Fee increase

[Bees Knees]

The letter I send to all clients along with their organizer will contain the following paragraph this year.

Fee increase. The IRS now requires all paid tax return preparers to be registered and subject to new regulations. Due to the increased cost associated with these new regulations, all tax preparation fees will be raised approximately 25% this year. If you would like a price quote before doing your taxes, please call.

[DaveO]

I bet that paragraph generates some phone calls.

[Gretel]

I don't think so. I did this in about the same range 4 years ago and only one client called and I lost maybe 2 clients.

[ChEAr$]

Well, it might just be that
Bees is contemplating retirement soon, and this is a preliminary strategy. (grin

[Bees Knees]

I did it several years ago when MN first required e-filing. I lost 2 clients. I doubt I will lose more than 2 this time. Net result, I get a 25% raise for doing 2 less returns.

[Peachie]

I like this Bees.

The letter I send to all clients along with their organizer will contain the following paragraph this year.

Think I will incorporate something similar in my strategy this year. Thanks.

Peachie

[BOB W]

FREE, FREE, FREE.......is what I am hearing..... Now it is Walmart offering free tax returns?????????

What to do is the question????? If I raise my fees to compensate for the loss of "Easy Type" returns do I chase more client to go "Free Return".

If I don't charge more I will loose income and my expense % will go up.

What do you think?

[S T]

Similar Issue

I have some long standing clients, that probably can not withstand more than a $10 - $15 increase, really are on hard times, but remain loyal.

then I have been fortunate with some clients that have had some good "fortune" in 2011, so I can raise slightly higher.

I don't see inspite of some increased costs that I can just "say" 25% across the board on all clients.

My feeling for my own practice - is take an individual look and see where it leads me

Let us not forget as well as the new IRS registrations, postage rates increase on 1/22/2012, my paper supply costs have increased, as well as some of the computer technology - OMG also the phone or cable service depending on where you are at!

However, I am still aware that some clients are having some financial difficulty - and I do not prepare more than 5 EITC returns.

So guess I am just going to calculate fees as I prepare, and hope for the best!

Sandy

[oceanlovin'ea]

Sandy, I am with you on this. I did an analysis of my clients and what I charged them for the last couple of years. Some I raised last year a little and some i didn't. The ones I didn't last year I will raise this year.
I am just doing mine on a client by client basis. Some of them I know are still having a hard time and I am easier on them and others can handle a little more increase.
I realized that I have been doing quite a few returns a lot lower than I should be because they are like family to me. I will have to raise them this year too.

That is why I like being my own boss and making my own rules....I can charge whatever I want.

Linda, EA

[ChEAr$]

For your general consideration:

Infation for last year was about 3.6%. Prior to that for about 3 years it was more or less flat.

Our customers, most call them clients, are price sensitive whether they show it or now.
Or we ourselves not also when we price gasoline? groceries? Christmas gifts?

Just because IRS complicated SOME things this year, remember other items are less so, e.g. no schedule L and M.

So about 5 - 10% should be about right for someone like me who did not increase fees last year in view of the economy.

And that's my 27 cents worth.

[Lion]

Form 8949

I'm going to cite new Form 8949 for my price increases. That also means I'm increasing prices the most for those with a lot of sales of investments in hopes that those are the ones that can withstand price increases. Case by case. Not across the board, unless about 3.6% inflation rate.

[JohnH]

Another good approach might be to raise fees across the board, then discount for loyal clients, etc. Discounts can be for anything form "loyal client" all the way to "abbreviated work due to well-organized records", depending upon what applies.

The nice thing about doing it this way is you can reduce the discount less on selected clients in future years, thus raising their fees without another general fee increase. I think this is most useful with clients whose fees you are keeping low due to their current financial circumstances. Some of these people will bolt whenever you raise their fees because they will resent what they see as your taking advantage of their improved economic circumstances. (you just can't win with some people).

I've never had anyone complain when I reduced their discount, because they can look at at last year or the year before and see what their fee "would have been" in the past without the discount.

[S T]

Good Point

JH - really a good point - I have an itemized list that I revamp every year =- adding and subtracting items - Such as the Schedule M, changing the Schd D entries for 1099B line items, etc, increasing line items. This entire form is calculated Manually by me and sometimes I am not so objective.

At any rate, get to the bottom add it all up - then I have a discount line - so over years past, I have left some of the line item amounts the same, and lowered the discount fee, or vice versa - depending on the client.

I really try to analyze the fees based on the client and the client needs, and then how much time that client really is asking of me.

Guess I would never make it in a Store Front Walk In Office and what the Computer Fees generate.

Sandy

[ttbtaxes]

I think it's always best to forewarn clients that a fee increase is in store for the upcoming tax season. Selective discounts are a good idea. Perception is reality.

I raised fees last year across the board when e-filing was required. Not one client groused because I told them it was a program i never thought was in their best interest but was forced into.

Clients will also be forewarned this year about the Schedule D/Form 8949 transactions.

Almost four decades ago, a senior partner told me his philosophy about billing. He said, "If I raise my fees 10%, I am not going to lose 10% of my clients. So, I make more money with less effort." I agree wholeheartedly although, as we all know, there is an elasticity to this theory. At some point, the rubber band breaks,

I'm no where close to that.

[Bees Knees]

Something to consider: From TTB page 26-1:

100,000 Tax Return Preparers Missing
IR 2011-74. The IRS announced that 100,000 tax preparers did
not comply with the new PTIN registration rules. The IRS will
send letters to these preparers. Over 700,000 preparers did comply
with the new rules. In an effort to find other missing preparers,
the IRS is sending letters to taxpayers who appear to have
had assistance with their returns, but lack tax return preparer
information. The letters will inform taxpayers how to file a complaint
against preparers who failed to sign returns and explain
how to choose legitimate tax preparers.

Note: Prior to the PTIN registration requirement, the IRS
had estimated that there were somewhere between
900,000 and 1.3 million tax return preparers.

Point: Even assuming the lower original estimate of 900,000 preparers, that means we lost 200,000 from before PTIN registration to after the requirement to register – or 23% of our profession. If you believe we had closer to the 1.3 million estimate when all this started, that means we have lost 47% of our profession in the last few years.

Combine the increased regulation on tax professionals and the shortage of tax professionals, any economics major will tell you that means prices should go up.