Rating States According to Complexity

[erchess]

I would like input into how people decide how much to charge for particular state returns. My software wants me to go in and put a charge for each form from each state but I do not have time for that. I do what my software wants for the two States I do most frequently and then every additional State has a flat fee which I manually add to the bill before billing and printing.

So if we were to divide the States according to the amount of work that remains when the Federal has been done, what would the groups look like? Here is my List.

Most Complex - NY CA OH MS ($45)

Complex - the rest ($35)

Simple NC SC KY ($25)

Simplest TN FL ($15) These are just intangibles returns.

Local Returns - I have a double whammy on those. The possibility of having to do these is a factor in bumping NY and OH up there with CA but I still charge an extra ten bucks.for each.

[veritas]

I like your approach.

Some states are much more difficult.

By the way $100 would not be to much for Ohio.

[wv112]

Why did you list MS as one of the complex ones?

[JohnH]

Tax Credit Add-On

Do you add an additional amount for a multi-state return requiring a Tax Credit schedule when a taxpayer lives in one state but works in the other? Here in Charlotte I have a lot of SC residents working in NC or vice versa, so I charge more for the state of residence because there's always the cross-checking to be done on the TC Schedule for either state. I never trust my software to do that task right.

[JCH]

Some states are much more difficult.

By the way $100 would not be to much for Ohio.

Ditto on Ohio, maybe more than $100.

[Lion]

States

I think NY, NJ, MA, CA, and PA, are tricky. PA has some strange local stuff, too. IL is not simple. CT is easy as a resident state but trickier as a non-resident or part-year resident. H&R Block has a three-tier price list for states, but I don't have access to it; it includes some extra charges for localities.

[veritas]

Philadelphia PA

for self-employed is ugly.

But then again so is Portland, Oregon.

[DTS]

Out of state returns

In '98 and '99, HRB charged $75 for each out of state return here in CA. I don't know what the charge is now.

Dennis

[Gretel]

Montana is complicated too in some areas. Sometimes I wonder how out-of-state preparers can really do a good job with unfamiliar states. It also depends greatly on the software program. My software (ProSeries) only points out serious mistakes on MT. A number of things are easily missed.

[erchess]

MS Complicated

Why did you list MS as one of the complex ones?

My information may be out of date because the last time I had to deal with a client who had resided in MS it was 1997 or earlier. I was working in Durham NC for a company which had a couple of people who handled all the returns for states other than NC.. There was a notebook in the back that I would have to get and look up each state to make sure that he had all the necessary information about the client for that state. MS at that time had the possibility of itemized deductions. I don't remember what impact if any the decision to itemize on Federal had on MS.

Now here is the way I see the issue of States' Complexity. The simplest states are TN and FL because all you do is list certain investment class assets by their market value on a particular date and calculate the correct percentage. This is a one page form not a lot more complex than most local returns.. Next come NC and SC. They both start with Federal Taxable Income and tweak that just a bit then have a few tax credits all of which are simple to calculate and the most common ones are derived from Federal Counterparts. There may be other states which are as simple as these. It may also be that from the standpoint of someone who is used to MS or NY or CA NC and SC are more complex than they appear to me. Other factors that make States seem difficult to me but are common are credits for home owners and/or renters (and yes I know SC has a home owner's credit) earned income credit, and itemized deductions. I consider it especially complex if certain credits or other elections may or may not be available depending on the Federal Return. When I start getting really busy I may offer a discount for States having deadlines after 4/15 when the taxpayers are willing to wait until the day before the deadline to receive their forms or have me efile the returns.

[erchess]

Well

Do you add an additional amount for a multi-state return requiring a Tax Credit schedule when a taxpayer lives in one state but works in the other? Here in Charlotte I have a lot of SC residents working in NC or vice versa, so I charge more for the state of residence because there's always the cross-checking to be done on the TC Schedule for either state. I never trust my software to do that task right.

I charge by the form for NC and I have a specific charge of $15 for the D400TC but unlike Schedule A my software does not have a way for me to charge by the section on the D400TC. So in other words whether the taxpayer has one credit or all of them my fee is the same and on a complex return it's probably low. For other states I charge per State whether very simple or very complex and again my charges for states are probably low in the complex situations. Like Bart and others I am in an environment where an awful lot of people won't consider anyone but a CPA to do their taxes and an awful lot of the rest assume that their return is so simple that number one it should qualify for the lowest fee I would charge anyone and two anyone who has the nerve to offer his services as a tax professional can do it and get right and not have much risk of trouble with the taxing agencies later.

[erchess]

OK on a scale

Ditto on Ohio, maybe more than $100.

where $100 is the charge for a complex state such as Ohio, I wonder what else you are charging.

I charge what I find the market will bear and here is one example. 1040, Sch A, F2106, Sch B, several forms W2 and a couple of forms 1099R plus two kids and NC came to $250. Now on that scale it's obvious to me at least that 100 for Ohio is too much but maybe 45 is too little.

[gkaiseril]

The very simpliest are Texas, Nevada, and Washington state.

[Nashville]

$0 for each

Yes Kaiser G, I also charge $0 for each TX, NV, and WA return.

I only do non-residents for CA, but does not appear to be as bad as others. The absolute worst is NY state. As is the case everywhere, it is a product of their politicians. Every conceivable device to maximize revenue but also subsidize the low-income residents simultaneously. NJ is not easy either.

To be quite honest, I don't see how an out-of-state preparer can do a decent job for most states. Of course, I do several because they come with Federal customers. My state is long and narrow and has lots of neighbors, so most years I do 10 or 11 different states.

I also wonder why someone listed Mississippi as one of the most difficult states. MS is really in the easy-to-moderate category. KY, NC, SC and GA are also relatively easy. The AL return is based on 1935 law, and includes reporting all income items and itemized deductions from scratch. It would be difficult for me except I do lots of AL returns.

My worst experience was with an AL customer who sold a commercial building in Minneapolis. I offerred to file a Minnesota return (my first ever) as a non-resident to report the sale of the building. My customer was content to show the gain on his Federal and Alabama return, and not invite MN to the table. I told them AL would allow a credit for state taxes paid to MN, but they didn't want to pay me to do a MN return.

Not very smart. 5 years later MN had a court order for them to pay $6K on the $100,000+ gain. Of course, the statute of limitations had expired for AL, so there was no opportunity to take this as a credit against AL. To this day, I've never done a MN return.

My vote goes to NY, NJ, and MI in that order. KY, NC, SC, and GA are the easiest. I haven't done OH in 15-20 years, so it might be as notorious as others say. FL and TN are not even recognizable as income tax returns.

[Lion]

Multiple States

For those states where your software has a single price for a form that might have multiple parts for one client and less for another, add a catch-all line like "Multi-State Allocations" and put a number on that invoice line when you need to increase the overall price.

I've raised NY NRPY to $100 minimum. Probably NJ and MA too; I'll see.