Tax Prep Fees

[taxea]

Hi
I'm looking for a resourse to determine what other preparers are charging as a base fee and also additional fees. Just curious as to whether I am in the right ball park. I have over 10 years experience, am self-employed with a client base of about 300 and am an enrolled agent. I am not looking to gouge my clients like many CPA's do but would like to find what the acceptable average for tax prep is.
taxea, Hawaii

[taxmandan]

Fees

Hi
I'm looking for a resourse to determine what other preparers are charging as a base fee and also additional fees. Just curious as to whether I am in the right ball park. I have over 10 years experience, am self-employed with a client base of about 300 and am an enrolled agent. I am not looking to gouge my clients like many CPA's do but would like to find what the acceptable average for tax prep is.
taxea, Hawaii

The recently released Form 1040 instructions have average fees for individual and business returns. Interesting reading for sure. The IRS is really, really reaching with this latest effort to "educate" the public. Fees are very dependent on your local market, I know some EAs who have a minimum starting fee of $400. I couldn't charge that in my town, even though I know I'm worth it!!

You should evaluate your cost of doing business, how much your time is worth and arrive at a fee that represents your situation. Other tax offices will have very different expenses, living costs, etc. and fees will vary widely as a result. The only notice I take of others' fees is on prior year returns that new clients bring in when they first visit my office.

There is a Yahoo! tax group with some fee information discussed by some members might be some help to you: http://groups.yahoo.com/group/TaxProExchange/

[Chief]

Tax Prep Fees

Where in the 1040 is the in formation on average fees charged for tax return preparation?

[RLymanC]

RLymanC

Like all of us in business, you must be competive. Check out the fees of others in your area, evaluate your services offered, compare them with the competion and set a price schedule that will increase your business, not drive them to others.

A lot has to do with your client base and complexity of the returns. It could be expensive if your clients are shoppers and your prices are a bit high.

I have a home office, sort of a Mom & Pop operation, that results in low overhead, for that reason amoung others, I have no trouble meeting the compitition and have built up a 1500 client base.

The primary reason is I give excellent year round service, never charge for consultation phone calls, and provide free copies of a return if my client misplace's their's.

Good luck in the coming season.

[Steve]

tax fees

I am also a home office person and am lucky enough to be able to charge lower fees. Some of my clients say I do not charge enough but my thoughts are if they want to they will pay me more or just be happy and refer some of their friends to me as a complaint. I was wondering how do you do 1500 returns out of your home office without any neighbors complaining. I currently have about 150 and still building but I worry my neighbors will start calling with complaints and I will be forced to rent office space somewhere.

[Black Bart]

Fees

TO TAXEA: Years ago, a friend in the Air Force was stationed in Hawaii and told me that everything over there was a lot higher-priced that on the mainland. Is that still true? If so, then I don't know that my fee ranges would be of any help to you as I'm from a poor state here. So, I don't have any specifics for you, but here's a few generalities.

I don't have a strict "by-the-hour" or "per-form" fee. I don't feel that I overcharge anyone, but, at the same time, I charge different prices for different people, adjusting them upward (and sometimes even downward) over a number of years. I've got a standard "short form" (1040A & state) fee and a minimum dollar fee for certain forms for new customers. I try to get a feel for the psyche and personality of the customer over time. If it takes a cheap fee to keep a tightwad, then I give him a cheap fee. Young high-rolling, wheeler-dealers get charged the max because they're the riskiest to handle. People earning minimum wage and operating a "side" business get a much less costly fee than what HRB or JH would charge them for it (they've told me so). Sometimes I'll do a preacher for nothing (here they don't make anything like what they do "up north') and they refer some in their congregations to me. But I've also got a pastor whose tax bill is paid by his church--I charge him $300. In short, I'm extremely flexible and do whatever it takes to keep a person next year once I do a return for him this year.

Some people think this sort of unpredictable, unorganized approach is completely crazy. But, it works for me and that's what's important. If you don't know what dollar figure to ask of someone; make up something. If he/she throws a fit, cut it back on the next one. If they smile, increase it a bit next time--like that (nobody really knows what these things are worth). Also, I think it best to start off as a cash only (pay on delivery) business--it's a terrific shot-in-the-arm to get immediate cash. Accounts receivables can kill you (many CPA's suffer from this--I assume their higher fees force a later billing).

I don't know what your business philosophy is and maybe you don't either yet, but whatever it turns out to be; do it your way and the hell with everybody else.

[Snaggletooth]

Where in Hawaii

Taxears, where are you in Hawaii? The difference between what you can charge on the big island and Oahu would be staggering.

You can start with H&R Block, and I'm sure if you have 300 customers, you have done some for former Block customers and get to see their fee in their paperwork from previous years. HRB historically was the cheapest preparer in town most of the time, but I don't think this is true anymore, as they have made adjustments in improving their product, have a strong advertising campaign, have dramatically improved their quality control, and are now offering other services as well. If you can find another franchised firm other than HRB, such as Jackson-Hewitt or Quality this would be a low-water mark. HRB charges more than these nowadays.

On the high end are CPAs, for a number of reasons. Although any preparer can get sued, there is a much more latent liability for these folks. My cohorts will throw stones at me, but much more education, training, and passing the examination is involved for a CPA than an EA. I have taken both exams, and although the EA is much more difficult in the tax arena, this is only a fraction of the spectrum required for CPAs. CPAs in general can also quarterback the "entire field" of finance and accounting for their customers, although I think I do a good job of this myself. Be careful of thinking that CPAs "rip-off" their customers until you've walked in their shoes.

Somewhere between these two ends of the spectrum should be your prices. One thing I do is have a flat return fee plus a standard hourly rate, then a "file charge" of some 15-20%. This calculates very high, but give a substantial discount which is a very competitive rate. Sometimes, like Bart suggests, I get very generous, and other times when I get a customer I don't really want, I give no discount at all.

I am in the rural South (as is Black Bart from the previous post), and work out of my home, so I can virtually guarantee you should be charging more than I do. But most of that is because of your geographical location.

Regards and best wishes - Ron Jordan, Manchester, TN

[RLymanC]

Steve

I use the front 3 rooms for preparation plus a reception area of our Victorian home located in a block of other Victorians that have been converted to apartments. I'm very lucky with the location and have not had any complaints in the 13 years at this location.

The street looks and feels residential, but the closest single family dwelling is a block away. The city indicated they would deny my home office permit if there were any traffic complaints.

I cross my fingers each year, cause I would not enjoy getting up and going to the office each day.

[KBTS]

Fees

I generally charge a flat return fee and then an hourly amount for anything beyond what I estimate is involved in a “standard return.” I have only been in business for two years; but as part of my research before start up, I called some preparers in the area and asked their pricing for a sample return. This gave me an idea of what others were charging and helped my set my initial fees. When I get a new client I usually ask what they paid last year so that I can be competitive with my prices. I know that I do not charge enough for some returns, but I figure that satisfied customers will refer new clients and it will all work out in the long run.

I work out of my home, so I do not have the extra expense of renting office space; but I am located in a small town in a rural area, so fees here are no where near the national average or even what others on the board might get. Even the local HRB has to discount their fees so that they are not way overpriced. JH just moved in this year, so it will be interesting to see their fees.

[John of PA]

Fees

TaxEA!! Many non-CPA's gouge client also; 2 friends of mine, non CPA, charge and get much more than I do. I charge 175 per hour. I find it best not to commit to an up front fee. We are not an auto body shop and giving bids on work is risky as we just don't know what we will be running into. Make sure you get enough. If you charge by the form, have a "bookeeping charge" as an added charge when you run into time consuming "shoe box" type work. Our resources are becoming more expensive, we have inflation; and as tax preparation gets more regulated (which it will), our costs will go up. Good Luck.

[taxmandan]

Form 1040 instructions

Where in the 1040 is the in formation on average fees charged for tax return preparation?

I see theirs has pulled the Form 1040 instructions from their website! Anyway, it was in the back of the book with the usual estimate of time to complete a return info. I printed a copy before they pulled it. Says a 1040 with no Sch. A, C, E or F but other forms was an average fee of $121.00 It sampled other combos, 1040 with C but no E, etc. for more complex returns.

[Bees Knees]

IRS is now a paid preparer

For all this talk about the IRS coming out with FREE tax preparation service online, I guess FREE doesn’t necessarily mean FREE.

Case in point: New 2005 Instruction booklet for Form 1040, page 25, under Partially Taxable Pensions and Annuities.

The instructions say for you to use the General Rule or the Simplified Method to figure the portion of your pension that is taxable.

Then it says: “You can ask the IRS to figure the taxable part for you for a $95 fee. For details, see Pub. 939.”

If they can charge $95 to do that one simple calculation that takes me a whole 1 minute 37 seconds to do, I guess maybe the rest of my fees ought to be raised accordingly.

So much for the IRS trying to offer FREE tax preparation to those poor taxpayers being ripped off by the professional preparer community…

[John of PA]

Free Software

Free tax prep software from IRS? I would not uee tax prep softrware from IRS if they paid me to use it. IRS is not a software company and has too many coals in the fire as is. I don't see how they could meet our needs for prep software.

[Bees Knees]

IRS has been offering that for several years now. It is somehow connected with several private software companies. Here is the link:

http://www.irs.gov/efile/article/0,,id=118986,00.html

[John of PA]

For consumers

Ok, I misunderstood. It appears that the IRS software is for consumers and not tax preparers.