Comment As You See Fit - Price Increase

[easytax]

I understand what you are saying....but....most of my clientele came to me because "of price".

While you may feel it's nothing to brag about....they think it is.

(They are aware that I work out of my apt and have no overhead.)

With new clients....I'm just going to give them "the going rate" price....and if they complain (but Joe said you only charge $XXX) my response is very simple "My rates went up.")

If they switch based on price....that's fine with me.

A side note: They may know you work out of your apartment - HOWEVER - you do have "overhead". You may not use the deductions; look at it this way, if you don't charge a "fair" price (whether you see it as cheap or not"), you may not still be doing taxes, etc. very long. Regardless of where you sit (apartment, home, office, park in center city, country - anywhere - you have the same overhead as all of us - except maybe your rent is less 9AND IF YOU DON"T PAY RENT --- maybe you'll be sitting in the "outside".

Please review my earlier post on this subject and THINK about all you put into actually doing the taxes for these folks. ---- THAT'S ALL OVERHEAD - it's ANY cost associated with doing what you need to do to render your service ---- EVEN if paid in your normal day-to-day life; like apartment rent, etc. --- you need a place to render the service, so it's not actually free --- unless your the government and don't count in the cost of people, buildings, etc., as they are paid NOT BY the GOVERNMENT but by the people ....

Stopping now, before "politics" set in.

Have a GREAT ONE.

[Richcpaman]

The government is responsible for raising your rates.

Congress is changing the laws.

The IRS is interpeting them differently.

The IRS wants to regulate us even further, even though *We* are not the problem...

The states require us to do more training, CPE, due diligence.

Your quote via email to your clients is: "Just as no two people are exactly alike, including identical twins, no two tax returns are the same.

My fee is based on a combination of data to input that I am given by you, forms that will be generated and time needed to prepare your tax return.

This year the IRS has imposed new regulations, and in order to avoid “potential issues” I will be spending more time doing “due diligence” on every return."

My engagement letter was much simpler, I simply stated "Due to increased costs, each return was going to increase by $25 for next year."

Simple and to the point, if clients had an issue, there wasn't much wiggle room for then...

That would be my recommendation to you. Leave little room for interpetation.

"My fee for tax preparation services is based on a combination of factors, including the complexity of the return, how the information is provided and how long it takes me to complete the return for delivery. Due to the increased "due diligence" requirements of the IRS and State of New York, every return is going to take longer to complete, and therefore, a minimum of a 10% increase in fees is required. "

That way, you can increase everyone 10%, discount that for some, and increase even more for some others...

And I would not send out just something that has the fee increase quote in it. It would be part of the organizier letter, the engagement letter, or the year end reminder letter.

Whether sent via email, or snail mail, it it just part of business.

Rich

[michaelmars]

if you really have to justify an increase or your fee itself then you have a problem. My fee is my fee and you can go elsewhere. I try to be fair and conservative but really, I can charge what I want and either you see my value or you don't. I'd rather do one $600 return than 3 $200 returns, less time with clients and everything else associated with doing a return. They aren't paying me for filling in input screens on a computer program; they are paying be for my review of their financial activity, availability for consults and personal service, etc.

A few times a client asked why my fee went up since everything was the same as last year and my response was; "did your grocery and electric bills go up? Well so did mine!

Sometimes things change that causes increased like mandatory efiling - my fees went up with a $100 charge, until NY in order to get taxpayers behind efiling, made that separate charge illegal, now I have to include it in my fee.

I also charge a postage fee on every return. Once a client that didn't pay it in the prior year, called about his return and I told him it was done. A week later he called saying he hadn't received it and I politely told him that its been on my secretary's desk all week for him to pick up. He got the hint.

Do quality work, respect yourself and your profession and never apologize for a fee. Doctors don't and Attorneys don't.

Of course audits etc take some explaining like, the auditor came 3 times not the 2 planned etc. Recently I had an audit and the client was assessed about $10,000. I said we could appeal but my fee will be $3-5,000 depending if I can resolve it with a supervisor or have to do a formal appeal. In the long run the client decided to pay the tax. That is time and cost that you do need to justify to a client.

[CathysTaxes]

I don't mention in writing that my fees are increasing. If a client asks about the fee before they drop off their stuff, I will mention anything new that pertains to their situation, the increase in CPEs because of changes in the tax law, new forms required as a result of these changes, increased software costs and because of that, I am increasing the fees.

[BulldogTom]

How about this:

My fees will increase 6%-10% on average this year due to many regulatory and cost factors. I will be happy to explain all the increased costs to you at my standard hourly rate.

Tom

Hollister, CA

[JohnH]

As for fee discussions, you could always tell them you answer the first question for free, but there's a charge for every question after that. The conversation usually goes like this:

Client: "How much do you charge for each question after the first one?"

You: "I charge $100 for each. What's your next question?"

[Kimberly K]

It has been a long time since I posted on here, hope everyone's tax season is a smooth breeze. (Joke, we all know that is but a dream)

As for discussing price increases to clients( I would have to agree with JohnH's posts) , it is best not to have a fee discussion or letter unless the taxpayer brings it up. If you call attention to it, they will become defensive and might not return. The big tax prep corps do not discuss their 6% yearly increase, so why should you discuss your increase.

I think your letter is great, but I would wait for the clients that balk at the price. Your education and due diligence is enough, to stress to the clients that begin with the shock of your fee, then if they continue, I would pull out the letter.

[MsTabbyKats]

So....yesterday I had a client call me 4 times (and my husband once)....because he needs me to fill out something (for him to get an apt) and have it notarized and faxed to the party that needs it on Monday.

No..."Please, I know this is last minute...and you may be busy...but would it be possible....."

Instead..."Blank is faxing you something. You need to get it notarized and fax it back on Monday. It's very important for me."

No offer to "charge me for it."

He's getting a surcharge on his return this year....$50!

But....I appreciate all the input. My plan is to give a quote before I start any work....get a confirmation that the fee is OK.....and I'll give "the song and dance" if they complain.

In the past I've told a few of the "your fee is too high" people to take their papers back and go elsewhere and price it. And you know....they all came back to me.

[Guest Taxed]

>>> Instead..."Blank is faxing you something. You need to get it notarized and fax it back on Monday. It's very important for me."

Must be some requirement usual and customary in NYC. In my neck of the woods, folks who apply for reduced rent housing need only present a tax return and other proof of income. As a tax preparer I would not run around notarizing other people's forms.

[Mr. Pencil]

You need to get it notarized and fax it back on Monday.

Most tax preparers would probably refuse this request, citing IRS ethical standards. Without a written authorization to release information, there would be little defense against a malpractice suit if the landlord denies the application. Even with a release, fax is basically NEVER considered a reasonable business practice for handling confidential information because there is no control over who has access on the receiving end.

It was different in the past, but nowadays the professional approach is to hand the letter to the client personally. Period.

Edited December 21, 2013 by kcjenkins
TO EMPHASIZE THE CRITICAL POINT

[MsTabbyKats]

>>> Instead..."Blank is faxing you something. You need to get it notarized and fax it back on Monday. It's very important for me."

Must be some requirement usual and customary in NYC. In my neck of the woods, folks who apply for reduced rent housing need only present a tax return and other proof of income. As a tax preparer I would not run around notarizing other people's forms.

It was at the request of "the agency that determines" if he can get the apt. And they just want my signature to verify that I am a real person....not a bum sitting on a park bench.

[MsTabbyKats]

Most tax preparers would probably refuse this request, citing IRS ethical standards. Without a written authorization to release information, there would be little defense against a malpractice suit if the landlord denies the application. Even with a release, fax is basically NEVER considered a reasonable business practice for handling confidential information because there is no control over who has access on the receiving end.

It was different in the past, but nowadays the professional approach is to hand the letter to the client personally. Period.

Chill out and smell the flowers.....life is too damn short for worrying about every little thing.

[Jack from Ohio]

Chill out and smell the flowers.....life is too damn short for worrying about every little thing.

Famous Last Words!!!

[kcjenkins]

Chill out and smell the flowers.....life is too damn short for worrying about every little thing.

I understand the reaction, Tabby, but this is not a "little thing". The penalties for not taking 'due care' are much higher than they used to be, plus more people are filing suit over this sort of thing. It used to be a 'little thing'. but it's really not any more. Be smart and CYA.

[JohnH]

I never send anything to third parties under any circumstances. (This includes tax returns, by the way). Everything goes to the client.

If a third party absolutely requires a document from me as a condition of approving something for a client, then the client isn't going to get the loan, approval, grant, whatever. The more adamant they are about this, the more convinced I become that they want to drag me into some sort of potential liability situation.

[Pacun]

My goal is to not complicate life......make a little money......and help out people who want good work but are short on their means.

This is why I'm raising all my $250,000 IT engineers a lot......and not caring if they leave so I can focus on my $30,000 researchers with 2 kids, who have trouble with day to day expenses. Maybe they get a $10 increase.

I have heard that the EIC penalties are harsh. So in my situation, I am trying to get more clients with more income and get rid of EIC claimants. So I would keep the engineers and fire the researchers with two kids. Unfortunately, I have a big percentage of EIC claimants and my market is destined to be like that.

[taxxcpa]

The IRS should provide free tax-preparation service for EIC claimants instead of expecting paid preparers to stick their necks out in their behalf.

[Guest Taxed]

They sort of do. It is called VITA. Made available by many non profits is most cities.

http://irs.treasury.gov/freetaxprep/

I used this tool to re direct many calls I get during the tax season.

[MsTabbyKats]

I have heard that the EIC penalties are harsh. So in my situation, I am trying to get more clients with more income and get rid of EIC claimants. So I would keep the engineers and fire the researchers with two kids. Unfortunately, I have a big percentage of EIC claimants and my market is destined to be like that.

The researchers aren't EITC people......for the most part. Usually both spouses work....so the combined income is over the limit.

Anyway....they aren't Americans.....and have a very different attitude about accepting "charity."

I've found that non-Americans are more conservative because taxes are taken more seriously in their home countries .

I've also never had a problem with payments because "non-pament" of bills is a crime punishable by going off to jail!

[Guest Taxed]

>>> I've also never had a problem with payments because "non-pament" of bills is a crime punishable by going off to jail!

Can we import that tradition to USA?

[MAMalody]

I agree with JohnH.

[David W Ristau CPA]

How about this approach:

"My fees are based on time required to complete your return. My hourly rate is $ xxx.xx. I add $ xx.xx for computer and supplies expense. Sales tax, if applicable is added to the total invoice amount."

I've used this approach myself for many years. I also include a time sheet on the fees over $ 1,000.

Current billing rate is $ 250/hr. Minimum charge, 1 W-2, nothing else: $ 75.

Very little resistance to the fee structure.

[Guest Taxed]

Why go into details of how much your computer, supplies, overhead cost is. That opens an opportunity for the client to question that?

I would just quote what your hourly billing rate is? Just like how the lawyers do and so does the mechanic at the car dealership.

[MsTabbyKats]

Thanks for the input to my original question. I've decided I'll give each client the fee before I start....generally a bit more than last year. And, that's based on the information supplied at the time...which they will also be told.

I can't do an hourly fee....it just wouldn't work. And I'm not getting into "changes at IRS either. It isn't their problem and I believe I am supposed to produce a return that would "pass all the tests" anyway.

Truth is....the fee will be based on how much work I need to do....and their income and/or lifestyle.

I always say..."If you have any questions, please let me know." Most just ignore that statement; some will ask when they can expect their refunds; a few will ask me to explain every single deduction and the amt! If a question cannot be answered in a few lines....I'll invoke "the hourly rate".

Truth be told....no more "free rides".

[easytax]

Thanks for the input to my original question. I've decided I'll give each client the fee before I start....generally a bit more than last year. And, that's based on the information supplied at the time...which they will also be told.

I can't do an hourly fee....it just wouldn't work. And I'm not getting into "changes at IRS either. It isn't their problem and I believe I am supposed to produce a return that would "pass all the tests" anyway.

Truth is....the fee will be based on how much work I need to do....and their income and/or lifestyle.

I always say..."If you have any questions, please let me know." Most just ignore that statement; some will ask when they can expect their refunds; a few will ask me to explain every single deduction and the amt! If a question cannot be answered in a few lines....I'll invoke "the hourly rate".

Truth be told....no more "free rides".

Not a bad choice overall.

I do have a question --- (my paranoia) "the fee will be based on how much work I need to do....and their income and/or lifestyle." -----

From your other posts -- I KNOW you don't mean it the way I'm asking (I believe you are saying -- I will help the "poorer" earning people, more kids, bigger expenses, etc. making less - so I will cut them a break, etc.) BUT given todays' attitude toward litigation, etc. -- would that not be (or at least construed by those just wanting to make news, money, etc.) discriminatory?

Just asking as I do NOT want you even to have a remote possibility of being in trouble --- or worst yet, court.