Should I disclose fee increases before beginning tax work?

Hi all,

Hope everyone is ready for another great tax season.

This year due to inflation and just wanting to push the envelope a bit in increasing my revenue I'm going to raise fees again for the 2nd year in a row.

In the past I would usually disclose the fee increase ahead of time however this year I'm thinking about not spending the extra time and effort on the fee dialogue ahead of time.

For example, let's say my average fee is $500 and I want to raise the fee to $575 or a $630 fee raise it to $695 do you think this fee increase warrants letting client know ahead of time or do I just provide the fee at the completion of the tax returns and out of every 100 clients maybe 50 won't even notice or care or will understand fees go up and then maybe the next 30 clients will say "i noticed the fee went up again this year" and I can reply with a brief explanation due to inflation and rising overhead costs, etc and client will accept the fee increase and the the last 20 clients it may be more of a push back and forth and if need be i can decide if i want to meet in the middle or just keep the fee the same as last year. I'm wondering if bringing up the fee now will just create more of a back and forth ahead of time then simply providing the fee amount at completion?

Of course, for any clients with a more substantial fee increase I would give them the heads up before starting work.

Thanks as always for feedback !

my #1 piece of advice for clients is 'pretend you are the customer; how would you want to be treated'

would you want the advance notice on the price increase

i personally would

and

i'm inclined to think that giving an explanation with the fee increase would be a good idea as long as
your client's will think the explanation has merit

the flip side

let's say you raise prices and don't tell your clients and a few qive you really bad feedback

like they are leaving

well by not sending the letter out, you can have an exit...you can just not increase future returns with the price increase

I sort of think anything under a 10% increase doesn't need an advance warning

Thank you for helpful replies greatly appreciated !

I went from 320 to 350, 9.375% increase.

I included a note in my organizer cover letter. Of my 350ish clients only 1 complained when I went from 300 to 320 for 2022, so I felt the need to inform this year.

I'm hoping some clients seek out other options.

At my old firm we would try to bump personal returns at least $25 every year

For inflationary and other small increases, I do not notify. For larger increases, I use the following "canned" letter....



Dear XXXX,

Thanks for being a client for so many years now, I really appreciate it!

This is advanced notice that our fee for your 2022 tax preparation services will increase to $XXX.XX plus tax (assuming a similar complexity).

Given industry averages and inflation, I don't think that you will find this to be a big deal, but I think it is good business to let clients know these things in advance.

Thanks so much for your continued business,

ItDepends

I have increased prices by a minimum of inflation every year for the last 20 years. I almost never get a question.

I sort of think anything under a 10% increase doesn't need an advance warning

I agree with this. Ideally, your fees should be raised some small amount every year just to keep up with inflation.

Now if you are doing a larger increase because, for instance, your fees are below market, then I think advance notice is appropriate.

I raised most prices last year about 10% and will again this year. I honestly don't think most people remember the exact amount they paid last year anyway.

Inflation increases no, and I agree you should be doing those each year otherwise you're working for less. It is possible to establish this practice and keep it fresh in client's minds with communication. Given that 2022 inflation was 8-10%, I made it very clear that inflation is going to factor into 2022 compliance fees, even if complexity does not increase.

Large increases because of complexity I do a short call. My experience has taught me that's best and most client's prefer that to an email, even if an email memorializing what was said on the call follows after. I generally define large as more than 25% increase over last year's fee.

I feel that if the fee increase is ~ consistent with the rate of inflation, then no advance notice is needed.
When inflation was ~ 3%, and we our fee increases were consistent with this there were few questions.
It's unfortunate and frustrating that inflation has been much higher this year. Historically, most reasonable clients have been understanding of this. I guess we'll see what the reaction is this year.

I require nonrefundable deposits for all tax work. The invoice for it indicates if it is based on the KNOWN or ESTIMATED final fee, so they have a very good idea of where they'll stand for total fee. I also send out my minimum fees, including for subscription tax services ($$$$). That's assuming they read the damn invoice, just as most do not bother reading engagement letters. I put a little "Easter egg" in my new tax engagement letters to see if any would see it by having read the things, and so far only two clients have not just blindly signed.