I am a CPA. Most of my business is write-up and QB consulting. This is my first year offering tax return prep. Most of the work will be current clients but I am hoping to pick up new clients with recurring work as well. One of my prospects needs a S corp return along with the 1040, containing two Sched Cs and the related State return. Could some of you please share your fee structure? I know some charge by the schedule, some a flat rate, etc. I want to charge low enough to encourage them to give me more non-tax work but not so low that if nothing else pans out, I lose money. I am located in the Northeast. In advance, thanks for the help.

asked 19 Feb '10, 22:29

Carol's gravatar image

Carol
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edited 24 Feb '10, 05:59

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TaxQueries ♦♦
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Your only as good as you believe. Charge your worth. There will always be those who will work cheap, and perform cheap work.

Foregoing an equitable fee as an avenue to a greater volume of work, is questionnable.

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answered 20 Feb '10, 16:52

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W Horne
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I WISH I could vote this answer UP more than once! You've hit the nail on the head.

(21 Feb '10, 03:28) EAgent

Here's what I do -

I decide what I'd like to make per hour - and I'm NOT cheap.

Then pick an IRS Form Number and read the instructions. They usually contain a section that lists three numbers - the time to keep the records (this is on the client), the time to learn the law (this is on me) and the time to prepare and compile the return (THIS is what I charge for).

I multiply the time to prepare and compile the return by my target hourly rate - then divide that number by half (since I'm twice and fast and/or twice as smart as the IRS . Then I charge this as a FLAT fee for that form or schedule.

I do this for EVERY form I have to prepare. Then annually I adjust that fee by the same amount of the Social Security COLA increase.

This way I get what I think is a fair price for the return and it ratchets up automatically (except this year when SSA had NO COLA for the first time ever!). And I'm free to discount that calculated price if I think its appropriate.

For example, I just finished a return that included a Schedule C. The IRS instructions for Schedule C say it should take 1 hour and 66 minutes (no joke, our government at work!) to prepare the form and another 58 minutes to copy, assemble and send it to the IRS. That's just over 3 hours. Assuming my target hourly rate was $150 (which it isn't and NO, I won't post here what it is), that's $450 for a Schedule C - ON TOP of the other fees for the rest of the 1040.

BUT this particular Schedule C only had one 1099-MISC for $700 as income. There were no expenses and nothing else on the Schedule C. I could NOT in good conscience charge $450 for entering ONE number on TWO forms (don't for get the SE Tax). So in this case I charged NOTHING for that form.

And not only do I agree completely with W Home - I'll take it one step further. If YOU don't value your time and expertise how can you expect your clients too? Charging too little is NEVER a good thing. The day will come when you'll need to increase fees to cover costs and increase profits and what will your cheap clients do when you double or triple fees just to keep the lights on.

Do yourself a favor and start out charging a decent rate that you can live with. Personally, I'd rather make $50K off 50 clients than off 100 clients - half as many clients means more personal time and attention to each client and that comes at a price. Good clients and good work takes time, so NOT sell yourself short.

I've seen it written many, many time - you can pick any two, but you can NEVER get all three - Good - Fast - Cheap!

Good & Fast ain't Cheap Good & Cheap ain't Fast Fast & Cheat ain't Good

This is your chance to PICK where which three are important to you, as a professional, and what you want to offer your clients - YOUR reputation is at stake so choose wisely.

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answered 21 Feb '10, 03:26

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EAgent
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Thanks EAgent. This is just what I was looking for.

(21 Feb '10, 14:50) Carol

Great answer. What I was trying to say, but said much better.

(22 Feb '10, 14:51) Jayson Wiser

Definitely a great answer. Thanks for the details.

(24 Feb '10, 01:18) Linda Hamilt...

I created a fee schedule for individual income tax returns last year, and it tremendously simplified the billing process. I attach the fee schedule to engagement letters for individual returns to answer possible questions about fees, and my tax software automatically computes the fee after inputting each form. For other returns, I just charge an hourly rate.

Read the Thomson book titled, Efficient Tax Office Quickfinder Handbook. Chapter 7 has a proposed fee schedule for an average tax-services firm. I input the schedule in excel in order to recreate and adjust the values.

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answered 13 Mar '10, 20:45

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Bill-EA
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GREAT reference, Bill - The Efficient Tax Office Handbook is a WONDERFUL reference. It has LOT and LOTS of good info. For most of us there won't be any "A-HA" moments from it. BUT for the newcomer this is a MUST have in the office library!!!

(13 Mar '10, 21:05) EAgent

Accountants typically charge an hourly rate. Built into this is the cost of overhead and any variable costs for the return, along with how much you want to take home at the end of the day. I look at the fee structure 2 ways. People don't generally want to know you are working by the hour, as it can make them feel you are taking advantage of them. I've gotten to the point where I have a pretty good idea how long something is going to take me. Using an hourly rate that I've calculated I give them a quote for the forms and schedules they need as a fixed fee. With the understanding that if there is something else that we haven't discussed, a new fee will be discussed before doing that work.

It's a guessing game, but in the end, you need to get paid for what you are doing, and there is a value to your time and expertise.

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answered 20 Feb '10, 16:00

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Jayson Wiser
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I think it depends on where you are. Most of the accountants I know charge a flat fee per form or schedule.

(21 Feb '10, 03:27) EAgent

I might suggest that deciding to get into tax prep and not knowing the answer to the fee structure question, makes me wonder about whether or not this is a good business model for you.

Remember that if you keep your fees low in order to get more work, you may just lock yourself into being a minimum wage CPA. It is very tough to raise those unnaturally low fees later when you have the additional work. People who come to you because they are sensitive about price, will leave when your fees go up because they are sensitive about price.

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answered 06 Mar '10, 20:46

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Jan Dillaha
512
accept rate: 0%

This is an EXCELLENT observation. You can always discount your fee down if necessary, but it is very hard to write a bill UP in front of a client.

A tax seminar speaker, long since retired now, used to say "when you're working too hard and not making enough - DOUBLE YOUR FEES. I guarantee you won't lose half your clients. BUT if you do, you'll make the same amount for half as much work."

I never had the heart to try that, but always wondered if it worked. I do know that there have been times when I've bumped the price for a PIA client.

(13 Mar '10, 21:09) EAgent

Better check Circ 230. Fee discussion could be considered against the rules.

Charge what you think is right.

Helen, EA in PA

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answered 20 Feb '10, 03:34

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Helen EA in PA
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I have recently comprised a "fee schedule".

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answered 20 Feb '10, 20:39

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SandySea
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I agree with all above responses and will add one more. Check with all your professional organizations, NATP, NSA, AICPA. I know NSA sends out annual surveys to all the members of suggested fees for different type of work, tax and non-tax.

I find my affiliation with the NATP and NSA has been very helpful in my eventually coming up with a great fee structure.

Diane Offutt, EA, MAcc Woodstock, GA. 30189

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answered 22 Feb '10, 05:35

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dianeoffutt EA
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accept rate: 7%

Make a schedule on what you think the forms are worth. I prep. taxes and I charge based on my rates and my customers love it. For a simple w-2, single and nothing else is $30 plus e-filing fees. I just did one with itemizing, 1099 R, W-2, Dividend, 1099-S, 1120-S, K-1, and a 8863, and I charged him $200. Don't charge because you know you can screw people, just have a heart and charge them what you feel is fair and not on how long it takes you, it's not their fault if you are slow.

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answered 15 Feb '11, 01:00

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Ygg
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Asked: 19 Feb '10, 22:29

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Last updated: 15 Feb '11, 01:00