Fees, what to do??!!??

[Jiggers]

Potential new client comes to you with a copy of his tax return, prepared by local preparer working out of her home.

Taxpayer, spouse, 3 dependents, all under 17, child care, Schedules C, E, F, SE, Form 4562 for C, E, & F. AGI $125,000.

Prior return preparer charged $100.00.

My standard fee is $265.00.

When I told the potential new client, who is now not my client, my fee, he excused himself and left, "...fee too high".

That is OK. I charge and get what I can. I don't care what other preparers charge.

The problem is that this person is now telling all his friends, who are also my friends and some of my clients, about my "exhorbitant" fees. They are questioning my fees and causing some embarassing problems when we meet socially.

What can I say without disclosing anything in violation of Circular 230?

[j2kp0t]

hopefully helpful

Cut-and-paste of a document that my employer says to give away under the circumstances you mention:
----
A question we are sometimes asked is this:

“You only spend about (pick an amount of time) preparing my tax return. Why in the world does it cost so much?”

FIRST, HERE IS A REVIEW OF WHAT EVERY CLIENT GETS FOR THE TAX PREPARATION FEE:

1. A complete copy to keep of a fully completed tax return
2. The professional services of a well trained tax pro who:
a. Has substantial original training and education, AND who
b. Fulfills a minimum of 24 credit hour EVERY year in update education in the specific area of income taxes – in fact, every preparer will probably spend at least 50 hours on classes, homework and updates for the new tax season before they ever see the first client! AND who
c. Has the resources of a network of other professionals to research every tax situation imaginable.
i. Through other tax pros here within our office
ii. Through the library of resources collected here in our office
iii. Through access to the research staff of the National Association of Tax Professionals
3. Free e-filing of both Federal and state tax returns
4. A great guarantee
a. Every return is guaranteed to be free of errors or we will:
i. Pay any and all penalties incurred by our preparer’s error
ii. Pay any and all interest incurred by our preparer’s error
b. Assist you in responding to any and all correspondence you may receive in relationship any return we prepare
c. If you are ever audited, we will:
i. Assist you in preparing for the audit and
ii. Accompany you to the audit to answer any questions about how your return was prepared
5. Other free year round services
a. Free year round telephone answers to tax questions
b. Free copy of your tax return if you lose the original we gave you
c. Free tax planning session for those who desire it
d. Free notary service for those who need a notary
6. An overall fee that is well below all of the national chains and less than most local firms as well!
7. Overall peace of mind from knowing that you always have a friend to call for any of your tax needs!

WHAT DOES IT COST US TO PROVIDE THAT LONG LIST OF SERVICES?

1. Some obvious costs
a. Cost of the time the preparer spends actually completing the tax return
b. Cost of printing the return and making necessary copies, including the
i. Initial cost of the printers and copiers and the
ii. Ongoing cost of maintaining the printers and copiers and the
iii. Cost of toner and the
iv. Cost of paper
c. Cost of the tax return cover
d. Cost of e-filing
e. Cost of a receptionist
f. Cost of purchasing office furniture
g. Cost of maintaining office furniture
h. Cost of miscellaneous office supplies
2. Other “not so obvious” costs
a. Cost of providing available year round service
b. Cost of year round rent
c. Cost of year round utilities
d. Cost of year round office upkeep
e. Cost of year round telephone expense
f. Cost of providing free follow up when correspondence is received from the IRS or the state
g. Cost of providing free preparation for and accompaniment to a tax audit
h. Cost of tax software (over $1000 per year)
i. Cost of other related software necessary for serving the client
j. Cost of books and publications for tax research that go into our tax library
k. Cost on ongoing education for all tax preparers (minimum of 24 credit hours per year for each tax preparer)
l. Cost of professional memberships and certifications
m. Cost of recruiting, hiring and training our “world class” staff
n. Cost of maintaining and fulfilling a “world class” guarantee
o. Cost of ongoing advertising
p. Cost of a business license
q. Cost of professional liability insurance
r. Cost of storing tax returns (IRS requires we keep all returns at least 3 years but our policy is to keep all returns at least 5 years)
i. Cost of filing returns
ii. Cost of pulling tax returns when needed
iii. Cost of floor space needed
iv. Cost of filing cabinets needed
v. Cost of security needed
s. Cost of shredding all private paperwork and returns of clients who have not been in for 5 years.
t. Cost of providing free copies of tax returns when needed
u. Cost of providing free notary service when needed
v. Cost of providing free tax planning session whenever requested
w. Cost of offering credit card service to clients
x. Cost of printing various stationary, envelopes, labels, forms, etc.
y. Cost of postage
z. Cost of many other small costs that when totaled together contribute to the overall cost of providing the tax preparation service

[FEDUKE404]

Charge a fair price and move on

Anyone who expects professional tax preparation of a return of the type you described for a fee of only $100 is living in a dream world, or perhaps just has some incriminating photographs of the tax preparer.

BTW: Did the kitchen table dude sign the prior tax returns???

Regardless of the complexity and/or issues involved with Sch C, E, and F, that prior charge is ridiculous. I would dare say that I would probably charge more than you have quoted, again based on facts that are not (cannot) be presented in this forum.

You could always tactfully say (think?) "you get what you pay for" and even remind the person that, so far as I know, the simplest tax return at a Block or similar ilk will not go for that rate.

My own clients know they can get their returns done cheaper elsewhere, but they also know there are a lot of factors involved with the way I run my business that make the prices far less of an issue. I've found that those who just question prices are usually the PITA's of the clientele anyway.

FE

[TaxBird]

Stay Cool

Potential new client comes to you with a copy of his tax return, prepared by local preparer working out of her home.

Taxpayer, spouse, 3 dependents, all under 17, child care, Schedules C, E, F, SE, Form 4562 for C, E, & F. AGI $125,000.

Prior return preparer charged $100.00.

My standard fee is $265.00.

When I told the potential new client, who is now not my client, my fee, he excused himself and left, "...fee too high".

That is OK. I charge and get what I can. I don't care what other preparers charge.

The problem is that this person is now telling all his friends, who are also my friends and some of my clients, about my "exhorbitant" fees. They are questioning my fees and causing some embarassing problems when we meet socially.

What can I say without disclosing anything in violation of Circular 230?

This character, having never worked with you, has no idea of the quality of your work. I would emphasize that in the shortest possible way - the shortest responses having always served me best.

I would recommend some variation of the "You get what you pay for" theme and then work in how this character has no idea of the quality of your work, never having sampled it.

A good variation would be, "People who make service purchase decisions based on price generally get what they pay for" said confidently with a sad, but knowing, shake of the head. The intent being to very subtley (sp?) get across how this character is not as wise as your clients.

If that doesn't work, then offer to send your own version of the excellent list J2kp0t provided.

Some other fee-based come backs (for other occasions)...

"If you can find comparable quality at a lower price, I recommend you take it."
"If you want cheap brains, go to a butcher." (Not my original, by the way).

I hope this helps!

[Jiggers]

Thanks to all of the above

Thanks, very helpful.

I have noticed that those that are in the upper income brackets, usually $125,000 AGI and greater, and usually a professional, are the ones that complain the most!

One professional that I do refuse to take is "Veterinarian". They are the worst, plus they take at "Cheat the IRS" CPE at their annual conferences! Been through several who are no longer clients, so this is the voice of experience speaking.

The second professional that complains the most and trys to screw you for a lower fee and the IRS out of taxes are those in the medical profession.

[erchess]

Related Question

What is the best thing to do when someone calls you up wanting to get an idea of what you charge? The competition in my area generally gives out its fee for an EZ and one State or makes other efforts to "lowball". I stress my experience and expertise but I tell them flatly that there are cheaper tax professionals out there. I know one service whose base charge for a 1040 is only $45. I have been known to ask callers "Do you feel that you have such a simple return that any tax professional can handle it correctly and are you therefore shopping based on price alone?" If they agree that I have them pegged I tell them flatly that I am not the cheapest service and that my clients generally know that they need a real tax expert.

[Gretel]

I had something similar going on. By the way, Erchess, I really like your statement "If you feel..."

Shortly before April 15th an elderly came in because she couldn't file with her tax preparer since he was in the hospital for weeks. She had hoped he would be back in time, now she was embarrassed to be so late. When I looked over her information I noticed that her preparer fees was $75 incl. item.deductions, royalties, rental and a second state. So I said to her “You don’t want me to prepare your tax return, my price is at least double that amount”.

But she wanted me to do it anyway, since she wanted to have it out of her hair and acknowledged that I have to keep up an office.

I discovered a mistake with the royalties and gave her a print out about my findings to take to her preparer so he can amend last year’s tax return.

I am curious if she will be coming back.

[Beth]

Fees, what to do??!!??

What's interesting in the first post, is that though the "bargain" price of $100 was charged, the client still went looking elsewhere for some reason....

[jainen]

thinking straight

>>though the "bargain" price of $100 was charged, the client still went looking elsewhere for some reason<<

Yes, that is VERY interesting. And related to that is all the people he told you were so expensive, and then they also wanted to talk to you. If you can't get a few new clients out of that, you aren't thinking straight.

[BP.]

The ones questioning you about your fees are giving you a signal. Take the opportunity to sell yourself & your service! Don't compete on price.

[Gretel]

That's an excellent advise. We can not expect our clients to know what our services all include. Im always for learning better ways of communication.

[Luis Mopeo]

Bargain hunter gets complicated return done real cheap, doesn't like your prices, goes out and blabbers to everybody how greedy you are, and you haven't even done any work for him.

I've never seen any better example of why it can be a bad idea to lure in new clients in with discounts or to appeal to bargain shoppers.

[DaveO]

I remember seeing a sign in a store years ago.

I can’t remember the quote exactly but it goes something like this.

“There will always be persons who will perform a service poorly or produce a shoddy product in order to sell it a little cheaper. The consumers that shop on price alone are this mans rightful prey.”

[jainen]

interesting topics

>>I've never seen any better example... <<

There are several interesting topics here, but we must not get carried away and forget that the underlying story is not true. How could it be? Clients usually lie about competetive pricing, and no professional anywhere would or even could do a business, a rental, and a farm for $100.

[Jiggers]

True!

>>I've never seen any better example... <<

There are several interesting topics here, but we must not get carried away and forget that the underlying story is not true. How could it be? Clients usually lie about competetive pricing, and no professional anywhere would or even could do a business, a rental, and a farm for $100.

This is a true story. The problem is that this preparer has other income: military retirement, Social Security, spouse's retirement, etc.

They set up shop, use turbo tax, are not licensed (EA or CPA), and turnout poor returns.

I tried explaining my fee, but that fell on deaf ears.

I didn't have time to look for errors, but I have picked up clients from this other preparer and have always found errors. Some large, requiring an amended return, some small and not worth the effort.

My complaint is his complaining about my fees in public, even though I have never done his return, nor presented him with a bill.