question about rates

[mblatour]

I'm sitting here pondering something. This is my 4th year preparing taxes and I know for a fact I charge too little. I'm working my way up the totem pole and will eventually get to where I want/need to be. For the meantime, I was wondering if anyone would give me the amounts the charge for preparing Schedule D entries. This would just help to assure me that I need to make some necessary changes to my fee schedule (perhaps sooner rather than too much later).

I have one with 29 entries and I had to call to get the needed info. for about 1/2 of them. (Several phone calls in fact and one additional meeting). Besides that, the return is MFJ:
1040
Schedule A (pretty simple one)
4-1099R's
5-1099 INT
6-1099 DIV
(5-1099B's which have the 29 entries)
both have social security
and a couple of other little income amounts to claim.

If you're bored; I appreciate it!!!

[Gretel]

How much time have you spend on the phone and in that add. meeting? If it wasn't too much time I would charge at least $300.

[fliszt]

I have just added up

the minimum charge I would bill based on no "extra" time. My bill would be $305. There may be some extra charges for certain other forms. Does that help?

[mblatour]

about 45 minutes total

thanks for the info,

[erchess]

I would charge about $300

plus a time charge for the second meeting not caused by me and for the time spent on the phone. It's their responsibility to provide basis information and they can do that in roughly four ways:

use a broker who tracks basis for them and puts it on the statement (as I understand it this should now be all brokers but was once only the most expensive ones);

keep good records themselves (This is always a good idea but it does take work.);

call the broker and beg or do historical research if dates are known during the tax season after the year of sale; or

pay a tax professional to do the above.

[mblatour]

thanks for the replies....

I feel much better now. I'm going to keep this one down lower for this year because it is a return client ($210). But I am going to give a fair warning (I like what erchess said) and let them know that next year will be higher. I'm learning!!

[JohnH]

Lay the grounwork for the future

Bill them $350+ and then discount it down to the $210 you intend to charge. That will imprint in their mind that your normal charge would have been higher and they should value your time more. You don't need to make a big deal about the "favor" you are doing them, but they will probably get the message.

You will also find it easier to increase the charge next year by either decreasing the discount or removing it altogether, depending upon what you think is fair to you at that time. I'm betting your attitude next year will be a little more hard-nosed and you'll be ahead of the explanation game because you already put them on notice with this year's invoice.

[S T]

Charges

I am like John, I would charge a higher price and then provide the discount down to the $210. I tried to calculate quickly and came up with about $310 to $370 depending on the trades, etc.

I frequently show a full price with a discount, the clients like to see that, and I have had no complaints. The seniors really like to see their discount.

It also will remind you next year, so you can increase their price or reduce their discount, it really is a good measuring tool for your fees. I also developed a Rate sheet per form and/or line entries that I hand complete, that I sometimes give the client.

Sandy

[erchess]

The firm where I started used a

technique that I also use. That is to increase normal fees by whatever margin the market seemed likely to bear but to limit the fee increase for returning clients to ten percent plus the normal this year cost of any forms they need this year but did not do last year.

By the way, here are my Fees.

I will do a return for a dependent who has only job and bank interest for $25. I will also do the return for someone who does not meet the filing requirement but has some rational reason for wanting the forms filled out such as to show the return to a creditor or get the stimulus for the same price.

I like electronic filing and so that is free but there is a $25 fee for paper filing a return that could have been efiled.

I will do any 1040 EZ for $45.

My base form charges for 1040A is $55 and for 1040 is $100.

Schedule B is $2 per line. Schedule A is $25 per section. Schedule E is $25 per rental property and $25 for page two. C and F are $35 each unless there are no expenses in which case they are $12. Forms W2, K1, 1099R, and 1099G are $3 each. Stock transactions are $2. I have a time charge of $50 an hour if there is any information I need that is not given to me. Other forms range from $5 to 50 depending on how complex they are.

I live in NC near SC and near Tenn. These states are $25 each. Other States are $35, 45, or 55 depending on the complexity of the Federal return and of that state. Any Local return that may be needed is "free" but it drives the state up one level in complexity. (In other words Ohio would probably be a $35 state because it starts with a number from the Federal return and then plays with it somewhat but the possibility of returns for cities and school districts raises it to a $45 state.)

I do a time charge when the client ties me up excessively with extraneous conversation or makes me dig for information about their facts. I will very willingly call the broker, do historical stock price research, write or call the charity to explain why their receipt is not sufficient, but I do charge $50 an hour. I do not do a time charge when I need to research applicable tax law because as I once told a client, I would then need to pay him back if I ever used that knowledge on another return.

I charge $75 to do an Extension but the cost is applicable toward their return if they pay me to do it. The area around me is full of people who know that they do not know how to do an extension but are sure that they do know how to do their return.

What I call a "simple audit" where I read their stuff for up to an hour and solve the problem with a phone call I charge $50. For more complex audits that take longer I charge $75 an hour with the clients and $200 for each face to face with the taxing agency.

[mblatour]

thanks for the ideas....

every little bit helps. I'm so glad there are people out there willing to give some direction. It's tough when you're self employed to set a fee schedule and stick to it. I've been trying to climb up my rates every year, but very carefully because I am still building my client base. My client base is mostly from referrals and I need to keep everyone happy without shorting myself in the process.

Thanks guys!!

[mblatour]

erchess....

Thank you for taking the time to put that all together. I see a lot of similarites between our billing schedules. I got a couple good ideas from things you wrote. Have a great remaining tax season!

[geekgirldany]

I appreciate you guys posting this information also. I have been in business for 8 years. I know I under charge. The example return that was posted I would charge $150.00
As I have stated before I really need to redo my pricing.

[JohnH]

A good way to handle price increases

Another way to work price increases into the mix is to put a sentence into your January client mailer that "some fees will increase about 20% this year". The word "some" is very important. It sets an expectation but doesn't commit you to anything one way or the other.

This gives you a fair amount of flexibility to put in significant increases where called for (PITA returns, for example), but you didn't say that everbody's fee is increasing 20%. So if a client asks about the fee increase before giving you their info and you are comfortable with what you are charging them, you can always tell them the increase doesn't apply to them, or that their fee is only going to increase 10%, etc. I gotta say a 10% increase is a bargain when you're expecting 20%.

I did this in the current year, and so far only a couple of clients have even mentioned it. I've increased most of them the full 20%, except for a few special cases. Of course, right now I don't know how many will not return because the 20% figure scared them off, so maybe by the end of tax season I'll have a different opinion on this.

[Y2KEA]

If someone walked in off the street & wanted that return done my fee would be around $420. That does not include the state or numerous phone calls to get basis info.
My time is billed at $75/hr.

My practice is in the south bay Los Angeles area. So while this may seem excessive, one must take into account the cost of living in a given demographic.

If the client didn't like this price & went to the big "green" box storefront operation down the street, he would pay at least this much & probably get sold peace of mind snake oil at an additional charge. Also my office is open year round.

[Jiggers]

$75/Hr LA area too excessive?

If someone walked in off the street & wanted that return done my fee would be around $420. That does not include the state or numerous phone calls to get basis info.
My time is billed at $75/hr.

My practice is in the south bay Los Angeles area. So while this may seem excessive, one must take into account the cost of living in a given demographic.

If the client didn't like this price & went to the big "green" box storefront operation down the street, he would pay at least this much & probably get sold peace of mind snake oil at an additional charge. Also my office is open year round.

I am in South Texas and my 1040 hourly rate is $95. But I bill by the form and/or schedule and the items on it. My average hourly rate using that fee divided by my hours is about $150/hour.

Billing by the form and/or schedule does generate a very larger bill, but it also helps to be consistent with your billing. You use a fee schedule, add up the items that apply to that return, and you have your bill. Helps when someone asks for a quote and is a new client. I take their prior year return and calculate a fee. I tell the client that this is just an estimate.