Price of a DIY tax Return

So I offered to help a colleague with his 1040. I didnt want him as a client. He is a smart guy, uses turbo tax and bought a rental house. I offered to set up the schedule E, explain how it works, show him areas he can read about this etc but he doesn't need to pay me $500 -$600.

All went as planned and when he paid for the single user fee on Turbo Tax it was $145. Think about that, $145 to do it yourself.

Why anyone would charge below $250 need to , in my mind, revisit the fact that Block, Turbotax etc... are very expensive.

I am surprised that it was $145 for a DIY on TT. I thought the premier version was $80 Fed plus $40 for state = $120.
Did your friend choose any additional service?

I think the average going rate for a preparer prepared return with Sch E is north of $200.

Do you think Block is lowering their fees? Seems like they are advertising way less?

Block's high fees are great for us praticioners...they set the floor.

So much of their $ goes to

-renting their office for 12 mos
-and advertising

they don't seem to pay too well.

But throw in all their overhead and marketing and their desire for profits, and their fees have gotten quite up there, and in my opinion, the caliber of the work is questionable.

So i agree....never charge less than Block.

Turbo tax could present a problem in the future for the easier returns.

I'm not sure how good the schedule-E interview is in TurboTax -- but I have to imagine a good tax accountant will earn his/her fee at least in tax advantage over that DIY software. Just think about the variety of expenses to consider, and handling sec 179, depreciation, segregation, etc. Maybe on a very simple rental it's okay...I'm really not sure.

The younger generation of taxpayers who are in love with their smartphones and have a simple 1040; those will likely not be future customers of a tax preparation firm unless their return becomes more complex at some point.

I am surprised that it was $145 for a DIY on TT. I thought the premier version was $80 Fed plus $40 for state = $120.
Did your friend choose any additional service?

I think the average going rate for a preparer prepared return with Sch E is north of $200.

He bought no extras.... but I see so many here who charge 200 to 350. My point in sharing was that TT isn’t cheap anymore.

that return in my office would have been 600.

This is really an amazing reminder of how crazy the tax preparation market is in general, price-wise. TurboTax is amazingly expensive, but TaxAct is out there at a much lower price and CreditKarma and many others offer free self-preparation.

Across the street from my home office, there is an EA firm that does about 3,000 returns a year. People around town complain about the EA's fees going up, as they're now being charged $100 to have their (admittedly simple) tax returns prepared. It's all about perspective...

$100. That is unbelievable. That sort of thing is what makes people undervalue the service and not realize how complicated the Code is.

$100. That is unbelievable. That sort of thing is what makes people undervalue the service and not realize how complicated the Code is.

I think $250 is unbelievable. As missing donut astutely points out, its all persepective.

I imagine an office doing 300 1040's at $250...

thats $75,000 gross. After expenses etc, you may as well work for the department of Motor Vehicles.

I am surprised that it was $145 for a DIY on TT. I thought the premier version was $80 Fed plus $40 for state = $120.
Did your friend choose any additional service?

I think the average going rate for a preparer prepared return with Sch E is north of $200.

He bought no extras.... but I see so many here who charge 200 to 350. My point in sharing was that TT isn’t cheap anymore.

that return in my office would have been 600.

If he had to pay someone for the advice you gave him, his return would have cost even more.

$100. That is unbelievable. That sort of thing is what makes people undervalue the service and not realize how complicated the Code is.

Absolutely. At least TurboTax asks squilliards of questions, imprinting the idea of how complex the tax code actually is.

I think $250 is unbelievable. As missing donut astutely points out, its all persepective.

I imagine an office doing 300 1040's at $250...

thats $75,000 gross. After expenses etc, you may as well work for the department of Motor Vehicles.

$75k gross for a firm that does 300 1040s at $250 each would net $55k+ for 3 months' work. I think a lot of people would find that preferable to working for the DMV.

$100. That is unbelievable. That sort of thing is what makes people undervalue the service and not realize how complicated the Code is.

Absolutely. At least TurboTax asks squilliards of questions, imprinting the idea of how complex the tax code actually is.

I think $250 is unbelievable. As missing donut astutely points out, its all persepective.

I imagine an office doing 300 1040's at $250...

thats $75,000 gross. After expenses etc, you may as well work for the department of Motor Vehicles.

$75k gross for a firm that does 300 1040s at $250 each would net $55k+ for 3 months' work. I think a lot of people would find that preferable to working for the DMV.

Its all a matter of perspective I suppose. Assume you are 45, self employed, you do that from your house? You need health insurance, etc. "Perspective". You need to fund your retirement, etc.

I'm with Missingdonut on this one. Employer-provided health insurance is (in most cases) not much use if one's illness lasts more than twelve weeks. At that point, you're out on your own. Every day, my wife helps sick people transition from the hospital to home care. A large part of her job is helping people get interim charity care or using other inventive means to get them care until Medicaid kicks in.

Its all a matter of perspective I suppose. Assume you are 45, self employed, you do that from your house? You need health insurance, etc. "Perspective". You need to fund your retirement, etc.

I respect you and the firm that you've built, in large part because you figured out what you wanted out of your professional life and took actions to make it happen. I respect a lot of the people here for running their careers the way they want (or working towards that goal). So if a person is happy making $55k for 3 months' work, in my opinion, bully for them. If they're not happy with that, but are taking steps toward their happiness, that's awesome too.

From the perspective of a regional or a Final 4 firm, you undercut the market. You think firms which charge $200-$350 for that return undercut the market. JAD and I look down at the EA firm across the street from me for undercutting the market. Interestingly, I know someone who used to work for the EA across the street, and the attitude in that office is that the CPA firms in the area are ripoff artists -- I can only imagine what they would think about your prices or what the regionals charge. Everybody looks down at someone else... we all come from a different perspective.

I'm not disagreeing with the central thesis of your argument at all, by the way. But not everyone can have your practice (not everyone has the resume you have, nor does everyone live in an your area) and it does factor into pricing.

Its all a matter of perspective I suppose. Assume you are 45, self employed, you do that from your house? You need health insurance, etc. "Perspective". You need to fund your retirement, etc.

I respect you and the firm that you've built, in large part because you figured out what you wanted out of your professional life and took actions to make it happen. I respect a lot of the people here for running their careers the way they want (or working towards that goal). So if a person is happy making $55k for 3 months' work, in my opinion, bully for them. If they're not happy with that, but are taking steps toward their happiness, that's awesome too.

From the perspective of a regional or a Final 4 firm, you undercut the market. You think firms which charge $200-$350 for that return undercut the market. JAD and I look down at the EA firm across the street from me for undercutting the market. Interestingly, I know someone who used to work for the EA across the street, and the attitude in that office is that the CPA firms in the area are ripoff artists -- I can only imagine what they would think about your prices or what the regionals charge. Everybody looks down at someone else... we all come from a different perspective.

I'm not disagreeing with the central thesis of your argument at all, by the way. But not everyone can have your practice (not everyone has the resume you have, nor does everyone live in an your area) and it does factor into pricing.

Very well said and I respect you and agree with you.

Here is what I would add. I come at this from the business side with as you stated Big 6 experience. I actually do not think big firms look at me as undercutting them. I have several friends who are partners at PWC, GT etc. They refer me work as they KNOW a $1,500 client for me is not worth their time. There is a market for everyone. That said... I look at economics. I have seen so many self employed people get to their 50's and have very little saved. So... I absolutely say we MUST build in say $12 to 20K for retirement and 10K for health insurance just to break even. If our business was the restaurant business, me personally, I am not Ruths Chris or The Palm. I am probably Bone Fish grill or a mid priced restaurant. The Palm never cares who's eating at Bone Fish. Many want to be Apple Bees etc. BUT, the lower your prices, the more you become that mom and pop, who sometimes doesn't get to the phone, is late to work, sends unprotected pdfs on a gmail account.

FWIW... I coach to young CPA firms, both guys in their 30's on practice management. I was coached many years ago and was lucky to have found 2-3 mentors.

I'm not looking down at the guy doing it for $100. I just don't think he made the best decision for himself in pricing himself at that level. I actually feel sorry for him. I wouldn't sharpen my pencil for that fee. If it were a situation where I absolutely had to earn that money in order to feed my family, I'd go down the street and get a job serving coffee at Peet's or Starbuck's. We work at the intersection of government corruption and Congressional incompetence. I would not work this hard at something this complicated in this toxic environment for $100. I would not let anyone rent space in my head for $100.

FWIW... I coach to young CPA firms, both guys in their 30's on practice management. I was coached many years ago and was lucky to have found 2-3 mentors.

I'm glad that you're mentoring others; if they have similar goals in life to yours, it'd be hard to have a better person in their corner. I know I've stolen incorporated some ideas you have posted here. And you are right; I was stretching with the Big 4, but you don't have to go too far down the list of regional firms to find one that would be competing for your clients.

My disagreement, though: Not having enough saved in retirement is entirely different from having relatively low earnings. Some people making $40k/yr contribute more to their retirement than people who make $150k/yr, and it doesn't take a rocket surgeon to figure out who will be happier in retirement. Self-employed people are not inherently better or worse with money than others; there's just a bigger pot of money to either spend wisely or piss away.

That practitioner we talk about, doing 300 returns in tax season netting $55k less $10k for health insurance, still makes more than 2/3 of all working individuals in America, and they do so having close to 9 months off. While that level of income and lifestyle doesn't appeal to you, there are certainly a lot of people that would kill for that.

I'm not looking down at the guy doing it for $100. I just don't think he made the best decision for himself in pricing himself at that level. I actually feel sorry for him.

I think it's fair to say that we are both being judgmental about that practitioner. But, what do either of us know about running a firm? That EA built a firm that does 3,000 returns a year, and not all of them are that cheap!

I have no problems admitting when I am being judgmental, crabby, or just generally a grouch. I don't need anyone else to tell me when I am being so. I was not being judgmental about the guy making $100 per return. I was feeling sorry for him and wondering about his thought processes. I am being crabby/judgmental/grouchy about someone else telling me what my motivations are. You do not hear the voices in my head or know the motivations in my heart.

We seem to have different definitions of what we mean by being judgmental, and that while my definition is not inherently derogatory or negative, your definition has some negativeness. I am not meaning any offense here.

I'm simply stating that both of us believe that we know the pricing aspect of this business better than the EA. Whatever word you'd use to describe that, substitute in my post.

$100. That is unbelievable. That sort of thing is what makes people undervalue the service and not realize how complicated the Code is.

Absolutely. At least TurboTax asks squilliards of questions, imprinting the idea of how complex the tax code actually is.

I think $250 is unbelievable. As missing donut astutely points out, its all persepective.

I imagine an office doing 300 1040's at $250...

thats $75,000 gross. After expenses etc, you may as well work for the department of Motor Vehicles.

$75k gross for a firm that does 300 1040s at $250 each would net $55k+ for 3 months' work. I think a lot of people would find that preferable to working for the DMV.

Its all a matter of perspective I suppose. Assume you are 45, self employed, you do that from your house? You need health insurance, etc. "Perspective". You need to fund your retirement, etc.

There is a CPA firm down the street from me that does Sch A returns for $150 and there are multiple practitioners. I have no idea how they are profitable, but it’s been around for 20 years.

I come at this from a different angle. I’m only in my third tax year (but my 12th year as self employed) and the learning curve has been steep on the tax side of things, but I have enjoyed it. This year I will do about 200 1040 returns at about $250 on average. I don’t live on any of my tax revenue, all $40,000 of profit goes to retirement. I’m in my mid-30’s and make a living that supports my lifestyle as a financial advisor.

The tax business allows me a to get ahead much faster and it also brings in new investment clients. I have added $20,000 in investment advisory revenue this tax season so far. To me, it’s getting paid to prospect while funding my retirement. Not many tax clients convert to advisory and I don’t push my services, however, the few that convert do so very naturally when I see a need and say, “Have you ever considered..”

If I had to support my family with only tax revenue, there is no way this model would work. Even with my current setup, I can already tell changes will need to be made as I get closer to capacity. There are so many different business models and ways to run a business, pricing is a very subjective topic.

There is a CPA firm down the street from me that does Sch A returns for $150 and there are multiple practitioners. I have no idea how they are profitable, but it’s been around for 20 years.

I come at this from a different angle. I’m only in my third tax year (but my 12th year as self employed) and the learning curve has been steep on the tax side of things, but I have enjoyed it. This year I will do about 200 1040 returns at about $250 on average. I don’t live on any of my tax revenue, all $40,000 of profit goes to retirement. I’m in my mid-30’s and make a living that supports my lifestyle as a financial advisor.

The tax business allows me a to get ahead much faster and it also brings in new investment clients. I have added $20,000 in investment advisory revenue this tax season so far. To me, it’s getting paid to prospect while funding my retirement. Not many tax clients convert to advisory and I don’t push my services, however, the few that convert do so very naturally when I see a need and say, “Have you ever considered..”

If I had to support my family with only tax revenue, there is no way this model would work. Even with my current setup, I can already tell changes will need to be made as I get closer to capacity. There are so many different business models and ways to run a business, pricing is a very subjective topic.

You sound pretty smart to me. I manage quite a bit of money as well as a CFP. I am at the point I only do tax work for investment clients with a few exceptions. PM me if you ever want to chat.