Pricing

On my invoices for tax returns I show just one amount, unless there is other work billable hourly and then there is a second detail line for that. I am considering adding another line to every invoice for a "Technology fee." This would be a flat fee applicable to every tax return that would be for software, data security, web portal, etc. It seems to me this may be a good way to increase fees a bit to help defray those costs without it seeming that my rates have increased.

I'm curious to know if others use this sort of strategy and if so what their experience is with it.

Thanks.

I personally do not appreciate seeing "petty" fees like that so I don't do it. With my business clients, either I price by the job or by the hour and they do expect to see a slight increase to the rates with the passage of time.

I think it is a matter of perception. Some people just don't want to be nickle and dimed. I hate by cable TV bill because that is what it presents every time I get one

Personally, I think it's a bad idea. If your rates must go up, then increase your rates. The term "technology fee" reminds me of the years I paid college tuition and thinking wow these people are ruthless. That and the "health services fee" and the "athletic fee".

For me, there is nothing but a negative connotation around these types of fee add-ons.

Then again, given how many of my tax prep appointments seem to become a therapy session maybe I should start charging a "health services fee" (!)

Just include the proposed technology fee in your line for tax return fees. Your proposal is all downside and no upside -- you're probably not going to make any client happier with billing that way, but you could easily irritate clients.

I have seen engineering firms send out bills so detailed that there is a line item charging for the time that the administrative person spends preparing and sending the invoice to the tenth of an hour. All it makes me want to do is to challenge that fee.

ATSMAN. what is the range of slight increase for this coming year?

Technology fee is not new. I used to work at a mid-sized firm that has included that in the billing.

For 2019 tax season I have yet to figure out what the increase would be based on how much more training I need. I try to limit price increases under 10%.

It seems to me this may be a good way to increase fees a bit to help defray those costs without it seeming that my rates have increased.

Nobody's fooled by that ploy.

Could someone argue that something called a technology fee is an efile surcharge and would you spend more time demonstrating otherwise than it would be worth?

It seems to me this may be a good way to increase fees a bit to help defray those costs without it seeming that my rates have increased.

Nobody's fooled by that ploy.

I think all of the comments to my question were useful, except this one. My goal was exactly opposite of what "nobody's fooled by that ploy" implies. My goal was to add to my invoices a reasonable amount to reflect the costs and cost increases of the items I mentioned, and showing the client that it was not an arbitrary increase.

Could someone argue that something called a technology fee is an efile surcharge and would you spend more time demonstrating otherwise than it would be worth?

A couple years back when the ACA took effect and we had to reconcile the credit for the first time I added a line item to all 1040s called "ACA compliance fee" and I think it was $10. I do about 300 1040s and received no complaints, in fact not even any comments about it.

I think sometimes we can tend to be too sensitive ourselves when doing our billing, and I think it can cost us a lot of revenue left on the table.

I bill by the form. If I have to do bookkeeping work for self employed clients or do a little bit of research to compute basis because their broker is too lazy to do the work and the client is too wishy washy to tell them to earn their commission then I will add an hourly fee. Everything is listed on my invoice. ACA and EIC/ACTC due diligence add costs. I see no need to add a technology fee.

A couple years back when the ACA took effect and we had to reconcile the credit for the first time I added a line item to all 1040s called "ACA compliance fee" and I think it was $10. I do about 300 1040s and received no complaints, in fact not even any comments about it.

I think sometimes we can tend to be too sensitive ourselves when doing our billing, and I think it can cost us a lot of revenue left on the table.

When the ACA came along, I didn't give up revenue either; my base 1040 fee just went up $15. I just didn't report the fee separately.

There are many roads to Dublin, and it boils down to how you want your invoice to look and how you want to be perceived. Personally, I think an invoice without the extraneous charges presents the most professional image.

I have a 'complexity base fee' line in my billing form, which I can increase on the fly, useful when something like disorganized paperwork or any number of reasons, might be involved.

"without it seeming that my rates have increased"

"Nobody's fooled by that ploy."

" My goal was to add to my invoices a reasonable amount to reflect the costs and cost increases of the items I mentioned, and showing the client that it was not an arbitrary increase."

I think your base assumption is incorrect -- clients do not analyze your fee for "reasonableness", and any fee increase is indeed arbitrary. Maybe the only person you're fooling is yourself.

Remember, pretty much every business these days has to implement the same technology you mention -- restaurants, car repair shops, doctors & dentists, banks. And most businesses implement fee increases, just as most high-paid employees get wage increases each year. What's so bad about a fee increase? For my clients, one tax year almost never has exactly the same forms as the previous year anyway.

I'm sure there is already a wide range of fees charged by professionals for preparing the exact same return, so they are all somewhat arbitrary. My clients never complain about my fees, so I'm sure I'm not charging enough, even though I aim for at least 5% increase in my base per-form fees each year

I’m always learning about practice management and love to get advice about the art of pricing . Last year , a CPA on a ThomsonReuters webinar explained the logic of a minimum tax prep fee that bundles all costs of tax prep together, along with desired profit margin. Credit card fee ,software license , pay per return , scanning , file encryption , 7 years of storage in secure cloud; elegant folders , monthly email updates of tax laws , portal , mailed or emailed organizer , secretary , etc.

I don’t have a Stanford MBA, so its great to learn these simple lessons!

For me, learning the tax code is much easier than setting fees and managing practice.

There’s no Pub 17 for how much to charge and how to run your business. You can pass EA test in a few months , but it takes years to master practice management and marketing ! Anyway, sorry to ramble .

In my opinion what you end up charging a client is also a function of the competitive pricing pressures. I am not suggesting you give away your services, but you have to consider what the tax preparer down the street is charging for a similar return. And that is the hardest part. In my area starting in Feb the market will be flooded with coupons and other giveaways to entice new clients.

In my opinion what you end up charging a client is also a function of the competitive pricing pressures. I am not suggesting you give away your services, but you have to consider what the tax preparer down the street is charging for a similar return. And that is the hardest part. In my area starting in Feb the market will be flooded with coupons and other giveaways to entice new clients.

I don't know how much I agree with this. I mean, you need to be aware of the range of pricing out there in the broad spectrum (i.e. in Bangor you don't charge what you would in NYC) but not every tax preparer down the street out there is your competition. Develop and market your unique selling point and earn what you're worth rather than surrendering to the lowest common denominator. Not only that, but if you're not losing some clients due to price, then you're not charging enough!

The super-cheapos never seem to stay around for long. At some point, they realize how much work they're doing for how little money and they close up shop (unlike Uber, they don't have lots of venture capital to fund losses).

I’m always learning about practice management and love to get advice about the art of pricing . Last year , a CPA on a ThomsonReuters webinar explained the logic of a minimum tax prep fee that bundles all costs of tax prep together, along with desired profit margin. Credit card fee ,software license , pay per return , scanning , file encryption , 7 years of storage in secure cloud; elegant folders , monthly email updates of tax laws , portal , mailed or emailed organizer , secretary , etc.

How interesting that TR says that all of these things which are important they happen to provide (except for the secretary -- yet). Not that it makes it wrong, but TR is gonna be TR

For me, learning the tax code is much easier than setting fees and managing practice.

This is a great comment and I couldn't agree more. Pricing is difficult for the owners of small businesses in just about every industry. A couple days ago I received a call from a prospect who had been referred by her mother-in-law who is a client. She and her husband just moved back to my area from the midwest and during 2017 purchased a house and had a second child. She was unsure about preparing her own return as she had in the past. Her question for me was if I thought it was "worth it" for them to pay me to prepare their 2017 return.

In my opinion there are two general categories of clients. Those who understand the value of a professional and those who only come around when they're stuck on something and think our services should be practically free.

Incidentally, I think a "technology fee" would not apply to clients where everything is done on paper (input and output documents). 90% of my clients work remotely & paperless, so I do use a lot of technology for them.

The super-cheapos never seem to stay around for long. At some point, they realize how much work they're doing for how little money and they close up shop

I"ll take this opportunity to point out also that price does not stand alone, two other key factors are speed and quality. There is a saying, "fast, cheap, or good, pick any two", I aim for the cheap & good combo. By "cheap", I mean when I first started my solo practice, I had a price list from the local H&R Block office where I used to work, and the price list of my next employer for two years, and I based my initial per form prices on the range between those two, with regular annual increases since. But I rarely have a sense of urgency to completing a return and put 30-40% on extension each year (have never caused a late filing penalty).