Client not in our demographic, but wants to pay us anyway

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#1
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The new client is the sister of a client with a couple of s corps, so she was recommended. They are both really nice.

The new client wants a look at her 2020 tax return and help with filing 2021 because she just bought a car with which she will rent out on Turo (unlikely it will make much money. if any).

Her 2020 tax return consists of a W2, a very simple schedule A, and a little but of unemployment income. AGI is $40,000.

The 2020 issue she wants to understand is just really all about withholding, but she will need some hand holding for her new business, I would guess.

I quoted her $350 to look over her 2020 tax return and to provide advice ("it looks good, change your withholding"), and $900 for her 2021 tax preparation (along with some Q&A help that she will need).

How is a $40,000 per year individual going to pay me $900 per year (and $1250 this year) to get her taxes done?

I honestly figured she would not hire me when I quoted her the prices. Our high-ish prices usually solve this issue.

But what about when they say "OK"?

I won't lower the price, because I wish to fill my time with this amount as a minimum rate, but it's just not a good match. I'm "full" and this is not my demographic). It's a lose/win for her.

What do you do in this spot?
 

#2
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I may have a differing opinion, but this seems to be a simple return without a ton of headaches at your price point, so I’d take it. If you don’t have the capacity to take on anyone else at all then pass or find someone with a lower realization to disengage from. Or drop one of your PITA clients.
 

#3
ATSMAN  
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If I were in your shoes I would explain to this nice lady that for the type of return that she needs your charges are going to be more than the average BECAUSE (fill in your reason). Let her know up front before she finds out from someone else that she got overcharged. That will NOT be good for your relationship with your regular client who referred her.

I have done this many times, and in each case the prospect appreciated my honesty. I would hate it if a friend of mine earning $40K paid $900 for tax prep :x
 

#4
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If client is willing to pay (bill them a nonrefundable deposit "to ensure your availability" and see how quickly they pay it), take it. Inform her upfront there will be other tax preparers that charge less, and see if she still wants to go with you. Once you have fulfilled that ethical duty, who cares if it is simple or not if she still wants to hire you. I have some clients whose returns do not fit into what I seek, but they are so frickin' profitable I am not about to turn them away.
 

#5
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You quoted her a price and she took it. "Overcharging" is something I hear as a fear from several professionals on this site, but if you make it clear that you are not a "low cost provider", she's made an educated decision. It's not your job to figure out how someone can pay for your services unless you're engaged to advise on a personal budget.

I usually share something along the lines of "I find it difficult to provide enough value for folks that have a scenario such as you to justify my base price." If she still agrees, you've surpassed any responsibility you have in that regard.
~Captcook
 

#6
Frankly  
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ItDepends wrote: I honestly figured she would not hire me when I quoted her the prices. Our high-ish prices usually solve this issue.

The woman called your bluff, so you're stuck. A risk taken when one quotes jobs one doesn't want to do.
 

#7
HowardS  
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so you're stuck

$900 for a one hour job? :shock: I'll take that any day. :D
Retired, no salvage value.
 

#8
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ItDepends wrote:because she just bought a car with which she will rent out on Turo (unlikely it will make much money. if any)


It almost certainly won't. Just like those who Uber and Lyft don't make a lot of return once they figure in depreciation and wear and tear on the vehicle. i.e. the non-cash costs. The way these companies capitalize on that ignorance is borderline predatory IMO.

Worse than that, if the auto rental is intermittent and here-and-there, I don't think you have a bona fide trade or business, which means gross income is taxable but the expenses are not deductible (for federal at least through 2026).

Once you consider the need to have conversations like this and sorting through a hodgepodge of receipts and documentation related to the "business", $900 may be reasonable.

ItDepends wrote:How is a $40,000 per year individual going to pay me $900 per year (and $1250 this year) to get her taxes done?

...

What do you do in this spot?


I would have politely turned her down, told her to call me when her AGI gets above my minimum threshold, and then had a productive conversation with the sister (client) regarding what my ideal client looks like.

I don't take on prospects with only $40k of annual income.

I don't high-ball, I completely remove the ball from their court. I used to high-ball hoping they'd say not, but regretted it most of the time after they accepted. If not immediately, after a year or two.
 

#9
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Think about it like this...

1-3 years from now, when the ride-share business fails or she shutters it, which is almost certain to happen, you'll be left with a $40k W-2 client that you'll feel obligated to reduce your fee for.

In contrast: You could have onboarded a client that had positive growth trajectory expected for the short, intermediate, and long term for the same fee, and that fee might grow to 2 or 3k by year 3, between compliance and advisory.

There is benefit to being selective with who you take on, and doing a rough assessment of what their tax picture is going to look like in the short to long term and how you'll fit in as a value provider.
 


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