What would you charge?

[ATSMAN]

A young man (nephew of a client) called me up and said that he was doing his taxes on a free website and got stuck and if he needs to speak to someone it will cost him.

This fellow has 4 W2, 1 1098-T, 1 1098-E. Lives with his parents and is 23 years old, single. He grossed around $25,000.

What would be the lowest you would charge?

[Uncle]

If he were the child of a current client, $0. Otherwise, $100.

[Lion]

How many states? Any self-employment? Did he graduate in 2019 and that's why his student loans are no longer deferred? Is he the dependent of your client or of his parents? Does he have his bursar's statement? Are his parents taking the education benefits? Do you have to deal with his parents or only your client?

If he's not a dependent of my client, I'd charge him full fee, with maybe a discount if all information is ready to go and I don't have to deal with his parents -- he knows his dependency status and who's taking education credits.

I would definitely charge him more than $100 unless my client pays me a lot for his own returns.

[ATSMAN]

Thanks for the response. I called the fellow and told him I will do it for $100 as a favor to his uncle. He already graduated in Spring of 2019. He is not a dependent on his parent's tax return. He says he has 4 W2 but I have had situations where the layperson thinks a 1099-Misc is a type of W2. Let's see if he mails or uploads his tax documents next week.

His uncle is a good guy, I did not want him to complain about me to him.

[ATSMAN]

I have a hunch that the 1098-T will be minimal because he graduated in Spring of 2019. The key is to figure out if his parents already claimed AOTC 4 years or if there is a year left. I have run into this issue before doing a newly graduates tax return. So I put a disclaimer if they are not 100% certain.

[Lion]

You said he may have self-employment income. And, income from that job on campus (state #1) and from his parents' town (state #2) when home and from his new job (state #3)? A 529 plan? Savings bonds? Sold a mutual fund for spending money and has no idea of basis (gift from granny when he was a kid)? Corrected 1099-B won't arrive until March. Are you sure his parents didn't claim him or won't be angry when their e-file is rejected because their kid claimed himself?

I have kids of good clients that have more complex returns than their parents. I usually discount about half. If that makes it a very low number, then a token $100. And, if a really low number and I love the parents, then $0. But, for an uncle?! If I love him as a client, maybe a FIRST year only heavy discount. But, I would show the full price and then label the discount something like GRADUATION PRESENT DISCOUNT to make it clear that the price will go up.

[kathyc2]

How to you sign a return as a paid preparer if you don't charge anything? I will always charge something, even if it's $10.

[ATSMAN]

Lion bring up a lot of good points and that shows her experience dealing with these types of clients. Frankly because his Uncle has been a client of mine for 3 or 4 years, promptly pays his bill, I am doing him a favor by helping his nephew. If this kid had walked into my office as a stranger, I would quote double or more!

I have never filed a return as self prepared except for my own. Even for family members that I do free, I file them with paid preparer info at the bottom of the form.

[Lion]

I too always sign as a paid preparer, even for my freebies (family), because I AM a professional paid preparer, just not at that particular moment in time. I usually get hugs as payment, though, so that counts. I always sign as an EA, too. I'm preparing returns professionally and not as a hobby, even the free ones.

[ttbtaxes]

If that uncle sent his nephew to the same automotive garage he uses, do we expect the garage to do the work for nothing or very little? No, of course not. We expect the nephew will be charged like everyone else.

If I never do another return for the "adult child" of a client, it will be too soon. Clients always undersell the work involved in doing a tax return and will say all that's involved is a W-2 and maybe a little interest. Invariably, when you peel back layers of the onion there is more than meets the eye.

If the nephew's uncle was a client that had a business return, or for which I charged a hefty individual fee, I might consider a tiny discount. Otherwise, it's $250/return minimum even if it's someone with one W-2 in their back pocket.

I'm not giving my time away to people who can afford to pay me.

[ATSMAN]

If that uncle sent his nephew to the same automotive garage he uses, do we expect the garage to do the work for nothing or very little? No, of course not. We expect the nephew will be charged like everyone else.

You have a point but it does vary by the relationship with the merchant. My family and my in-laws family use the same mechanic, barber and snow plow guy. And we do get a discount because of that. In my neck of the woods it is expected. But there is nothing wrong with your business model. If you command a min. $250 per return and taxpayers are willing to pay you for that, more power to you.

[ttbtaxes]

ATSMAN....I'm astonished how much chain stores charge. Invariably when I meet with a new client whose return was prepared by them, and see what the fee was, I am reminded to raise the minimum fee each year. When I was a young pup at a large CPA firm, I remember the philosophy of a certain partner when it came to billing clients. He said if he raised his fees 20% he would not lose 20% of his clients. Even if he did, he'd end up at the same dollar amount of billing but 20% more time to bill new clients or 20% more time to enjoy life.

Obviously, at some point there is a law of diminishing returns but I think, in general, he was probably correct about the way he approached his billing and the increasing of fees.

[Rapid Robert]

"How to you sign a return as a paid preparer if you don't charge anything?" I don't. For my own return and maybe 3-4 immediate family members, I always file as a non paid preparer, since I am not paid for those. Not sure why you would want to put down "paid" if you are not.

As for what to charge, the consensus seems to be something more than zero. You still have costs for preparing a return, so even if your labor is going to be free, you still have out of pocket. If on a pay per return license, you never forget; and even with an unlimited license, you still have costs to prepare and file each return. And it was stated that the 23-yr old was using free file online but "got stuck". So that right there tells you it should cost something more than "free". Like, what did he get stuck on, with such a relatively simple set of documents? Maybe you could just provide advice on the question he got stuck on and let him proceed on his own.

[ATSMAN]

I'm astonished how much chain stores charge.

Chain stores make it a point to sell their customers on advance refund or some other bank product to jack up their fees. I see that a lot in my neck of the woods. I don't do bank products so I point out what it cost them to get their refund on the spot instead of waiting 2 weeks. It just blows their mind!

And it was stated that the 23-yr old was using free file online but "got stuck". So that right there tells you it should cost something more than "free".

That was the point. I wanted to find out what you guys do in a situation like that. I had two objectives. I wanted my client who referred his nephew to be happy with me. I wanted to charge something for my work be at a discount. Lastly I am hoping if this 23 year old kid is happy with me, then may be when he is 30 and married with few kids he may choose me over a chain store??

BTW the kid is coming next week to drop off his paperwork.