Amended Tax Return

[ericleve]

How much does everybody charge for an amended 1040 when you didn't prepare the original return? I am getting heat from a lawyer because I charged $150.00 to prepare an amended return.

My reasoning for the fee is this: I not only had to re-create the taxpayer's original 1040 on my software (so I would be able to prepare the 1040X on the software) but I also perform the due diligence related to a regular 1040 preparation. My thinking is if I am going to sign off on a 1040X, which includes information from a 1040 that the client self-prepared, I do not want to assume that everything on the 1040 is correct from the start. We perform diligence and make sure we either have the substantiation for all the numbers on the return or make sure they are reasonable for that taxpayer.

The lawyer I am dealing with (don't ask, it's a long story) is looking at the 1040X instructions under Taxpayer Burden and he sees the IRS estimates average cost as $28, so he thinks my fee should be close to the same.

Who is right here? By the way, is there a place where the IRS places limits on fees practitioners can charge? If so, can anybody point me in the direction of that document so I can review it? There is nothing in Cir 230 that applies to this type of situation from what I can see.

[Snaggletooth]

Lawyer takes a flying leap

Eric - I'm going out on a limb, but NO ONE charges $28 for an amended return. Lawyer is either outright lying, or is quoting from an inaccurate source.

My fee for a 1040X begins at $50.00 plus time charges. It would not be unusual for me to charge $150, and I am generally cheaper than most preparers where I live. Explanations often exceed the space allotted and have to be attached. It's like calculating two different returns.

Obviously, there is a story behind this mess that you spared us from reading, and that ALONE commands an abnormal fee. Nothing wrong with a $150 fee or even more for an amended return.

[veritas]

Ask the attorney

to do it for $28.

Your price is your price. You can charge whatever price you wish.

Years ago when I was new in the business I was intimidated by attorneys. You will learn to get over it.

By the way the attorney is probably billing your poor client for all this nonsense.

[ericleve]

Right on

Thanks so much for the comments. I am not so much intimidated by the attorney as I am fretting over the extra hassle this is going to cause me in justifying my fees to a third party, and probably a judge in a court of law.

By the way, I am glad this is not my client but her ex-boyfriend who is incurring these attorney's fees.

Anyway, thanks again.

[ED SMITH]

i don't know where the attorney got the $28 figure, but it could be right if it only takes into account returns amended by the original preparer. HRB amends at no cost and is only supposed to charge for additional forms.

If you are amending a return prepared by someone else, I would charge at least as much as the original return and possibly more.

If the attorney was concerned about the price, he should have asked you prior to starting the return.

You can charge any d__n price you want? I would make sure he pays you before you turn over the return.

[Jiggers]

Agree, let the attorney do it!

IRS instructions for 1040X, last page, gives "Estimated Average Taxpayer Burden":

Average cost $28
Average Time Burden 3.5 hours

That is $8 per hour.

Will the attorney work for that? I doubt that.

Idiot attorney.

I think the IRS has something wrong in this estimate.

[JohnH]

Tell him that maybe he's accustomed to charging average fees himself if he's an average attorney, and that's an understandable situation since everybody has to start at the bottom & work their way up. But you're an above-average tax pro and you need to be paid accordingly.

Maybe if he spent more time doing legitimate legal work and less time nit-picking a $150 invoice from a fellow professional, he might move a step closer to becoming something more than an average attorney. As long as he believes spending time on this sort of minutiae is worthy of his time, I'm not even sure he rates as average right now.

[OtisMozzetti]

Fees must not be "unconscionable"

By the way, is there a place where the IRS places limits on fees practitioners can charge? If so, can anybody point me in the direction of that document so I can review it? There is nothing in Cir 230 that applies to this type of situation from what I can see.

It does say in Circular 230 that fees must not be "unconscionable". As everyone has already explained, the labor and expertise which you need to apply when you amend a return where you did not prepare the original return more than justify the amount of fee you described, i.e. the fee isn't unconscionable not unless maybe the client is single no dependents who left one of his two W-2's off his or her originally-filed return.

[DaveO]

If I did the return

I will amend for $50 if it's something real simple like adding a dependent. Otherwise our base fee for an amend is $100. If I have to recreate the original return they pay full freight.

I had an attorney come in for a consulation a few years back. He inquired as to my hourly rate which I quoted. After we met for a 1/2 hour I did about another hours research on his question and gave him my findings. He threw a fit when I billed for a full hour since we had met for only an hour.

I just told him to tear up the bill and take his business elsewhere. Not worth the grief to me to even deal with someone like that. His office is only a block from here. What do you suppose I say when clients needing an attorney inquire about him?

[Jiggers]

Attorneys, bah...............

I always count my fingers when I shake hands with an attorney.........


And I hold my wallet with the other hand...................


I had an attorney stiff me once. He was sub-renting from me. And he and his wife were friends.

He asked me to do the tax return of someone that he was filing a workers' comp claim for. I would be paid out of the settlement. When the check came in, it wasn't as much as he anticipated. He got his full fee, plus the advances he made to his client, plus interest he charged for those advances. When it came time for my fee, he had his client send me a check for 1/2 the amount of my fee. He didn't even pay me from the settlement as promised.

I argued with him, he shrugged his shoulder, and I threw him out of my office. He had to find another place.

I know I should have had an engagement letter and a deposit, but this "WAS" my friend.....

I have never trusted another attorney.

[Gene V]

.

I have never trusted another attorney.

Remember: 99 percent of lawyers give the rest a bad name.

[BHoffman]

If I have to recreate the original return they pay full freight.

I'm with DaveO. Bill dispassionately . You have a billing structure and if you're doing that work, then charge that fee. The client is probably mad that the attorney is billing time for interacting with you. So, if he has to justify his fees to the client that's his problem. Sounds like he's trying to make it your problem.

[Lion]

Software

Different software acts differently, but here's how I prepare an amended return when I did not prepare the original (it's not in my software): I create an "original" return (from my viewpoint and in my software) the way it should be, then when calling up a 1040X, I leave "my" return in column C as the amended info and type in the column A info from the client's original return. Sometimes, you can't even make your software match the client's return, whether it's errors he made on a paper return or rounding by his/your software, so why struggle with what's going to be replaced anyway?

I entirely agree that the charge should be similar to, if not more than, what you charge for the full return. And, who's that lawyer charging his enormous hourly rates to comment on a $150 fee from another professional?!! I'd never amend a return I'd not prepared for less than $100. If it might be a continuing client, I'd probably charge them full rates and offer a discount if they return to me to prepare their 2008 return. But, for a one-time amendment via a lawyer, I'd charge full price or more.

[Davc]

Remember: 99 percent of lawyers give the rest a bad name.

It's easy to see a good lawyer. All you need is a shovel or a hammer.