Leaderboard

http://www.smallbusinessdelivered.com/hourly-pricing-9-reasons-to-stop-charging-hourly-rates.html 9 Reasons To Stop Charging Hourly Rates When’s the last time you walked into your dentist’s or accountant’s office and said, “I want to buy some hours”? I’d bet some pretty good money that it was never. Instead, you ask to have a painful tooth checked or your taxes done. That’s because people don’t buy hours…they buy solutions. Hours are an expense…solutions are an investment. And you always want to be talking about the investment. In fact, hourly rates are rarely in your client’s best interest-or yours. For you, hourly rates… · Double the trouble. Giving estimates with hourly rates means the prospect can take issue with both the rate itself and the number of hours you estimate. So now they have two fronts to try to needle you about when they want a lower price. · Cause sticker shock at invoice time. Folks who don’t do the type of work you do or who don’t bother to track how much time they spend on similar tasks are often shocked at the number of hours it takes. · Instantly brand you. Prospects want a fast and easy decision. If your hourly rate is much lower than the competition’s, you must be an amateur. If it’s higher, then you’re the “expensive” option. Remember, the prospect doesn’t know it’ll take the competitor take twice as long to do the work or that you automatically include something that they don’t. And since quality of work is so subjective, they may not even bother trying to judge it…because it’s much easier to judge based on price. · Penalize you for experience. It’s ironic-the more you work with a client, the faster and better you’ll naturally get at their projects…but since you’re paid by the hour, you end up making less. Maybe I’m crazy, but that kind of math just doesn’t add up. · Involve tracking every smidgen of time. Every phone call you take while you’re in the middle of something else. Every email you write. Heck, even the time you spent brainstorming on the way to the grocery store…are you having fun yet?! · Mean renegotiating. If you’re going to keep paying the bills, hourly rates eventually have to rise. But telling clients you’re raising them is about as much fun as a root canal. And if they’re a particularly big client, you may end up having to justify the increase, negotiate your new rate, sign a new contract and so on. Every year or two. · Occasionally spark jealousy. A client once made a snide comment that I should be rolling in the dough, given my hourly rate. So if you work with folks who get a salary, inevitably some will divide it out to an hourly rate and compare it with yours. Of course, they don’t get that you’re factoring in health insurance, taxes, expenses and so forth that they get in addition to their regular paycheck. All they see is that you seem to be making more than they do. And the resulting attitude can be a pain in the arse to deal with-especially when they DON’T say something and you’re wondering what’s wrong. · Undervalue what you provide. What’s a new $20,000 client worth…especially over time? Or to have a professional-looking website presence that builds credibility and trust? To finally be pain-free? Or to finally find the career or relationship of their dreams? Granted, it’s harder to judge worth in some cases. But the value of the solution you provide is certainly worth more than an hourly rate. · Mean your income is forever limited by the number of hours you can work and the hourly rate you feel comfortable charging. Enough said.

My thinking is similar to Jack's, that it's not really about the time involved in the amendment but about your knowledge in knowing how and why and when to amend. And as he said, basing it on time alone will Penalize you for experience. Time may be a factor in the way you set your base fee for a schedule, but it should not be the only factor. Or even the primary one, when it comes to amendments, especially. Likelihood of needing followup correspondence is, IMHO, a more important factor, for example.

My business for 2013 tax season suffered loss due to the issues of ATX2012. Despite my best efforts, I lost about 20 clients. As I predicted a year ago, the effects of the trash program would follow us for at least 2 years. As a result, I am looking very skeptically at the simple 10% normal early renewal discount I have been offered as an insult to my professionalism and intelligence. This year was FAR better than last year, but ATX/CCH has yet to deliver a program that is nearly as stellar as it was in 2011. CCH management has no clue how the trainwreck of 2012 is still costing us money and clients. Rollovers this year would not rollover all fixed asset information. Now this problem may not be here for 2014, if they have standardized the data storage protocols. CCH is still leaving a bad taste in my mouth i.e. the lack of quality tech support. Same song second verse from last year. I managed to make myself such a nuisance that I could send an e-mail and get a call if I had an issue. This is NOT the typical tech support response for most ATX users. I am on the fence again. At the firm, we will probably not change due to the extensive resistance of the preparers here at the firm to adapt to the totally different methods of other softwares. I, however have no trouble adapting whatsoever and changing is on my plate of consideration again. CCH is going to have to be even more forthcoming about next season to sway me. Currently on the fence and do NOT have any reason to be pressured one way or the other. I guess all my public relations actions this year have had no meaning to anyone there. Film at 11.

Remind the client of the consequences of losing his job and the loan becoming an early distribution if that happens. Client has health issues and it is entirely possible that they will not be able to perform their job duties as a result and lose their job. It then is a double whammy of losing the job and getting hit with additional taxes at a time of high stress and poor health. Not good. Make sure they understand what the consequences are before they go down that road. Tom Hollister, CA

Saw this on Facebook and thought it has a great message...worth the read and definitely the share! A little girl had been shopping with her Mom in Wal-Mart. She must have been 6 years old, this beautiful red haired, freckle faced image of innocence. It was pouring outside. The kind of rain that gushes over the top of rain gutters, so much in a hurry to hit the earth it has no time to flow down the spout.. We all stood there, under the awning, just inside the door of the Wal-Mart. We waited, some patiently, others irritated because nature messed up their hurried day. I am always mesmerized by rainfall. I got lost in the sound and sight of the heavens washing away the dirt and dust of the world. Memories of running, splashing so carefree as a child came pouring in as a welcome reprieve from the worries of my day. Her little voice was so sweet as it broke the hypnotic trance we were all caught in, 'Mom let's run through the rain,' she said. 'What?' Mom asked. 'Let's run through the rain!' She repeated. 'No, honey. We'll wait until it slows down a bit,' Mom replied. This young child waited a minute and repeated: 'Mom, let's run through the rain..' 'We'll get soaked if we do,' Mom said. 'No, we won't, Mom. That's not what you said this morning,' the young girl said as she tugged at her Mom's arm. 'This morning? When did I say we could run through the rain and not get wet?' 'Don't you remember? When you were talking to Daddy about his cancer, you said, ' If God can get us through this, He can get us through anything! ' ' The entire crowd stopped dead silent.. I swear you couldn't hear anything but the rain.. We all stood silently. No one left. Mom paused and thought for a moment about what she would say. Now some would laugh it off and scold her for being silly. Some might even ignore what was said. But this was a moment of affirmation in a young child's life. A time when innocent trust can be nurtured so that it will bloom into faith. 'Honey, you are absolutely right. Let's run through the rain. If GOD let's us get wet, well maybe we just need washing,' Mom said. Then off they ran. We all stood watching, smiling and laughing as they darted past the cars and yes, through the puddles. They got soaked. They were followed by a few who screamed and laughed like children all the way to their cars. And yes, I did. I ran. I got wet. I needed washing. Circumstances or people can take away your material possessions, they can take away your money, and they can take away your health. But no one can ever take away your precious memories...So, don't forget to make time and take the opportunities to make memories every day. I HOPE YOU STILL TAKE THE TIME TO RUN THROUGH THE RAIN. If you've read this all and it's touched you... share it.

Lion is correct that if the state starts with federal AGI, it really doesn't matter how the W2 is broken out. The states all give the taxpayer credit for taxes paid to other states on the same income (where it was earned). All the fancy math is to apply the highest tax rate to that income. For example, say you earned $100k altogether. You made $1k of that income in one state. Normally, if you only made $1k that state wouldn't tax you at all. But it wants its piece of the cake, so it calculates your income tax rate as if you made $100k there and then applies that rate to the $1k you really did make there. The state where you live and made $99k will do the same thing, but it will give you credit for the taxes you paid to the other state. This is where it gets tricky. Say the first state taxes you 5%, so you paid them $50. The state where you live taxes you 7% on that high income of yours, so the tax on that $1k is $70, and you owe them $20 more after the credit. If the W2 isn't broken out, it doesn't matter because the one state will still give you credit for the taxes paid to the other, and tack on more if its own rate is higher.

I charge $100 for an amended return and if it takes more than an hour, I charge by the hour at $100 hour. (I have to estimate the time because I am a one man office and I estimate how long it would take me if I had no interruptions which I always do.)

I have had three phone calls and an e-mail about renewing. In fact, my rep called again today. I told her that I needed more time to think about it, especially in view of the $85 increase in price. I don't think that it should be my onus to pay for the mistakes of others. The fact that they delivered this year does not make up for the frustrations of 2012; especially when they deny that there were all sorts of different discounts for different folks in 2013. Basically, the squeaky wheel got greased. If you didn't complain enough in 2012, they just assume that you didn't have any issues. Also, I never even installed my "reward" for beta testing 2013. None of the choices were of any value to me.

Well, actually, Tom, we do not know if it's the client's health issue or his family member. Might be his spouse is the one with the medical bills, for example. But I do agree that taking the funds from the 401K should be a last resort, because it usually ends up costing more than even using a credit card! Plus you can not put it back, which at least the 'loan' option does allow.

We charge $75 plus any new schedules if it is a return we prepared. If not a current client, we charge full price for the original return, plus $75 (and any additonal schedules) for the amended. After a few "oh, I forgot to tell you about this form" calls from the client, they get used to bringing everything in for their appointment, because I don't normally lower or waive that charge. Tom Hollister, CA

Minimum $100. Not for what I would do, but for knowing what to do.

I charge based on what has to be done. In this case ....did you recommend the amendment? Did you do the originals for both? If so...they may wonder why you didn't recommend this before...so I wouldn't go overboard.

great speech Catherine.

Presuming the client has no other resources, Could the client ask for a LOAN from the plan instead of a distribution? Lynn

A retirement plan may, but is not required to, provide for hardship distributions. Many plans that provide for elective deferrals provide for hardship distributions. Does your client's plan allow them? A hardship distribution may not exceed the amount of the employee's need. However, the amount required to satisfy the financial need may include amounts necessary to pay any taxes or penalties that may result from the distribution. (Reg. §1.401(k)-1(d)(3)(iv)(A)) The exception is code 05 Qualified retirement plan distributions up to the amount you paid for unreimbursed medical expenses during the year minus 10% (or 7.5% if you or your spouse are age 65 or older) of your adjusted gross income for the year.

I do a lot of states so I've been getting one or the other every year. I actually like multi state returns!

Or, The Tax Book's All States Edition.

This is when the All States Quickfinder comes in handy. I buy it about every third year or so.

Turbo Tax has been a boon to the paid tax prep business. All they need to do is get an IRS letter, or to come in one year because of some unusual circumstance like an inheritance or divorce only to learn they've been cheating themselves out of some juicy deductions. (Had one this year who have been claiming their state refund as income year after year, even though they were in AMT land and never got a benefit from it.) They all vow "never again" and become clients for life. We have lost some clients to DIY software, but most of them have the type of return they SHOULD be able to do themselves. We won't miss the W-2, maybe some interest, Sch A returns. In fact, we're referring most clients with EITC to H&R Block, where the preparers are well-trained in the required due diligence, record-keeping etc. To us it's not worth the risk (exceptions for long-term clients who just had an off-year, we know their kids live with them and the requirements are all met). And some of the simpler returns we're referring to VITA. Some clients won't move, but maybe some others will digest the suggestion and give it a try. I agree that the replacements are indeed more complex returns. The majority of our returns this year have taken 2+ hours (some many ++++ hours) to complete. For those looking to increase business, it pays to work with attorneys. We've had attorneys as clients and found an error in the way their own partnership returns were prepared, or were able to help them help one of their divorcing clients with the tax implications of various ways of dividing assets or retirement accounts, and before you know it they're sending tax law questions and estates and trusts to you. We've had the same response with our clients' financial advisors. Contact the advisor for this or that piece of missing info, they get the idea that you're thorough and really care about that client, and they begin to refer others. Another way to increase business if that's what you want to do is to specialize. I see this as the direction of the paid tax practice. No one could know everything, and as the code becomes more complex it's harder to know the basics of some tax situations. So learn everything there is to know (at least as humanly possible) about, say, foreign citizens with US income, US citizens with foreign income, estates, law or medical practices, bars and restaurants, construction businesses, or whatever interests you. Those clients will refer others, and you will establish your niche. We have more clients than we can handle, even after firing some. We intend to fire more. This is when we have to think about the types of return we want to do. The easy ones are quick and bring in revenue, but is it worth the stress of keeping up the fast pace? I'd rather sit at my desk for a few hours completing an intricate return than seeing 8 clients in 4 hours. Others would like it best the other way around. Something to think about as you take steps to shape the direction of your practice.

Or you can all come to my house, and I'll feed you, and I have wine but nothing harder except a little Kahlua. And you are not allowed to wreck the house I rent.

I say we all just show up at Joan's house, raid her refrig, drink all her booze, wreck her house, and then go home If that doesn't work, Stockton works for me. Tom Hollister, CA

Me too! You have made this tax season the best with your knowledge and sense of humor. I am not afraid of you. Keep up the good work! Love your posts!

Remember way back yonder when you could qualify for EIC with negative AGI? I swear it's true - I had a couple who received EIC with negative AGI. One had 4,872 SE income, other had (8,439). I didn't give them EIC, never occurred to me. IRS sent them the letter saying you might qualify. Year was 2001. I'm looking at the file right now. I have in my notes where I called IRS in disbelief, a Ms. Casper didn't know either, spent 30 minutes on it, finally told me to have clients fill out the form and hope for the best. They got $346. EIC is a nightmare, in my opinion, and I wish it had never been instituted. I fear we are stuck with it forever.

I had to ask myself: Do I want to be feared or loved? I decided I want people to be afraid of how much they love me.

Just to add a little humor to the thread, I had a client call me last week to say that he had gotten a letter from the IRS suggesting that he might qualify for EIC. He trusted me to know what they were talking about. Well, by golly, I overlooked that one. He is on disability for a bad heart and his wife works two part time jobs. No qualifying child. I ran the numbers and told him that he was qualified for $8 in EIC. He laughted. I told him that it wasn't worth amending for, but if they had given him a form to fill out, he should send it in. If they want to send him a check for $8, let them. He said he would think about it. (This is due diligence in reverse).

Good records are always the best protection. Just hard to convince some clients it's worth the effort. Until AFTER the audit.

We were just recognized by our regional chamber of commerce with a Headliner Award for continued growth in current economy. We have seen double digit growth each of the last four years (2010-2013) and I bet when I get caught up with the books for tax season 2014, we will have hit that mark again. The economy is hitting people hard and they are looking for someone they can trust for help. My wife obtaining her EA, me Intuit QuickBooks ProAdvisor has drawn more people in who need and want help. Our approach of establishing relationships with our clients is resonating and attracting new clients. Gina is on the left, I am two over, or 2nd one from right.