Tax Professionals: How Do You Respond When Someone Asks About Your Fee?

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There’s a discussion going on in the Tax Business Owners of America LinkedIn forum about fees. It’s quite lively and has a lot of voices joining in. So, it may be worth your while to scan all the comments. 

Let me preface that I’ve been running a practice for a good many years. And as long as I focused all my attention on my tax practice, I was making a good, easy, happy living –- with little stress and a respectable amount of free time. I have sold at least three tax practices. (Now that I spend my time on the Internet, it has sucked up all available time. For good or ill.)

Let me also tell you that, these days, I regularly turn away practically all clients and refer them to my contacts and my graduates, depending on the skill levels needed.

Here is my fee philosophy that I shared. Think about how this relates to yours –- and if it’s relevant. 

1) I have no time for people who are shopping for price. They will leave the following year. So I simply turn them away and tell them that I am not accepting new clients. That leaves me more time to pay attention to clients who appreciate me and are willing to pay me, without question.

As Michael Rozbruch, CPA points out:

The Bottom Line: The more commoditized tax preparation gets (and let's face it folks, tax prep is a commodity whether you agree with me or not), the more you will encounter bottom feeders/shoppers. 

Within five years most of the tax prep and accounting you are currently doing will disappear and be replaced by the Internet and DIY sites. 

Do you really want to bet your future on a commoditized business model? Do you really want to be forced to match your competitor’s prices just to retain or get a new client? Do you really want to be just picking up the crumbs? The rapid advances in technology, in a few short years, will nearly eliminate the need for people to hire professionals for the work you’re now doing. Negotiating with, and representing clients before the IRS requires skills, finesse and the “human-touch” that no machine can replace. I have yet to see, or even hear of, a computer program that will fight for the protection of my client’s rights.

But back to my thoughts: 

2) If they are a referral, I must know from whom. Then I will decide if the referring source is someone sensible or a flake. (People have friends and contacts a lot like them, usually -- but not always.) That also tells me if the engagement will be more complex than the caller is admitting. As one person pointed out -- she quoted $500 and ended up with a $3,900 fee. This is very, very common. By the way, referrals from good clients don’t ask about fees. They already know you’re worth it.

3) My engagement letter outlines all the tasks I expect to perform -- how many years of tax returns, perhaps the complexity of the returns, if audit or collection representation is needed -- for how many years, etc. And it also spells out that if new information surfaces changing the complexity of the engagement, the fees will rise. And that they are being truthful and providing all the information -– especially income information. Incidentally, I have them read and sign my Client Rules and Responsibilities contract before our meeting -– a one-page document. If they argue, want to change any terms or refuse to sign -– I reject them as clients. Period.

4) As EAs, CPAs and tax professionals, we are not obligated to provide a defense for the guilty, rude, or those who are dishonest to us. So, if a new client lies to me, they are out the door. Oh, did I mention that the engagement letter also spells out the retainer is earned when received? (Note: I rarely enforce that or kick a client out. But in very rare occasions, I do use the terms of the contract to someone who has really abused the relationship.)

Most importantly, we love what we do. Why should we spend our precious, irreplaceable time with anyone but people we really enjoy and respect?

Saying 'no' may not be easy. But in the long run, you will be less stressed, and earn more, working with good, solid, long-term clients. Trust me. Been there.

…So…how are YOU going to be handling the fee question from now on?



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By LynetteC
Jun 26th 2015 01:11

Fantastic article. Thank you! I run into this a lot. I am not just putting numbers into a tax return, I am their partner in insuring accuracy.

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By Steve
Jun 26th 2015 01:11

Do you think Michael Rozbruch's opinion of DIY tax prep completely taking over is true of business tax returns as well? I am seeing that evidence at the lower end 1040 level, but not more complicated 1040s.Just curious as to your thoughts on the corporate and partnership side of tax prep.

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By Rug Pilot
Jun 26th 2015 01:11

Thanks, Mike. I too have no qualms about kicking a client out for taking too much of my time, leaving things out, arguing about fees, etc. They can be replaced by someone else and usually are. I occasionally tell people who are shopping for fees that we are expensive and they may not need that degree of skill. I am asked by Realtors what I charge for a return. In response I ask them what they sell a house for. Same Question.

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By Mel
Jun 26th 2015 01:11

I would love to see the list of "Client Rules and Responsibilities" because many of my clients don't know the 'rules', but I must admit, I've never explained them either.

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By TaxMama
to seth fineberg
Jun 26th 2015 01:11

Hi Mel,

Hmmm...I can't upload the doc file here.
Let me make that the entire subject of the next article.

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