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New Client: Red Flags

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#1
TY20XX  
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As we enter the thick of tax filing season, I wanted to know what red flags to look out for with new clients. Can anyone provide any good resources or advice.

What documents would you ask for?
What are things the client may say or do?
Anything else that I should look out for?
How sophisticated/savvy are these guys?

Any stories you might share would be helpful. Where before or after the engagement. It seems like when ever something goes wrong, the shoulda, coulda, woulda factor comes into play. I'm trying to avoid this.
 

#2
AlexCPA  
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I always ask for and review the income tax returns filed for the prior two tax years. Firstly, I'm assessing whether the potential client is sufficiently organized and tech-savvy to provide those documents electronically (my practice is 100% paperless). Secondly, I review the returns to ensure that the complexity and nature of the returns are within my wheelhouse and to spot any shenanigans which could increase risk associated with that prospect.

Recently, I reviewed the returns of a taxpayer who deducted almost $100,000 on Schedule C as wages to himself. No payroll was actually done -- they just deducted the wages. :shock: Needless to say, this was a no-go.

Another prospect took $80,000 in bonus depreciation on a truck in tax year 2017 and claimed 36,000 business miles in that year and 40,000 miles in tax year 2018 with about $500 in total revenue for both years combined. Thanks but no thanks. :lol:
Even more of my antics may be found on YouTube:
https://www.youtube.com/channel/UCXDitB ... sMwfO19h7A
 

#3
TY20XX  
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Yes, I considered prior year returns. Do you look to see the prior years preparer as well? It may have been self prepared or prepared by a firm or individual that may be "too aggressive ".
 

#4
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This should probably be in the Business Operations sub and not the Taxation sub.

For prospects who are not referrals I do an email screening first to qualify them. It's efficient and I don't lose 15-30 minutes of my time on a call doing it this way. If they are low AGI, or low complexity and I cannot add value, I politely pass. I started this after wasting 15-60 minutes of my time on a few prospects last year whose complexity does not justify a paid preparer.

For the ones that make it through, I need to see a copy of all as-filed prior year returns, and we hop on a 30 minute "get comfortable" call during which I inquire about year-over-year changes and we jointly decide if we are a good fit.

On the prior year returns you're looking for "shenanigans" as previously stated, opportunities to add value to the prospect, etc. Also try to gauge how long it would take you to prepare last year's return based on the state of the prospect financials, then take into consideration changes year-over-year and you have a good idea of what fee you're going to quote for the current year returns.

Some shenanigans are so bad that I immediately decline the engagement and tell the prospect we're not a good fit.

For the not-so-bad ones, I bring them to the prospect's attention. Their reaction will tell you whether or not it's worth it to move forward. The ones that give you the vibe that they don't think the material error is a big deal, don't want to amend etc, those are the ones to give strong consideration about passing on, as I have found these ones will usually pressure you later down the road to be "aggressive" without even knowing what that word means.

The ones that are reasonable will probably agree to an amended return engagement in addition to the current year one.

A major qualitative factor that I rely on is the intuition factor... It doesn't happen a lot, but when a prospect causes me a ton of stress and they haven't even onboarded yet, I turn around and decline the engagement no matter how far along we are in the onboarding process. I had one or two of those last year.
 

#5
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Lots of good stuff in this thread.

I have a "new client engagement/expectation letter" that I make them read and sign. The difference between mine and others, I think, is that there an is emphasis on expectations.

If any little thing about a bad client has stressed me out in the past, that issue is addressed in the letter and clearly and in great detail warns the client that our office is not a station for a train wreck.

It warns them that we charge by the hour for clients that require any extra attention. We warn them about our turn around time and deadlines, that we don't merge or compile numbers on a P&L or accept deductions in piece meal. We warn them the we will not compromise ethics or work outside of the tax code including as the deadline draws near and the tax return needs to be filed to avoid penalty. I could go on and on, of course. We list out about 30 of these things that stress us out (due to prior conflicts with clients).

They get mad at us anyway - but at least I can politely show them that I clearly warned them and that they must comply accordingly or they can choose to disengage.

This solved 90% of my problems with "bad' new clients.
 

#6
belle  
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When I was taking new clients, I always asked why they were leaving the prior preparer. The response was usually revealing. And if they've bounced from preparer to preparer to preparer.... it raises suspicions.
 

#7
ATSMAN  
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If your business model is to strictly work with referrals then it is easier to smoke out junk!

This is what I do and it has worked well for the most part:

1) Review prior tax returns, preferably 3 years but I will settle for 1 depending on the organization of the client.
2) Explain to the prospect your workflow model. I make sure they understand very clearly the deadlines of submitting tax documents, responding to my inquiries and when their return goes on extension. Make sure your timeline is agreed upon
3) Review your billing practice. Do you take a retainer with the engagement agreement or bill after you complete the tax return etc. Review your engagement agreement.
4) Based on your review button up loose ends
5) This is the important one. Make it clear that you follow the rules and regulations that are black and white. You don't like to dabble in grey areas. This is where I have smoked out many prospects who really wanted a more aggressive accountant.
I started doing that after a painful experience and it has worked thus far.
 

#8
Preppie  
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Not really red flags, but things I have leaned to clarify (because clients just don't know the right terminology):

"I pay alimony" - almost never true. Its usually child support or a property settlement.
"Grandpa gave me that" - probably inherited
"I need to file for estate tax" - almost never
"I paid $60K in tuition" - this probably included room and board and other ancillary expenses
"We put $45K in our Traditional Roth IRA" - Just start asking questions until you figure out what happened
"I have an LLC, so I can write off my education expenses" - client spent $30K on a Get Rich in Real Estate Boot Camp, but has not yet purchased a property
 

#9
FLAcct  
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I always ask the person why they are looking for a new tax return preparer. If they say they are looking for someone to prepare their returns for a lower price, they're out. I don't want to be anyone's cheaper tax return preparer.
 

#10
ATSMAN  
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If price is the sole determining factor it is doomed from the get go! The next tax guy/gal that gives them a dollar off they will jump ship. I know some tax preparers in my town advertise informally that they are the cheapest and their business model is get as many taxpayers in a year to prepare returns without much expectation that they will return the following year. It is very transactional model.

I lost one young single client with 1098-T, 2 W2 to one of that for $100!
 

#11
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ATSMAN wrote:If price is the sole determining factor it is doomed from the get go!


Agree. Also the ones that are struggling with the decision to move forward because your fee is out of their budget.

I usually politely tell them we're currently not a good fit but to circle back in the future if their circumstances change.
 

#12
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I like the new client expectations/acknowledgements letter idea in post #5. I think I might implement something like that. Thanks for the idea.
 

#13
novacpa  
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FLAcct wrote:I always ask the person why they are looking for a new tax return preparer. If they say they are looking for someone to prepare their returns for a lower price, they're out. I don't want to be anyone's cheaper tax return preparer.


Ask for your fee in advance - "I get paid in advance for new clients" - hear the silence.
 

#14
ATSMAN  
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novacpa wrote:
FLAcct wrote:I always ask the person why they are looking for a new tax return preparer. If they say they are looking for someone to prepare their returns for a lower price, they're out. I don't want to be anyone's cheaper tax return preparer.


Ask for your fee in advance - "I get paid in advance for new clients" - hear the silence.


With new clients I ask for a retainer. If there is any hesitation that tells me there will be some issues in the future and depending on the reason I make a decision. The typical answer is I forgot my checkbook or I don't have my credit/debit card with me. The answer I am looking for is that i will get it for you ASAP!

I am not doing any work for strangers that may come later and want their papers back because they found a cheaper preparer. Been there and I learned my lesson :cry:
 

#15
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ItDepends wrote:I have a "new client engagement/expectation letter" that I make them read and sign. The difference between mine and others, I think, is that there an is emphasis on expectations.


Would you be willing to share some of the points that the letter touches upon in your free time?
 

#16
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I let them do their initial typically BS statements of how simple their returns are, then I begin asking questions that always raise red flags to me or reveal their taxes are far more complicated:

-How many brokerage accounts do you have?
-Do you have foreign assets?
-Are you self-employed?
-Do you own any real estate?
-Do you itemize?
-Are you ok with working electronically and remotely?
-What have you historically paid for their tax returns?
-IF they mention any derivative of the word "aggressive" in terms of me as a CPA, they can go on their way to someone else
-Do you accept my minimum fee, with the knowledge that it is simply the minimum and not the amount you may ultimately pay?
-How readily can you accumulate the required documents?
-Do you use a bookkeeper or any sort of accounting software? I distrust anything scribbled on a piece of paper
-New clients require a retainer. Do you have any hesitations in providing one? If they answer yes to hesitations, they can move on
-Why are they seeking a new tax preparer, or have they ever used one in the past? I do not like working with people that have historically self-prepared, because they just do not understand the complexities and costs...they truly seem to think we use TurboTax to spit out tax returns
-What did their prior tax preparer do or not do to their liking?
-If cost is one of the first things to come up before I can even see their prior tax returns, I throw out such a high number that it makes them go away
-I operate in the black and white and operate accordingly...I will be as aggressive as it allows me to be. If you are seeking someone to CREATE gray areas of tax law, move on because I am not your person
 

#17
ATSMAN  
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If you are seeking someone to CREATE gray areas of tax law, move on because I am not your person


This is a very good policy! If I had $10 for each time I told a prospect to move on, I think I could retire!

What is sad is that we have accountants in our area that tout that they are "super aggressive" and get you the lowest tax bill :evil:
 

#18
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ManVsTax wrote:
ItDepends wrote:I have a "new client engagement/expectation letter" that I make them read and sign. The difference between mine and others, I think, is that there an is emphasis on expectations.


Would you be willing to share some of the points that the letter touches upon in your free time?


This board has been so helpful to me...have at it....

Dear Client:

Thank you for engaging with us to prepare your income taxes this year. We are very grateful to have you as a client and we will do our best to serve you well!

Every year, a very small amount of our clients become upset with us as a result of conflicting expectations. This agreement is designed to disclose these expectations in advance to prevent any issues between us down the road and we ask that you read it thoroughly.

We must have all information and data within 6 weeks of any deadline to file on time for you.

In this time window, we process data on a first come first serve basis. It’s not that we don’t want to help everyone file on time, but unfortunately, we become so saturated with work during these times, that our turnaround time becomes extremely slow. This is even for the simplest items and additions/corrections.

We are clearly warning you now that if we are corresponding or operating with you in this time window that it is almost certain that your tax return will not be filed by the deadline.

We will file an extension for you on request, but there still could be late penalties if you have a balance and do not pay it all by the deadline – which we may not have time to calculate for you.

The tax preparer will not cover or be responsible for late penalties or late filing under any circumstance. We also are not responsible to remind clients of deadlines or to take initiative to file and extension if it is not requested by the client. If an extension is filed, the Tax Preparer suggests that the client files the tax returns as soon as possible as penalties and interest for tax balances might accumulate monthly.

The Tax Preparer may charge by the form, for bookkeeping services, and/or by the hour.

Our estimated quoted rates are by the form, but there may be additional fees for the following items:

• Undisclosed tax situations
• Bookkeeping services
• Redoing, recalculating, and redelivering tax returns that have already been completed
• Managing client data that comes in piece meal rather than in a simple organizer
• Spending extra time on the phone or in person with clients

Generally, we try to warn clients in advance if the situation will warrant extra fees. We are not trying to gouge our clients or milk them for money. Our operating expenses are about $200 per hour and if we are spending our time working and not getting paid for it – we are losing money – and that’s not a business model that would work for anyone. If a client expects us to work for a loss, there will be a conflict, and we kindly ask that bargain hunters and those that expect us to work for a loss seek out another firm.

Our tax preparation services do not include bookkeeping services.

The tax preparer will not extract, interpret, sum, or merge data from receipts, ledgers, bank statements, emails, or other documents that are not official tax forms. The client must instead provide completed financial statements or completed organizers/questionnaires as provided by the tax preparer.

If data needs to be included, a new and updated organizer must be provided. [we provide simple, custom organizers]

The tax preparer will depend on the client to provide the information the tax preparer needs to prepare complete and accurate returns. The tax preparer may ask to clarify some items but will not audit or otherwise verify the data submitted by the client.

Ethics.

We must report your activity exactly according to the facts and the tax laws. Please proceed with this expectation.

The tax preparer will not compromise ethics or accuracy for an on-time filing.

Sometimes, rather than comply with IRS requirements, clients will ask us to “use last year’s numbers”, or “just use this estimate an amount”. This happens especially when a deadline is approaching, and clients feel the stress of having an incomplete tax return with not enough time to finish it. For obvious reasons, we will not be pushed into reducing accuracy/ethics and we will not break the rules to help you file on time. In this case, the client should request an extension and if the client owes a 5% penalty on taxes due for filing a month late – then that’s just how it goes. We will not cover these penalties.

Meeting Times.

When we have a client's taxes nearly completed, which typically takes around 3-6 weeks, we call the client in to review them prior to finalizing, and we provide a half-hour of time to review the return.
If you need more time than this, we will extend this to one hour. If you need more than that, however, we will need to schedule a meeting in May. One off season meeting will be gratuitous. After that, we charge a fee for our time and work.

Fees for additional calculations.

We charge additionally for additions/calculations, such as your request to prepare more than one version of your tax return. Our clients are not just numbers to us and we are not overly concerned with making money. But working for free - which is at a loss after expenses, is not a business model that would work for anyone.

The tax preparer does not retain or store copies of the client's records.

The tax preparer will return the client's original records at the end of this engagement. It is suggested that the Client store these records, along with all supporting documents, canceled checks, etc., in a secure location in case these items are needed later to prove accuracy and completeness of a return.

This engagement does not include additional services, other year tax filings, or future tax filings. Future prices are not guaranteed.

This engagement to prepare this tax return will conclude with the delivery of the completed return to the client (if paper-filing) or the client's signature and our subsequent submittal of your tax return (if e-filing). For Clients wishing to engage with the Tax Preparer for future tax preparation, if all data for future services is not provided to the Tax Preparer within 3 weeks to any deadline, the Tax Preparer will be too saturated with other work to file on time for the Client. Regardless of time of the year, however, the Tax Preparer may be too busy or underqualified to provide future tax preparation services for the Client and the Tax Preparer will only engage for future services with a Client on a case by case basis. Prices may be subject to change from year to year.

The Tax Preparer does not guarantee the Client’s refund or that the Client’s bank will accept the Client’s refund.

The IRS/State(s) may deny or hold or keep client tax refunds for several reasons. We do not guarantee the amount of any refund or the time it takes to receive any refund. Some banks may not accept a direct deposit of a joint tax refund into an individual account. If your filing status is married filing jointly, please check with your bank or financial institution before requesting the deposit of a joint refund into an individual account. Some banks may limit the size of direct deposits and may not accept the IRS transfer. If this happens, the Client's refund may be significantly delayed.

Income tax filing does not include Hawaii General Excise Tax filings (or other state sales tax filings).

Income/sales from a business, rental property, independent contracting, and many other sources of income may be subject to Hawaii General Excise Taxes (or other state sales taxes). These taxes and tax returns are not included with your income tax returns and they are the responsibility of the Client. We will not file Hawaii GE Tax Returns for you unless you specifically hire us to do so separately from your income tax preparation services.

The Tax Preparer cannot guarantee the Client’s claims for credits and deductions.

Certain positions and deductions may be examined and reversed by the IRS. The Tax Preparer does not guarantee positions, deductions, or tax credits. Any additional taxes, penalties, interest, or amendments incurred or as a result from disallowances, adjustments, or misunderstandings between the Client and the Tax Preparer are the responsibility of the Client.

Penalties and fees are the responsibility of the Client.

All filing requirements, penalties, interest, and other fees imposed on a client are the responsibility of the Client.

It is the responsibility of the Client to disclose and report all worldwide income.

The Client must disclose all worldwide income to the Tax Preparer.

Some elections and credits may expire.

Certain elections and credits may expire after various time periods. Any losses incurred because of late election or credit filings will be the responsibility of the Client. Some tax returns can’t be e-filed and must be sent via regular mail. We do not guarantee on-time or successful arrival of mailed documents. Clients who wish to send mail via express or certified services must do so themselves. The Client should verify the arrival of such documents with the appropriate tax agencies.

The Client must check to see that everything was included on their tax return(s).

Additional taxes, penalties, and interest resulting from documents, including but not limited to, forms W2 and forms 1099 that are mistakenly omitted form a tax return are the responsibility of the Client and not the preparer. Before filing, the Client must review the tax return to ensure that all documents have been inputted.

The Tax Preparer does not provide letters for lenders.

We are not able to participate in preparing or signing letters to lenders. We prepare tax returns based upon information provided by the client. We cannot attest to accuracy of information that we have not verified.

The Client must provide the correct entity and tax return type.

If we were not hired to specifically to plan and form your tax entities, we cannot guarantee that we are filing the required forms for your tax situation. The IRS imposes penalties for incorrect form filing – for example - filing a Schedule C when a partnership or corporate tax return was required. The tax preparer will attempt to guide the Client on the correct needed forms based on information given to us form the Client, but the Tax Preparer will not be responsible for penalties resulting from incorrect filings.

It is up to the Client to withhold or pay in enough tax during the year.

The tax code imposes penalties when taxpayers underestimate their tax liability. These are the responsibility of the Client.

The Client may owe taxes to other states.

Some US States are “difficult” when it comes to non-residency and they sometimes seek taxes from US Citizens living abroad or in other states. We are not specifically trained to know the rules of all 50 states. It is the Client’s responsibility to file and pay state taxes appropriately. There may be penalties, interest, and back taxes due for non-compliance. The Tax Preparer will make a reasonable attempt to interpret state laws and help the Client file accurately, but any penalties, interest, or other fees imposed by state tax authorities will be the responsibility of the Client.

Tax filing laws for those with non-US interests are complex – the Client might need a tax lawyer.

The IRS and the Financial Crimes Enforcement Network have various and numerous reporting requirements for foreign (non-US) accounts, trusts, business, business or other entities, gifts, distributions, crypto-currency, and many other items. It is almost impossible for us to ask enough questions to cover all of them. It is solely the Client’s responsibility to discuss and to meet these requirements. Please research these needs carefully as the penalties for non-compliance could be quite large. The Tax Preparer will not be responsible for any such penalties. If the Client has foreign interests of any kind, we suggest legal counsel.

Unless the Tax Preparer clearly made a mistake, there are additional fees for most types of support. Audit representation is not included.

Support with amended tax returns, letters from the IRS or state tax agencies, non-income tax related items, power of attorney, representation, penalty abatement, estimated tax planning, outstanding tax balances, payment installment agreements, additional tax forms such as form 433 or form 1095A are not included with income tax preparation services.

The Tax Preparer does not audit the Client’s work.

The Tax Preparer will perform services only as needed to prepare your tax returns or otherwise agreed upon by written agreement. All work will not include procedures to find defalcations or other irregularities. Accordingly, our engagement should not be relied upon to disclose errors, fraud, or other illegal acts, though it may be necessary for you to clarify some of the information you submit. The Tax Preparer will inform the Client of any material errors, fraud, or other illegal acts we discover and advise accordingly.

Electronic delivery may result in reduced accuracy.

The Client assumes all risks of misunderstandings and miscommunications resulting from electronic services and delivery of services. While we are willing to offer services without the Client being present, we suggest that Client seek out a local tax professional for services in person for more accurate preparation services.

Payment is due prior to filing.

Invoices are due and payable upon presentation. Interest or collection actions may be imposed for payments beyond 30 days.

Tax planning, tax mitigation, and entity formation advice, given by us, may not ultimately be the Client’s best option(s).

Accurate tax planning depends on several factors. We do not guarantee that the options we present are the best for your tax, liability, legal, and financial needs. The Client agrees that the Tax Preparer is not responsible for losses that may be caused by the results of the advice provided. The Tax Preparer officially recommends that the Client hires a business lawyer, financial planner, or insurance broker, etc., to help with these needs.
 

#19
MWEA  
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I had a referral call yesterday. “My guy retired last year and I’m looking for a new accountant. I would come in, he would input my documents, and I would walk out in 15 minutes with a filed return. What would you charge for something like that?”

I ask a few more questions: he has a consulting business, a taxable brokerage account with stock trades, Social Security, and wage income. None of it is difficult, but out the door and filed in 15 minutes? Not a chance.
 

#20
ATSMAN  
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May be his previous accountant was a super human!

Typically what I find when they say they were out in 10-15 minutes is the process of "dropoff". I have a lot of clients that will take 10-15 minutes to show my assistant or I the paperwork, go over the organizer if they are "confused" etc. and any questions they want answered. We then take about 5 business days to prepare the typical return and call/e-mail them to come back for signatures etc.

With a new prospect we go over our procedures and ask specifically if they agree to it. We may make minor adjustments depending on the situation but if the prospect is hesitant we clearly tell them that we are not a good fit for a business relationship and wish them well and bye bye!

About 3 years back one such prospect left our office and came back the next day agreeing to all our conditions. I guess she could not find anything better and then begged us to accept her.
 

#21
novacpa  
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MWEA wrote:I had a referral call yesterday. “My guy retired last year and I’m looking for a new accountant. I would come in, he would input my documents, and I would walk out in 15 minutes with a filed return. What would you charge for something like that?”

I ask a few more questions: he has a consulting business, a taxable brokerage account with stock trades, Social Security, and wage income. None of it is difficult, but out the door and filed in 15 minutes? Not a chance.


Say, "I'm afraid of getting the Virus - just send me images of your tax docs - I will PayPal you for my work"
 

#22
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Thanks everyone for generously sharing your experience and wisdom!

Do you give your estimated fee upfront or it will be determined when the returns are completed?
 

#23
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cyberdom wrote:Do you give your estimated fee upfront or it will be determined when the returns are completed?


I give an 'estimated' fee up front based on what I know, but am clear that the fee will change if circumstances change.
~Captcook
 

#24
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cyberdom wrote:Thanks everyone for generously sharing your experience and wisdom!

Do you give your estimated fee upfront or it will be determined when the returns are completed?


We provide a "menu" list by the form, but make it clear that it's just an estimate. And some of our items, like Schedule C, have a price "range".
 

#25
CathysTaxes  
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I've been burned too many times with estimates.
Cathy
CathysTaxes
 

#26
ATSMAN  
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Do you give your estimated fee upfront or it will be determined when the returns are completed?


I do NOT provide any estimates without checking their prior return(s) and current year tax paperwork. If they can't supply that I throw out a figure that is at least 50% more than my average just to smoke out price shoppers.

Over the years I have found that serious prospects who are looking for quality of work rather the lowest price will be open to discuss with you their tax situation and show you their paperwork.
It is the low ballers who call all day long looking for a price and compare you to the guy down the street! I don't need clients like that. You can pretty much tell by the answers they give to your questions.
 

#27
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CathysTaxes wrote:I've been burned too many times with estimates.


That's why I say "no less than." I will not give out estimates unless I see their documents. If they want a ballpark, I give a wide range and say it is impossible to know without seeing their tax situation.

Had a guy the other day just price shopping. He did not like my minimum tax fee. That is precisely what I implemented it, to eliminate dealing with cheapskates that do not value my time.

I also do not want to progress with a prospective client if they will not show me their prior tax return so I can get an idea of what I may be dealing with...including prior year messes.
 

#28
jesella  
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ItDepends, thanks for sharing your treasure trove of a letter. I don't think you could get any clearer in your expectations. There are definitely some sections in there that we need to do a better job of communicating to our clients.
 

#29
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Agree jesella, thank you ItDepends.

My engagement letters cover a lot of the specifics you mentioned, but I am going to make a 2-3 page "new and returning client acknowledgements" template after busy season that I'm thinking is going to make dealing with a couple of my major pain points more bearable.

The template will be more general than the engagement letters and deal with expectations and put everyone on the same page regarding fees and how to keep fees as low as possible.
 

#30
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New Jersey
the types of new clients I avoid:

- some referrals from current clients or family/friends who somehow "have not filed taxes in several years" and actually have significant income/filing requirements. I automatically decline these bc, if they werent worried about the IRS and tax authorities, why would they worry about paying my fee or being cooperative? I have too many, easy going, organized clients to settle for Pain in the butt new clients.


- price shoppers

- refund shoppers

- generally annoying, bad attitude, types. - i regularly receive emails and phones calls from prospective new clients who start off as rude, demanding, and entitled. This 1 guy sent me 3 separate emails and called my office 3 separate times in a single day just to "talk to me for a couple of minutes about taking him on as a new client"

the guy was so annoying and pushy, that I did not bother to even look at his info, I just politely declined and told him we are not currently accepting new clients.

I've had prospective new clients basically harass me after declining their business, asking why I declined their business.



- I HATE to sound prejudiced against people in this situation, but New Clients who are going through a divorce , esp with children involved. No matter what, every time a client couple of ours goes through a divorce, our office feels the effects of their often negative/emotion filled experience. this means catching those clients on bad days, them going off on you from all the stress. Multiple phone calls from both spouses tying us into their arguments. etc.

I dont take the risk of taking on new clients who are going through divorce
 

#31
sjrcpa  
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3316
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Maryland
For nonfilers, I get paid upfront if I accept them. Or I get a large retainer which they replenish as it is used up.
 

#32
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Near the Kwanzan cherry tree
I had a call with a prospect earlier today.

I normally don't ask prospects what they're paying their current CPA but did today.

Prospect said he paid his current CPA around $250 last year. I accidentally chuckled and told him that he'd pay at least $750 with me based on what I've heard so far (and I haven't heard a lot). We end the call soon after that amicably by mutually agreeing we're not currently a good fit.

I think I'll start doing this with all prospects who currently have CPAs and are looking to change. It saved me the wasted time sending him a guest link to my portal, downloading his files, running the numbers, and emailing him a proposed fee only to be rejected.

Very efficient IMO to weed out those who are going to turn you down on price eventually.
 

#33
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902
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Honolulu
Here's one I get all the time - what do you do with these...

"Hi. 4 years ago, my friend, who I really trust, told me I should be an s corp. So I went to Legal Zoom and set one up. For these 4 years, I paid myself $2000 a month"

([but what she means is that she took distributions - didnt run payroll]).

"I didn't file or pay any taxes in the last 4 years, can you help me file?"

As much as I prefer s corp clients over 1040 clients, I never take these. I send them a canned email saying that I'm not helping them, providing advice, they need to act quick, etc., and offer a few links to tax resolution services.

Am I the only one who doesn't touch these? Do any of you take these on and run back-payroll or do the Schedule C thing?
 

#34
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The prospect must acknowledge that they're going to pay a LOT in tax, penalties, and interest (failure-to-file penalties for an S Corp are not cheap). If they're not okay with this, move on. If they are okay with taking responsibility and accountability for four years of non-compliance, I would bill hourly and with a retainer. Once the retainer is depleted, works stops until the prospect makes another payment. If the prospect isn't okay with this, I'd move on. If I don't see the prospect sticking around and becoming a long-term client, I'd increase my rates accordingly. Some might frown upon this, but I'm not looking to have a lot of one-off, non-repeat engagements, so it has to be compelling for me. I learned this through experience.

I've had one or two of these prospects over the past 12 months. One couple needed three years of tax returns (a 1040, 1065, and 1120-S for each tax year). I told them it would be at least $8-9k. When they started getting wishy-washy over the fee, I walked. Not enough time in the day to entertain these types of prospects.

If you do engage, very first thing you'll want to do is confirm you're actually dealing with an S Corp. A lot of DIYers don't file the 2553.
 

#35
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3649
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Location:
WA State
ManVsTax wrote:I had a call with a prospect earlier today.

I normally don't ask prospects what they're paying their current CPA but did today.

Prospect said he paid his current CPA around $250 last year. I accidentally chuckled and told him that he'd pay at least $750 with me based on what I've heard so far (and I haven't heard a lot). We end the call soon after that amicably by mutually agreeing we're not currently a good fit.

I think I'll start doing this with all prospects who currently have CPAs and are looking to change. It saved me the wasted time sending him a guest link to my portal, downloading his files, running the numbers, and emailing him a proposed fee only to be rejected.

Very efficient IMO to weed out those who are going to turn you down on price eventually.


Had a call with a new client today. Spent 20min or so reviewing PY returns and talking through how I operate.
Noticed he paid around $300 and explained he'd pay around $800 with me...no hesitation.

You have to build a bit of value before expecting a prospect to swallow such an increase, but they can. I'd expect they would have gone elsewhere had I led with that.
Pointed out
~Captcook
 

#36
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That's valuable insight CaptCook. You're more measured than I am, and your thoughts are always appreciated.
 

#37
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32
Joined:
8-Dec-2020 3:00am
Location:
Texas
AlexCPA wrote:I always ask for and review the income tax returns filed for the prior two tax years. Firstly, I'm assessing whether the potential client is sufficiently organized and tech-savvy to provide those documents electronically (my practice is 100% paperless). Secondly, I review the returns to ensure that the complexity and nature of the returns are within my wheelhouse and to spot any shenanigans which could increase risk associated with that prospect.

Recently, I reviewed the returns of a taxpayer who deducted almost $100,000 on Schedule C as wages to himself. No payroll was actually done -- they just deducted the wages. :shock: Needless to say, this was a no-go.

Another prospect took $80,000 in bonus depreciation on a truck in tax year 2017 and claimed 36,000 business miles in that year and 40,000 miles in tax year 2018 with about $500 in total revenue for both years combined. Thanks but no thanks. :lol:


How these returns are processed and pass the IRS? I saw crazy s**t like this in many returns and it drives me crazy how incompetent preparers fly with these returns and customers believe they give them "better refund"
 

#38
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I like to think they're going to get theirs in the end. No way returns like that aren't flagged in IRS computers.
 

#39
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902
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Honolulu
ManVsTax wrote:I like to think they're going to get theirs in the end. No way returns like that aren't flagged in IRS computers.


This.

In the age of automation, the IRS will tighten up at some point and get smarter in the ways they spot these things.

The Gov can't do anything effectively until it comes to collecting money. Then all of a sudden they are Johnny-on-the-Spot.

It's coming.
 

#40
ATSMAN  
Posts:
1845
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Location:
MA
Just ran into a red flag prospect yesterday. This was a referral from an existing client. He has not filed 2019 and received a IRS notice. Fellow shows up with 2020 W2, 1099-Nec, and 1099-G and nothing else. What happened to the IRS notice and 2019 filing? His friend who has a contact at the IRS is supposedly dealing with it and I need not worry. OK can I see past tax returns. Answer NO. I politely showed him the door!
 


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