I’ve been in practice since 1993. Here are some things that I have learned. First of all, don’t make your money cyclical. Provide other services, such as accounting, tax planning, estate planning, tax resolution and others. If you are not licensed, rectify that. Today, the EA exam is pretty simple. Here’s some other advice:
Marketing is Imperative: If you are on social media, you are inundated with ads telling you how to make your practice a seven figure practice. It’s a con. You market by content media, blogs, speaking, etc. Do not pay some joker $5,000 to tell you this.
Marketing is done all year, not just during tax time. Again going back to my point don’t make your money cyclical. If you don’t know how to do tax planning, it boils down to putting as much money in your client’s pocket tax free as you can.
IT ISN’T telling them to buy equipment they may or may not need. You are the trusted advisor. In fact you are usually the only professional a client has to deal with, and knows. Build a network of financial advisors, and attorneys,
Don’t Negotiate Fees: Various societies publish what the average fee is to do a tax return. Ignore them! I was a partner in a partnership that charged next to nothing for services. This lead to a ton of work for little or no pay.
When I left the partnership, I had an epiphany. I was tired of clients not valuing my services, so I decided to triple my fees. It was scary because I lost 30 percent of my client base, but what I soon realized was I made more money and less “problem” clients.
I don’t negotiate fees. They are what they are. Since I raised my prices, I rarely get pushback. I charge a fee for the actual return and one for any additional schedule. Don’t be scared to raise fees and not take every client that walks through the door. Do not negotiate prices, and spell them out in an engagement agreement. Further, don’t file the return until you're paid in full.
Learn New Things: You have to expand your offerings. Learn tax planning, entity structuring, estate planning and other ancillary work that complements your business. Charge a retainer, and replenish it when it runs out. You put that all in the engagement letter. Accounting work is simple. Charge a monthly fee and get paid up front.
Charge for Everything You Do: You need a clear-cut engagement agreement, stating that tax preparation does not include answering IRS notices, audits, or anything else. Spell out what you will do and what will cost extra. If a client gets a letter from the IRS that isn’t your fault, charge to answer it.
When it comes to representation, when your client signs the POA, your engagement letter needs to state that if the client receives communication from the taxing authorities and does not refer them to you, you withdraw from the case, and the client forfeits any monies paid.
Charge a non-refundable fee to do research for representation as well. Then decide on a course of action. If it is an audit get half the retainer up front, and the rest before the audit occurs. If the client wants to appeal, you get half the retainer up front and the rest before the appeal. Get paid before you do the work.
With collections I want to impress on you, the client has not paid the most notorious collections agency in the world outside of the mafia. Get all of your money up front. Tax resolution is a very nasty business just make sure you get paid up front.
Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as...