am working alone and have no one to answer to but me for my fees, I can be flexible when I want to. Sometimes I won't charge as much for a return because I know their situation and other times I bill full amount.

So you can make your best judgement as to what lets you sleep the best at night.

Linda

[Lion]

Post the time

Post your research time &/or amount on their bill and then discount it, to zero if you wish, but make them aware of your service to them. I have a Loyal Client Discount line for returning clients when I need to reduce a bill but not over one specific item.

[joanmcq]

If it is research I can use at other times or would not be research to a local preparer (like researching any NM credits deductions for my clients that moved there) there is no charge. If a client asked me to figure out basis or research a complex issue that is specific to their return, then I will charge and will let them know up front. One basis issue involved years of reinvested dividends in a mutual fund. She was happy to have me do it and do it correctly even though it cost several hundred dollars to do so.

[Gretel]

I have three categories:

1. Research - specific issues not related to tax law - full billing

2. Research - just because I have not encountered the situation before but feel this is my eduction - no charge

3. Research - related to specific issues - out of state, foreign, to make use of a grey area in the tax code to have optimal tax liability etc. - I will charge and let the client know about this and about their option to go to a bigger firm who deals with their scenario more often but also charges much more to begin with

[geekgirldany]

I charge for research when it starts going over an hour. At one time I did consider it as education.

But after talking to client's lawyer about what I charged and did not charge for helping the client with a injured spouse claim and I did alot of research on it... he told me it was education for myself so I should not charge. I asked him if he did not charge for research on cases. He said of course he did. I then told him he just made me aware of a huge mistake I had been making for years.