Fee Question

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#1
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TX
Good afternoon -

This is the first tax season that I'm doing taxes on the side and I've run into my first fee conscious client (or rather his wife). I've learned a couple of valuable lessons from this experience in quoting a price before I see everything - but I suppose you learn everything the hard way. Tell me if the following fees seem reasonable - this is a 1040 with Schedule C (Used Car lot), Schedule E (Rental property). I originally quoted the client around $500 when I was just under the assumption it would be the schedule C alone. Well his books turned out to be a nightmare (go figure) and then once I got his stuff I discovered that he had a rental property as well. Then he asked me to prepare his Franchise Tax as well as his Property Tax Rendition (I explained these would be extra and he agreed.) I charged him as follows:

Books: $200
Return: $650
FTR: $100
PTR: $100

Total: $1,050 for bookkeeping 2 bank accounts, 1040 w/ Sch C and E, and FTR/PTR prep.

He didn't say anything when I went to his house to deliver the return and invoice him but his wife called two days later to complain about the fee. I explained to her about the Schedule E not being quoted as well as FTR an PTR but nonetheless she's left me second guessing myself. I know from my years in public accounting that these fees aren't reasonable but I would love any feedback from the community. Thanks in advance!
 

#2
Frankly  
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dfrancpa81 wrote: ... but nonetheless she's left me second guessing myself.
I wonder how much experience she has in pricing tax services.
 

#3
JAD  
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The first bill that I issued after going out on my own was for $660. I remember the amount because it took me 3 days to mail it. I kept looking at the time. I didn't see anything that I had done wrong or inefficiently. I'd print the bill. I'd put it on the desk. I'd throw it away. Rinse, repeat. And this was for a client who could not have cared less. It takes some practice.

I don't know the market in TX, but for what you have described, for around here, what you billed is too low. If you don't respect yourself, you can bet that no one else will either. Maybe W is really uneducated about what is involved in your work. Maybe she is always looking for a deal. Maybe she thinks bargaining for the lowest possible price is part of the game.

If you need the fees to feed the children, then recognize that truth, chin up, keep working for a better quality client base. If that's not your reality, then just explain honestly, respectfully, and let the chips fall where they may. The loss of this particular client does not sound catastrophic to me.
 

#4
CathysTaxes  
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Nothing wrong with what you charged. I also learned the hard way about giving a quote for tax prep or fixing someone's mess.
Cathy
CathysTaxes
 

#5
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SF Bay Area
Someone wisely told me that pricing a tax return prior to seeing scope of work , was like quoting house painting work w/o seeing the house.

You did a good job of communicating changes to fee estimate and provided valid reasoning behind fee increases.

Fees depend a great deal on location ( for SF Bay Area in California - your fee is quite low) For Texas, I don’t know the market or what level of clientele you are dealing with.
Just out of curiosity , for your bottom line profitability:

1) How many hours did it take you to complete ?
2) Did you pay out of pocket software pay per return costs?
3) Is the client an asshole ?

Thanks for posting. I always have great difficulty with quoting fees , especially with complex tax situations with unknown elements
 

#6
wel  
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I like that analogy - "pricing a tax return prior to seeing scope of work , was like quoting house painting work w/o seeing the house." I've often received the question "what does your firm charge for a tax return" from someone in passing + I suspect just about everyone else here has also. That quote sums it up nicely.
 

#7
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I just got this....

"Would you be able to give us a quote of how much it is to do our return this year? We were expecting that it would be the same as last year and can’t afford anything extra.

We appreciate your due diligence on the care into our return, and we are extremely cost conscious right now due to my inconsistent income as you know."

:oops: Last year's fee was $475 for 1040, Sec C, Sec E, 2016. It is low for a big city to begin with. After I finished with the returns, he asked me to calculate a scenario and I did not charge him for that.

This year he asked about the price. I told him it would be higher because I did not include the calculation in the fee. Then he said he did not need that.

But I want to raise it to 550 this year because I think it is the fair price. But it seems like he just forced the same price on me.

I start working on this year and knew I just provide some valuable judgement call that saved him taxes.

What would you do?
 

#8
CathysTaxes  
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Everybody is cost conscience. Don't call me in April and ask for a break in price. Any break in price is for January returns or after April 17th.
Cathy
CathysTaxes
 

#9
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cyberdom wrote:What would you do?


"Well, I can extend your return which will give you time to save up for my fee, which will be $550 this year, or you can pick up your paperwork."

That said, WIP does not increase in value with age. If you don't bill right away for what you provide to a client, you're the one that made a mistake. You really shouldn't be trying to collect this year what you should have billed last year.
 

#10
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TX
Gnfr_tax wrote:Someone wisely told me that pricing a tax return prior to seeing scope of work , was like quoting house painting work w/o seeing the house.

You did a good job of communicating changes to fee estimate and provided valid reasoning behind fee increases.

Fees depend a great deal on location ( for SF Bay Area in California - your fee is quite low) For Texas, I don’t know the market or what level of clientele you are dealing with.
Just out of curiosity , for your bottom line profitability:

1) How many hours did it take you to complete ? Probably 6 hours total including bookkeeping.
2) Did you pay out of pocket software pay per return costs? I pay per return so around $40.
3) Is the client an asshole ? No I really like the client. I worked with him in the past before I was a CPA and when I saw he was starting a small business I reached out to him. He's very nice but his wife is the one with money so I think she was butthurt that he didn't let her prepare the taxes. Good thing - she told me on their rental in the past that she had just subtracted their mortgage payments from rental income received. :lol: :lol: :lol:

Thanks for posting. I always have great difficulty with quoting fees , especially with complex tax situations with unknown elements
 

#11
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TX
Thank you to everyone that replied. I haven't heard anything from them but you all made me feel more confident. The last thing I wanted to do was bill to low and end up doing it every year for too little money. My guess is if he continues in his business he will find out that the fee I charged was more than reasonable. I did some checking around town and He would pay at least $400 more at any big firm here in town. Thanks again - glad to have found this forum.
 

#12
novacpa  
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You said he had a "car lot" - was a Physical Inventory taken - Inventory Sheets preserved ?
 

#13
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Cleaning up their books should be charged hourly, not a flat fee.
 

#14
novacpa  
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I detest those situations where the - Husband/BF - owns & operates the Business - and "delegates" the "Bookkeeping" to his wife/GF. Typically, she has no Accounting/Tax training - worse she has no appreciation for what it takes to comply with the "recording keeping requirements" of the IRC. Her instinct is to think "cheap" (how much is this costing us) - the furthest thing from buying "value".
I had this exact situation - where the case was "under field audit" by the IRS. Wife/GF - did her own "kitchen table" P&L - slapped it into a cheap tax program - e-filed it. They didn't want to pay fees. By the time I got "panic call" from them - the Agent had disallowed 3-years of all Sch C Business Deductions, Yes all of them - a big $-0-, assessed over 300k.
So much for "do it yourself" - now their perception of Professional Fees has drastically changed.
 

#15
CathysTaxes  
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My biggest pet peeve as well only the ones I encounter still don't want to pay for the the services because it's money that want to spend elsewhere.
Cathy
CathysTaxes
 

#16
WBR  
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novacpa - you are correct for the smaller businesses, I encounter very few that actual have a bookkeeper. I believe mostly because of QuickBooks etc they feel that writing the checks is all that’s needed. Most new business clients I have to train how to do bank rec’s. These are not startup businesses but ones that have been in businesses many years.
 

#17
ATSMAN  
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CathysTaxes wrote:My biggest pet peeve as well only the ones I encounter still don't want to pay for the the services because it's money that want to spend elsewhere.


I run into that quite often and this is my comeback. I had a used car dealer balk at paying my fees. So I said look I don't work free and neither do you so tell you what I will do. My son needs a new pickup truck because his old one is on its last legs. I will send him tomorrow to your lot and you can give him that F150 decked out in the front and we will call it even. You should have seen his face. The checkbook came out of his briefcase so fast I could not believe it.

I usually don't have much problem getting paid from other business people. I have problems getting paid from young people either living with their parents or they expect every service to be free!
 


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