Feedback regarding future plans?

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#1
AlexCPA  
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Hello there,

I just finished a busy season assignment at a local tax firm and would greatly appreciate some feedback regarding my future plans.

As a CPA, CFP, and EA with 10 years of experience in financial planning, fee-only investment management, and personal and business income tax preparation (4 busy seasons), I want to eventually work from home and prepare tax returns for other CPAs -- that is, I want them to "outsource" their tax return preparation duties to me. I have experience with Lacerte and ProSystem fx Tax, and it is my understanding that both software packages allow for remote work to be done via back-and-forth transfers of client files. I highly prefer this method of file transfer as opposed to use of remote desktop which seems to require the help of an IT person to get working properly (at least in my experience).

I am extremely comfortable with a paperless workflow so the workpapers I create would consist of Excel spreadsheets and PDF files to be included with each prepared return (along with a tied-out PDF copy of the return). Eventually, my goal is to also provide financial planning services to tax clients (working together with each respective CPA firm and/or working out a split-fee referral arrangement).

With regard to client confidentiality, I have researched the requirements for the CPA firm to obtain permission from clients before sharing their data. It is my understanding that I would qualify as a third-party provider of "auxiliary services" per IRC §7216 and CFR §301.7216-2(d)(1) which would preclude the CPA firm from the requirement to disclose the third-party relationship. I am not advocating any sort of secrecy around this, but I wanted to be sure that this was well within the bounds of the rules even in the event that no disclosure is made. As I would not have direct communication with clients, there would be no real way for me to confirm this disclosure anyway.

What am I missing? Is there anything about my plan that doesn't sound right? Would you consider such an arrangement for your firm? Why or why not?

Also, what is the best way to market this model to CPA firms?

Your feedback is greatly appreciated! And as a long-time lurker, I thank you for all of your insights, engaging discussions, and humor!
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#2
irc162  
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I did something similar when I first started out. Granted, that was a very long time ago, and things weren't as "digital" then. But I think some of the things I learned may still be helpful.

1. I picked up a lot of clients by cruising the "help wanteds"----firms that were advertising for CPA/employees. Once I identified likely firms, I sent them the equivalent of what Liz Ryan at Forbes Magazine calls a "pain letter" (https://www.forbes.com/sites/lizryan/20 ... 7c86d66503). In that letter, I laid out why it made more sense to engage me than to hire a permanent employee.

2. Have a written engagement letter and put a lot of thought into it, particilarly as to liability issues. Everthing from identity theft to mistakes on returns to clients that go elsewhere. If something goes wrong, the firm may well want to cast blame on you. You are going to be a convenient "fall guy/gal". Your engagment letter should make you as "bullet proof" as possible.

The other issue you want to address is your ability to work for other firms, expecially if you are working for more than one firm in the same local area. Lots of sticky issues can come up. If a client leaves one firm and goes to another----and you do work for both firms----even if you are blameless, there could be some unpleasantness.

3. When you interview prospects, you really need to take a hard look at how the other firm approaches tax law and how much risk they are willing to take. If you are more conservative in your approach, you will not be happy working with a firm that skirts the outer fringes of tax fraud. Vet your prospects carefully. You need to know in a general way, who their clients are. Some firms with a very slick appearance---and who seem very eager to have you on board----may turn out to have some very slimy clients.

Even if you are not the final "signer" on the return, you still need to sleep nights. You should also remember, that even if you don't actually sign the return, in the eyes of the taxing authorities, you are arguablly still a preparer of that return.

4. Lastly, it is not always easy to stay completely invisible to clients. Especially in smaller firms----and these may be the firms that are most eager to engage you----there will be times where you are told to call or email the client with a request for missing information.

I found out that having clients know who you are is not necessarily a bad thing. Right now, you just want to work for other firms. That may not always be the case. Eventually, you may want your own clients. It may be that one of the firms you work for may wind up shedding clients or the principals may retire. In that case, and if you want to take on those clients, there will be an easy transition because the clients already know you.
 

#3
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What is it you are trying to accomplish? Is that a long term goal or a short term goal until you open a practice?
 

#4
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AlexCPA wrote:What am I missing? Is there anything about my plan that doesn't sound right?


It sounds like you are a higher value proposition than as a remote preparer. Your value would be best utilized in meeting clients or reviewing staff accountants' work rather than keypunching W-2s and the like. Long term, you will do better with your own clients (why work for $50/hr for someone else when you can work for $250/hr?) and the integrated CPA/CFP could be a selling point for your own practice. So I end up with the same question as southparkcpa: is this a temporary thing or your long-term aspiration?

Personally, I would be uncomfortable sending my firm's files to a contractor just from an IT security point of view. CCH has a cloud version of their software which would eliminate the need to transfer files back and forth (via Citrix or similar, not remote desktop). I'm sure some firms use Lacerte in the cloud. This is the future of the profession and you need to embrace it.


irc162 has some really amazing advice and every word is gold.

I do some remote per diem work for a colleague who had some unexpected growth last year and I have some excess time. In my case, the real terms of the engagement are: (1) As my personal firm grows year by year, my tax season availability will decline, eventually to zero; (2) my clients are my primary focus, and while I will guarantee X hours of availability per week, the specific times I will work is set by me; and (3) I am entitled to keep copies of the review notes I make. But we both are pragmatic and we are not blind to what the relationship is.

My research of §7216 came to a similar conclusion as you. Also, even though if something went wrong it would be the other firm's E&O on the hook, my E&O insurer requires that I report and pay premiums on my contractor revenues. It's a small thing, but not something I expected.
 

#5
AlexCPA  
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Thank you all for your insights and detailed responses, especially during the height of busy season!

irc162 -- these are all great points -- thank you for taking the time! As far as being visible to clients, I would not mind that at all. I almost always pick up the phone and call clients before sending an email because that seems to facilitate the most efficient communication. Also, I find that clients are pleasantly surprised when they receive a personal call after exchanging emails for years with their previous preparers -- even if it is to discuss taxes!

I appreciate your insights also, missingdonut. To answer the question that you and southparkcpa posed, I absolutely plan to acquire my own tax and financial planning clients and bill them well above the $65.00 an hour that I would initially charge for third-party tax preparation. I felt that this is one way to create a steady flow of tax return work (through relationships with several CPA firms) that would allow me to pursue my own clients while also providing financial planning services for the CPA firms' clients. With the right agreement, I can see a mutually beneficial situation where clients get a solid financial plan, the CPA firm gets additional revenue from their existing clients, and I get to charge far more than $65.00 an hour. :)

The other option, of course, is to simply acquire an existing tax practice. This is always a possibility but one that I will need to consider more deeply before taking the plunge -- but I imagine that such an adventure would necessitate a separate post altogether!

As far as cloud integration, my understanding is that firms using ProSystem fx Tax would need to change their software to CCH Axcess Tax (the tax preparation component of CCH Axcess) to utilize cloud-based preparation functionality. If this is the case, then I'm thinking it might create too much of a burden for the CPA firm to be useful. Am I missing something here? Is there a way to prepare tax returns using ProSystem fx Tax in the cloud?

With regard to Lacerte, that also seems like an "on-site" solution which does not allow for any work to be done through the cloud. Am I missing something in this regard?

Thanks again -- your insights are very much appreciated!
Even more of my antics may be found on YouTube:
https://www.youtube.com/channel/UCXDitB ... sMwfO19h7A
 

#6
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So I had a guy who worked 2-3 days a week for me while he built his own firm. This was 2002. He worked for me until 2008. It became very clear that he couldn't build his own firm. We're friends today but he still bills out less than 75K from his house . But his issue in my view was one of confidence, a take charge approach and controlling clients. There is no replacement for getting in front of people. technical skills are great but you need to have clients who believe in you. That comes from face to face experience AND technical skills. If I had to do it all over again, I would have bought a practice . I worked for 2 small firms per diem in NYC when I left a big 4 firm. I thought I was a good CPA but they taught me a LOT. If I were you, I would find a small firm where you can go, work 2-3 days a week in their office and continue to grow professionally all the while adding to your business and looking for a retiring practitioner with a small book of say 100 to 200K in billings.
 

#7
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$65/hour as a contractor seems like a high rate for grunt-level tax work, even an experienced CPA/EA such as yourself, but I've been wrong before and could be wrong right now.

I don't really see a transition from ProSystem fx to Axcess to be much of a burden, certainly not as much as transitioning from ProSystem fx to Lacerte. But I was also thinking that the tax program can be installed on a remote server and that the program can be accessed from anywhere in the world if you have the right credentials.
 

#8
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missingdonut wrote:$65/hour as a contractor seems like a high rate for grunt-level tax work, even an experienced CPA/EA such as yourself, but I've been wrong before and could be wrong right now.

I don't really see a transition from ProSystem fx to Axcess to be much of a burden, certainly not as much as transitioning from ProSystem fx to Lacerte. But I was also thinking that the tax program can be installed on a remote server and that the program can be accessed from anywhere in the world if you have the right credentials.


You’re not wrong.... I would never pay it for remote type work. I would pay it for a solid on site guy that I can communicate with.
 

#9
AlexCPA  
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Thanks again, all of you, for taking the time to provide feedback. I appreciate it!
Even more of my antics may be found on YouTube:
https://www.youtube.com/channel/UCXDitB ... sMwfO19h7A
 


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