What am I runnin', a charity?!!

[JohnH]

To take this off in a slightly different direction

This makes me think of the person who calls occasionally and says they're already prepared their return (manually or with an off-the-shelf program) and wants to know what the charge would be to "grade their paper" before they send it in.

They're always shocked when I tell them the charge will be the same as any other tax return preparation - maybe quite a bit more if they ask me to take the time to figure & explain out why their results differ from mine.

Josh, next time she asks you a tax question, are you now thinking you should tell her to take a couple of aspirin & call for an appointment tomorrow?

[ED SMITH]

-- a professional pilot told me doctors frequently crash airplanes because they think being smart enough to fly through medical school means they're smart enough to fly through the air and "it ain't necessarily so."

This is flying off on another subject, but the pilot is partially right. Doctors are trained to go by instinct and not rely on instruments when their gut feeling tells them so. So, in situations of poor or no visibility, rather than relying on their instruments, which might indicate they are flying upside down or heading toward a mountain, they go by their feeling that they are flying correctly and end up going straight in.

[Matt Sova]

Client Service Agreement

This year, for about 50% of my 1040 clients, I am sending out a Client Service Agreement. For $175 they can have unlimited phone conversations during 2008, 2 hours of tax planning, 1 hour of retirement planning, I will handle all letters that they receive from the IRS or state of MI, I will handle a civil audit for them.

If they choose not to accept they will be billed $200/hour for all except correspondence with govt agencies and audits will be $250/hour. Hopefully this goes pretty well.

In the past I have never charged for consultations during the year, just like the one that started this thread. I never charged for writing letters to the IRS or state. I realized about a week ago that the amount of time I spent doing this in 2007 was enormous and did not include phone conversations. The way I see it is this is my only stock in trade. If this is all I have to sell and I have office expenses, staff to pay, a wife that does not work and 2 kids at home I need to make some money off this knowledge that I have.

[BOB W]

Matt>

Yes, life experience and education is what we are all about. Just remember most people hate their lawyers and doctors as they have the same attitude you are professing with your "Service Agreement". This will put you in the "necessary evil" catagory in their eyes.

The problem with this service agreement is not too many accountants/ tax prep people share the same concept, compared to lawyers and doctors. If all accountants did it, well you would be foolish not to do it also. But they don't. This leaves you as a "Loner" in your town.

With that said, it is a great idea but you must be willing to pay the consequences for those that will be offended by the offer of the service agreement. "Oh, now he is going to nickel and dime me if I don't pay this annual fee", they will think.

I view this "service contract" as a reaction to not billing people for extra services in the past. I think you should be charging people for extra service first and than, in the future, offer a service contract. The jump from "nothing" to a "Sevice Contract" will not make sense to them, they never paid before so why should I have a "Service Contract".

First you need to set up some guide lines of what is part of you fee structure and what is not, throwing in general client courtesies. From there you can bill or not bill based of those guide lines. You must adhere to your own set of guide lines first, then you offer what ever you want.

Chances are the only takers will be the pesty clients that now know you will be billing them based on your include/exclude list. The fees for the contract will not be enough to cover the pesty clients. It may actually cause extra work from these type of clients 'cause they will now call you for everything under the sun.

Be sure that you have a billing program that allows you to bill easily for these extra projects. When a client calls, you should be sure to let the client know that the service he/she is asking about is a billable service, don't just bill at the end and have to explain it then.

Sorry if I sound like a "know it all" because I don't. I just think your agreement is a knee-jerk reaction for something you should of been doing in the past. Blaming the client is not the problem.

Please forgive me if this is coming across wrong.........................But WE are ALL guilty of under billing on these issues and until WE take a stand WE will never get what we should for our services. Does this mean that we have to be hard-nosed, no, but it means that we must be consistant with our "excluded" list. I am going to make one up right now. I will start with my "included" list first and anything else is billable.

[sea-tax]

Wow a lot of good responses. I have to say I tend to agree with BOBW in regards to Matt.
Bob W cudos on what you said I think it was well thought out.

I persoanlly explain to all clients that my tax fee includes with in reason (I determine what is reasonable ) a few questions being answered through the year. If they take advantage or I have to spend loads of time to solve their problem they get a bill and the client knows up front what the charge will be.

The fact is in this business all we have to sell is our time, and knowledge we have no widgits to sell therefore we must becareful how we allocate our greatest asset our time.

[taxxcpa]

Charging clients

I used to have a client who would drop in just to talk and tell me all about the job he had before he retired. It never seemed to occur to him that I might be trying to do some work instead of talking to him.
Another client will go over his return line-by-line and question what I have come up with. Once he claimed a total I had was wrong. I had to re-add it to convince him it was right.
I've raised his fee as a result, but would just as soon see him go elsewhere.

Fortunately most clients, rich or poor, are not that way and don't quibble about the fees (maybe I should be charging more).

I haven't had any more problems from high-income clients than low-income clients. One doctor was so much trouble, I told him I was retiring to get rid of him. Other high-income clients are no trouble. One of them sends things piecemeal,and it is time-consuming but he paid me $ 3,600 for his taxes last year which is a lot better than any other client pays.

[wizbang30]

Tell them to go to H & R Block

I worked my way through college at H & R Block, their fees are outrageous, they charge based on the form (this was 10 years ago). I believe they can get away with it because most of their cliental are people who don't pay taxes, they get $$ back from our wonderful welfare program, EIC. I know that during the summer they had limited hours that they stayed open to answer questions and I don't think they ever charged for this service, so that being said, I try to charge based on the individual/business.

I can usually tell what kind of client they are going to be from the first interview. I make notes of whether or not I think they are going to be a pain in the arse, or easy to work with. After I complete the work and before I attach a bill I go back and look at my notes....I guess I am trying to say that I DO NOT think that your bill was unreasonable.

We should charge for every minute just like attorneys do. However I try to build the "extra's" in for the clients I know are going to be a pain the first time I work with them.

I really think that the more litigious our society becomes, the more specific we have to be when we talk to clients. I don't think you did anything wrong, I think you should tell them to go to H & R Block one year and see how much they charge and what type of person they are dealing with for what they pay for.........

[fliszt]

Josh, I just

want to tell you how I handle similar situations. In the body of my January letter to clients, I tell them what my standard 1040/Sch A fee will be. I also tell the clients that the first 1/2 hr of our interview is free and then I charge $150/hr for additional time. Most of the time the interview goes for 45 minutes. I do not charge for the over-time even tho I could. I charge by the form and could nickel/dime clients but do not. I try to be fair with all and place myself in their shoes. I'm rather fussy about being taken advantage of and do not want to do that to anyone. Clients that have a personality that clashes with mine, I do not accept back. I send a nice letter to them wishing them success in the future and I also list another EA in my area for them to contact.
After reviewing the tax return with the client, line by line I thank them and mention that as part of my year round service, they may telephone me and ask questions nocharge. I also say that they may make an appointment for at length questions, tax planning, etc for $150/hr. If someone calls and I can see that the question(s) are going to take extended time, I tell them we should talk in person and that will be at my standard $150/hr. I never charge anyone anything without first informing them of the charge. If someone did that to me I would be very angry. When I phone an attorney I always ask if they charge for initial questions. I have never been charged for a telephone question.

I think there are all kind of ways to handle things as you can see by all the threads posted.
This is just my way.

[JohnH]

Don't forget email

I like communicating with clients via email because it gives me time to ponder their question before responding, plus I can reply when it's most convenient for me. If the question is involved, it's easy enough to send a reply that says I'll need to do some research and advise them that I will have to charge for that work. And f we really need to have a sit-down I've already had time to think about the core issue.

Over the past couple of years, I've gravitated to the point that I look for reasons to send emails to clients during the year in order for them to capture my email address and thus make it easier for them to ask me questions via email without having to do anything but hit "Reply". It also helps to set up the initial email with a subject line that says "Tax Matter" or "Tax Question" since most people don't bother to alter the subject line when replying to an email. For most clients, even the older ones, it's becoming more and more a preferred means of communication.

[taxxcpa]

Communicating by e-mail

I like communicating with clients via email because it gives me time to ponder their question before responding, plus I can reply when it's most convenient for me. .

I prefer emai too. Often you can copy and paste info from a reference source rather than trying to explain it all and maybe just add a small comment instead of a lengthy explanation. Sometimes in a phone conversation your mind could drift and you might be explaining it wrong or unclearly. Putting it in writing and getting information in wriing gives more time to think and get it right.

[JohnH]

Almost forgot to mention

One excellent way to get the email communication process initiated is to email the January Client Letter to everyone whose email address is available. I also snail mail it as a backup, but emailing it gets me in their inbox and hopefully in their address book for future questions.