Percentage of Clients

What percentage of your clientele would you estimate are capable of doing their taxes without the assistance of a professional, but—for whatever reason—do not?

Of those that are capable, how many still benefit from your input?

Do you think it justifies the price of having their taxes prepared through you?

Good question.

I would say 30% of my clients but only 15% of my revenue could do this themselves. (Not because they're super sophisticated.. just because an average person could do that return on turbo tax. Im talking about people who have everythingon a w2 or a 1099 and im not preparing any schedules other than those that auto-populate from data on the w2 or 1099... just so im clear who im talking about.)

I don't let that influence my fee. But when I have a client who could do it themselves, 90% of the time I tell them, "I'm happy to see you, I enjoy having you as a client, I love taking your money, but by the way I feel like I have a duty to advise you that you could do this yourself and save some money."

I actually don't want those clients. I'd rather they leave so I can replace them with a client who actually needs an accountant. I feel like with the trend towards automation those clients will almost be forced to leave soon. (All this talk about electronic simplified systems through the IRS.)

when those guys all leave I want there to be only a few left so it doesn't hurt.

Also, if you don't really need my expertise, you can go to someone else who charges half as much anytime you want. And I feel if you "can" go.. I don't want you. I want people who absolutely need me.

Not sure the percentage, but just about all of my clients have at least one year where my services are indeed needed, such as:

Selling a vacation home
Adoption
Selling an inherited home
Multi State NR - 1040 is easy, but client works in multiple states
Multi State PR
Crypto

One year these clients can be simple and the next year not.

I did amended returns for two new clients today and both of them had 1099s and didn’t include the sale of stocks anywhere on the return and one put the dividends in as interest twice (once for ordinary and once for qualified)

Define "capable of doing their own taxes"?

Can they use TurboTax and get some kind of result? Yes.

Can they do what I can do? No.

What percentage of your clientele would you estimate are capable of doing their taxes without the assistance of a professional, but—for whatever reason—do not?

Of those that are capable, how many still benefit from your input?

Do you think it justifies the price of having their taxes prepared through you?

So almost all of my clients have some type of complexity as I don't do basic tax returns for the most part.

So for me I'd say fairly low. 20 percent at most.

Imagine a client doing 1 tax return a year with a small schedule C or E for example. Add to that just 1 brokerage statement of say $300K with a few trades, some foreign tax withheld. For us, it's a walk in the park.

Like changing your kitchen sink faucet assembly. It can be a DIYer. Takes us 3 hours, read instructions, and it still doesn't seem to fit right. A plumber is done in 20 minutes and it's perfect.

Capable of doing them correctly? Only a few, and I keep them because they're very long-time clients (10-15+ years, which is a lot given my career started in May 2005). All of my other clients have far more complicated tax matters and they would absolutely struggle or get things incorrect if they tried on their own via TurboTax or similar.

How many ask me for advice throughout the year? Two handfuls. They're the ones that pay me the most money, overall.

This is exactly what I am working to strategize for 2023+. I am contemplating some dramatic changes that will not really impact existing clients, especially if I like them, but will absolutely help define which future prospects I actually take on as clients.

I am not sure of the percentage BUT I have several clients who are college educated and are fully capable of doing their relatively easy tax return BUT choose not to do it because the relative small amount they spend on getting their tax return professionally is worth their time. They can spend a weekend without having to worry about getting tax returns done, study up of tax law changes and if there is an issue they have a professional who can deal with the tax authorities.

Some people know what their own time is worth for doing things they like to do and pay someone to do what they don't enjoy

70% of my clients probably could do their own with some more knowledge/training, things like stock transactions, rentals, small side-hustle. Quite a few only have things like W-2, 1009-Int, 1099-R that could easily DIY. They like being able to just drop things off and have someone take care it.

This past year I dealt with the son of a couple who reviewed his parent's return and determined all the errors I had made. Dear son used to be an investment banker, currently runs a medical company with about 500 employees, has an MBA from an Ivy League School but was unable to understand a 1099. He wanted me to deliver to him 5 years of his parent's returns and all documents so that he could review them for other errors I'd made. He insisted that mutual fund capital gain distributions which are re-invested are tax deferred.

We underestimate at times how difficult tax ideas are for some people.

Start billing the son for time used.

Does son have 7216 disclosure or POA?

Does son have 7216 disclosure or POA?

He has a contingent POA but I gave no confidential information to the son because I doubt it is operating but mostly because I never agreed to work with him. I told him things like "Box 2a of the 1099 shows mutual fund capital gains. Those are taxable" and then ignored his email meltdown. When he demanded documents from me I just ignored his emails and calls which sent him into a rage. I informed the clients that if he ever contacted me again in any way to consider it an immediate ending of our relationship.

Good for you. I hate it when a relative assumes you're doing something wrong and start demanding documents. Client had a stroke and someone was using his email account to make demands and counteract what the POA said. The POA told me it was another sister who is an accountant. I responded to the email requesting that he or she identify himself, use his own email account and provide POA or 7216 disclosure. No more emails after that.

Couple of years back I had a jacka** like that who contacted me on behalf of her parents wanting me to review past 3 years of tax returns with her because she thought it was done incorrectly. I asked for a retainer and a POA and NEVER heard back from her. When I mentioned this to my clients the following tax season the Dad said that unfortunately his daughter thinks she know better and interferes with every aspect for her parents life.!

So my friend estimate your hours and get a retainer upfront before you life a finger!

Nothing stops them faster when you mention retainer or that is a different service requiring a different fee. Then they don't need it. Unless it's your hubby's cheapa$$ friend from childhood who signs off his texts as hey brother and is a legend in his own mind. Oh, and it seems he only contacts us for tax info.

None could do their own returns and get the same results. Mainly due to lack of tax expertise and commercial grade software.
I suppose if they wanted to pay $2/3,000 to get the software - and spend a few hundred hours learning it - taking tax courses - they could get a close result.
Most express a distasteful reluctance to involvement in tax matters, they are very willing to hand off the rancid task, write a check for fee, and go to a cocktail party, on time.