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Pricing for 1065

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#1
Posts:
148
Joined:
1-Sep-2020 2:47pm
Location:
845-NY
New client to me last year. Picked him up because his old CPA was non-responsive.
99/1% LLC, real estate rentals, 8 properties combined value over 3million, no loans, rents of about half a million a year.

I got about $2500 the first year due to having to add the assets and figure out all the stuff the old CPA did wrong.

Just looking for a rough price range for what you might charge for this type of return.
My normal minimum rates are 300 for a personal and 750 on a business.
If a business does 500k I'm usually trying to get 1500-2000, and if they clear a million I'm trying to get $3k.

No bookkeeping, no sales tax, no payroll, no 1099s.
 

#2
Posts:
2702
Joined:
4-Mar-2018 9:03pm
Location:
Narnia
I've gotten to the point that I won't consider a 1065 for less than $1,000 except in certain circumstances. So my fees may be slightly higher than yours if your minimum is $750. FYI.

I wouldn't do that return for less than $3k. If it's holding 3 million worth of real estate it can (or should) be able to afford that fee.

Partnership returns have gotten significantly more complicated over the past 5 years. I've seen way too many returns that are train wrecks because they prospect DIYed up until contact or because they, frankly, were cheap and went with the low cost preparer, thinking it's a commodity service. This has lead me to the belief that if you're making subchapter K one of your niches, don't undersell yourself on a 1065. Charge a premium, and sell the client on that premium.
 

#3
Posts:
148
Joined:
1-Sep-2020 2:47pm
Location:
845-NY
Fair enough point, and glad to hear I am not that far off base.
I use 750 as a starting point as that usually scares the price shoppers off, but most entity returns would be more than the starting minimum unless there is very little activity.
 

#4
Posts:
2702
Joined:
4-Mar-2018 9:03pm
Location:
Narnia
It's also a deterrent to current clients. If they know my 1065 fees start at $1,000, they're not going to add their brother to their LLC for no consideration and create a partnership filing obligation. I'm very clear that staying DRE or sole prop until the have scale is a no-brainer. It's particularly troublesome in noncommunity property states as client tend to want to form a MMLLC with spouse-spouse ownership. Well, that creates a 1065 obligation. So it may not be smart to put your one $200,000 rental into that holding structure. I have to talk many clients and prospects away from that ledge...with the caveat that there's a legal side of the coin as well.

I'll go below $1,000, again, in rare circumstances. Such as a first year 1065 with little activity, if the client is brining over other entities as well and I'm trying to build the relationship.

Good luck with your practice.
 

#5
Posts:
1378
Joined:
21-May-2018 7:50am
Location:
SC
Interesting. I have minimum fees for 1040s, but have not established any for other entity types. I only have a few partnerships (most are S-Corps) and they range from $650-3k. S-Corps are all over the place but same range.

I like the idea of minimum fees because it gives a base for tire kickers to seriously consider. At same time, I do have some clients I do not want to lose because of a sudden increase to the minimum, so they would need to stay in line with my historical costs + annual average increase. Additionally, I quote minimum fees for each additional state filing because it makes them think about how many states they may need to actually report and potentially pay taxes. So many clients do business in other states not being the least bit aware or concerned about what establishes nexus.
 

#6
Posts:
428
Joined:
30-May-2014 1:43pm
Location:
MA
I would just take the $2,500 and bump that 3-5% each year going forward unless something changes where you can add even more. Is the client even aware there was more work in year 1? I would tell them all that extra work was built into the initial price with the understanding you were going to absorb that and make it up over the long haul.

Did the client balk at the year one price and you had to explain that there was more work in year one? If not, go up and do not worry about it.
 

#7
Posts:
148
Joined:
1-Sep-2020 2:47pm
Location:
845-NY
I am signifiganly more expensive than the old non responsive CPA who is presumably at over over retirement age.
I explained that the first year was a lot of work to get everything corrected, etc, so client was expecting price to drop.
There are multiple other entities which are zero or very little activity returns.
Total invoice was 5750 for personal, trust, and 4 entities. He was hoping for about 3800 this year and I figured my bottom line would be 4500 which he accepted. I was reporting all rental activities on a single worksheet, but now this year we have capital improvements which really should be broken out per property on separate depreciation schedules, so I am envisioning 8 rent worksheet in my software to keep each one separate, or at least different asset classes per property in case of eventual sale.
 

#8
Posts:
1378
Joined:
21-May-2018 7:50am
Location:
SC
Oh, and FYI, when there is additional work to correct accounting/tax errors, I bill it separately from the minimum tax fee I want in each future year the entity exists. It sets the tone for what the client should expect, and allows you to continue with higher fees more in line with value pricing.
 

#9
Posts:
625
Joined:
24-Jan-2019 2:16pm
Location:
Honolulu
My price is about $1600 here plus $150/hour for any "extra" stuff like if the data provided is not 100% clean.

One state tax return is included but add $150 per additional state tax return, as needed.

This is for a bare bones tax prep engagement.

If I undercut myself, and found myself working more than I thought in the 2nd year, I would send a letter an advance to adjust the 3rd year.

I generally add 2-5% per year depending on that factor as well.
 


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