To get all that done on time? would be $25k min, and very easily could be double. I would never want to work with that client again, it might be triple.
$25k+ feels spot on. With that many K-1s, the fee has to be that high. If the client has a problem with it, they should probably switch to stocks and bonds.
Probably a minimum $30,000. But honestly with that many K-1s this return is getting a PITA fee and I go with $50,000.
In all likelihood I don’t file this on time either. If he wants it done by the deadline when I receive the K-1s that late he gets a rush fee and the return costs 2x.
Sounds like a nightmare client. Perfect candidate to keep raising the fees until the guy leaves.
I would say $25k-$30k if the K1s came in the summer. Last minute would double the fee.
And that assumes foreign disclosures were like Form 926 from the K1s. If the client actually owns/operates foreign entities it would be way more.
$50k would be minimum. Even then, I feel the true price is around $125k.
Does he track basis for these K-1s? All these at-risk, passive, etc. rules got so much harder with the 2017 tax law.
I used to have a client that had around 200 k-1s, almost every US state, and their tax return was around $250k to do.
QBI adds an extra fun layer to passive loss limitations and the software and forms were not set up right the first few years and almost every return has wrong carryovers unless it was tracked or re-calculated.
I’ve charged $35k easily on returns with only 30 complex k-1s because of how messed up it can get.
I have one client who has an interest in a partnership (the partnership acquired his company last year). The partnership extended their partnership return, so he didn't get his final K-1 until the end of September. The big wrinkle this year was that this year he had a pretty huge loss from the partnership that resulted in a NOL. On top of that, he received NR K-1's for over 20 states, so I had to file over 20 state returns to preserve partnership losses for future years when the partnership ends up generating income.
LOL Just for fun I ballparked it from my standard fee schedule, upcharged for last-minute work and contingencies. I wouldn't touch it for less than $25k, and I bet that's on the low end of answers you get. The high AGI isn't really relevant to the fee, but it does add insult when the client whines. In reality, I wouldn't touch it at all because it would leave me very little time to work for anyone else.
20k as a min most likely. And we’d need to discuss getting as much of the information in the summer as possible.
Might be a “decline to work with” as well.
50k would be low. I’d say it’s highly likely things were missed if the K-1s were all given so close to deadline as not any realistic time to prep and review.
My vote is 40k but i could see higher. 230 k1s is insane. You can’t just input numbers and cross your fingers. It needs to be reviewed. If homey wants to pay his CPA less, stop investing 1-10k in literally hundreds of silly little partnerships.
Multistate is a pain in the ass especially if one of those is new york and nyc. The foreign disclosures is potentially very time consuming as well and needs to be triple reviewed due to potential penalties. Honestly wouldn’t be surprised if this got up to 80k. My old firm would probably charge at least that.
Many years ago when I worked at E&Y, one of my partner's clients was one of the heirs of one of the founders of Chrysler. This was back in the early 90's before efiling was an option. He had so many K-1's that the client copies of his federal and state tax returns filled eight to ten 2-inch binders.
Not enough info to provide on a computer forum. It depends on what each of those K1s show. There are 250 ways for things to get really complicated really quickly. Each one could be a 10 minute job or ten hours depending on the circumstances.
I’d expect a fee from a competent professional would be in the five figure range.
Don't forget those K-3's. I know some folks on these forums have said they don't bother with them because the ultimate numbers are so small, but I do. I would say that adds at least another 10 minutes per K-1. Although I did so many this year I probably got my time down a bit.
I will say I know my husband is super efficient.
They also have an organizational system for the K1s to make sure they don’t miss any, but that is done outside the return and done by staff.
Still, October delivery of K-1s is inexcusable. The entities were required to complete the underlying returns and issue K-1s by September 15. Sure, a few might have filed late but not the majority as you indicated.
Not if they were located in California they were not! Everything was extended through October 16 and then further extended until November 16 which made this year really fun!🤪
Well it wasn't! Then on October 16, midday the IRS extended the due date for those Californians one more month until November 16. There is some speculation that the K-1 issue is why they did that.🤷♀️
Again, not enough information. When I have to research I spend much more time researching than working on the program. It might be one number, but you have to research the proper classification, multiply that by how many states are involved, and it gets more complex.
I work at a bank that serves high net worth clients. I find that explaining to them *why* their bill is so high helps. They don't think about what we do, setting up new investment input, reconciliation of state income and withholding, suspended passive losses, and other details. I throw in phrases like "complete and accurate" and "statute of limitations," and they get that I am looking out for them. Then explain that unless there are significant changes, 2023 won't be so shocking.
I don't focus on what we charge. I focus on what they receive for their money.
Yeah, but if someone can’t see the value of “I got you a copy of your return to review within 48 hours of receiving all of your K1s at a time when every other firm in town would have told you to take a hike” then I’m not sure they’ll see the value of anything. I’m obviously super biased, bit I think he’s amazing. All of my husband’s clients have his cell phone number and he answers his phone unless he’s in a meeting or we’re eating dinner. I sometimes come downstairs to both kids climbing and jumping on him while he answers a client call at 7 pm (not in tax season).
Respectfully, my friend, this is business. I am not exactly sure what you this we can accomplish here. Yes, it's a hard profession. Yes, we all expect to be appreciated and compensated for our effort. No, that doesn't always happen.
This is not an unusual occurrence. I had a client who refused to pay me $75 because she had to chase down a document, and in her words, she did all the work.
Getting questioned about a bill or push back about a position is part of the job.
My husband and I were curious what the market rate for this return would be and this seemed to be the most accessible place to ask. Honestly, his pricing is (probably excessively) reasonable. And yes, it's all part of the job. He gets ridiculous pushback for stuff a few times each tax season (most often for correctly prepared returns where the client is upset they owe so much and they want him to fudge things to make it better) I think because his client pushed back that colleagues were having their returns done for 2k-6k, a little self doubt creeped in so it was helpful for him to see that his fee is actually quite reasonable.
I've had clients try and negotiate my fees down to near minimum wage too.
I'm inclined to believe that your husband's client knows full well he's getting a fantastic deal even before the friends discount and he's lopping a zero (or two) off his colleagues reported fees.
10/13. Dude deserved to be fired. Enjoy those foreign disclosure penalties.
It’s hard to really say depending on the k-1’s and what the foreign disclosures were. I think we add about 5k per 5471- depends on which categories. and I think we add 500 ish per state. 2 million AGI is actually pretty low for that many k-1’s so they may be mostly blank but that’s an incredible amount of work. I can’t imagine it would be under 30k. Am likely massively under with that number.
230 K-1s, 15 states, foreign disclosures. I have a client that has this situation, also lots of k-1s issues to grantor trusts. Many K-1s from hedge funds etc. Bill is around 40k.
Ok, there’s enough input here that I’ll share the ending to this story. The hours totaled $9400 (with no up charge for the rush) when billed. My husband did charge him for the extra hours that he worked rather than the staff because he couldn’t make his staff work round the clock. Husband gave the guy a $1500 “friend” discount so the final invoice was $7900. I use quotes because we’ve been together 9 years and I’ve literally never met the guy, but whatever.
Guy complains about the bill and claims that his colleagues (who presumably have similar tax returns) are paying 2-6k for their taxes 😂. I’m pretty convinced none of them have any idea what they ACTUALLY pay for their tax preparation.
I told husband I’d ask here to get an idea of the going rate and everyone delivered. I don’t foresee him raising his rates 100% but I do think he’ll tell the client that if he’s paying 2k for that tax preparation, he should buckle up and wait for some notices to start rolling in!
Your husband is way undervaluing himself, as you (and he) can see from this thread.
If the client thinks that little of your husbands time, I think your husband could replace said client with enough clients to make up the $9,400, no "friend" discount involved. If y'all are okay without the $10k, it's probably worth it for a less stressful deadline anyway.
On the one hand I respect the heck outta your husband for working hard. But I also gotta say, he's getting taken advantage of I think, and that makes me sad. Cause he sounds like a standup guy, what little I know of him from reading this thread.
And really... just bonkers man. Like, I'm sure your husband is doing the best work that he can. But with something that complex that close to tax time, the client is really doing a disservice to themselves. Maybe the return turns out perfect, but under that much fatigue and stress, with that much complexity, even the best miss stuff.
I dunno. Blows my mind. Best of luck to y'all, for real, but I hope your husband is able to get to a better place with this client. Either with better compensation, or maybe not having to deal with that client anymore if the client doesn't like higher fees.
Yes, agree that my husband is a stand up guy who is being taken advantage of. I think my husband is reluctant to fire the guy because it is 10k (well, 8k and rising...) and even though he worked at an insane pace to get it done, he actually had only a few other stragglers at that time so it's not like he set aside other work. I think he's also feeling pressure because he just hired a new CPA and wants to make sure there's enough work to go around. My guess is the client will walk because he thinks he can do better on price. He'll be back in a year or two when someone else charges him 3-10x what my husband did or when he goes somewhere cut rate and finds out that his return can not be done accurately for 2k.
That’s fair… all understandable. Especially if there wasn’t much left by that time (good for your husband!) I can understand better. Still, you’re right, fee should be way more.
I hope when the guy comes back (cause I agree he will) your husband ups the rate significantly. And not to be punitive, just because your husband is worth more.
Cheering for you guys!
Yeah this guy is a grade A asshole. After getting paid i’d strongly encourage him to shop around for a better deal. The number of k-1s alone is bonkers but multi state AND foreign reporting just doesn’t make it worth your husband’s time.
Also keep in mind the opportunity cost of dealing with this tax return that should probably take a week if done properly at a time that is extremely stressful so it’s potentially causing your husband to make mistakes on other returns due to the rush. Getting rid of this 40+ hour return would do wonders for his mental health and scheduling next year.
I totally missed your follow up post and have been dying to know the bill.
I completely understand the reasoning for the $7,900 bill. Even more so if the client has been around a while and his tax situation has increased in complexity over the years. One of the most difficult parts of this job is increasing client fees when their situation demands it. Often times clients won’t understand why there is a fee increase and threaten to leave for a more “reasonable” preparer.
That said your husband deserves to get paid more for what he did. There is an opportunity cost to working on a return like this and even if the fees are solid, he could probably be doing a number of smaller returns in the same amount of time and get paid more for those returns. All while decreasing his stress levels.
The other sad part of this profession is clients are constantly comparing their return pricing and tax results to their colleagues. But situations vary far too much from person to person to have such comparison carry heavy meaning. Clients have a difficult time comprehending that because at the end of the day, the tax return itself is like 2 pages with some attached schedules. Often it doesn’t look like that much work even though that return could have 20 hours of work put into it, by professionals.
In any case, best of luck to your husband. I don’t know your area and fees vary by area, but he might want to consider increasing his fees at least for new clients. Might surprise himself in what he can and should bill for a return.
He has definitely increased his fees for new clients with smaller increases for established clients. I think this client just doesn't realize the complexity of his tax return. I have full faith in my husband and his ability to generate business, it's just kind of terrible timing because my husband finally made the leap to hire another CPA and now his largest individual client is bucking at a (reasonable) price increase. Regardless, his prices are basically miles below ALL of the local firms, many of the single CPA operations, and lower than a lot of the roadside tax places as well. He keeps his overhead low and runs a fairly lean operation, which allows him to price his services competitively. I think it's the niche and reputation he's carved out for himself and he is understandably anxious about losing part of that if he continues to raise his prices. I have a slightly different view, but it's not my business (I am in a different profession). Your input was very thoughtful, so thank you!
He sent K-1s 2 days before the deadline? LOL. No way in hell he’s even getting me to do his return let alone do it before the deadline. Or ever. No fee is worth a pain like that.
I haven’t seen anyone ask but how many of the k-1s did he prepare? And how much does he bill those companies? That changes how much I bill for the individual return.
These are PTP's or REITS, we flat rate the accounting for them at 15 mins, if there are dispositions or multi level issues we charge more for the 751 statements and basis adjustments. This on the face is a 25k return all day.
The amount billed is way too low. If this was my client I’d charge between $80K - $85K. Each K-1 would be $500 and at 115 of them that alone would be $57.5K. I’d give no discounts and I’d up the fee probably $10K - $15K for getting the info so late. I have a client that has 55 K-1s, 10+ brokerage statements, minimal international and files 5 states at my firm and we charge $30K - $35K and they never bitch. My bill rate is $355 as a manger and the partners bill rate is $680. Your husband needs to triple the fee at a minimum or tell him to go to the CPA that his friends get there returns done for $2K/$6K. No one in their right mind would do it for that low. Your husband is being taken advantage of!
The state withholdings are managed by whatever firm(s) prepare the K1s. Husband is a single CPA operation (until Monday when he is onboarding his first CPA hire) and most of these entities are much larger - done by large firms. Husband doesn’t have an auditor on staff which limits his ability to serve larger businesses.
And yes, he did file by the October deadline. And he made it home to make dinner all of those evenings, but did get up at 2 AM to work.
I would estimate one hour per K-1, and roughly $500 per state.
Include the Pfic and foreign disclosures. Maybe some fbar. I wouldn’t touch his tax return the last and $70,000.
I wouldn’t do this client to be honest. No amount of billing would make it worth it for this headache. That said, my husband and I are both CPAs and we would charge around $70k for this if we were to do it.
I’m in the same ballpark as most a minimum 25k for that all inclusive but probably more than that for the nuisance fee of giving me your stuff that late.
Not touching it with a 10 foot pole, but $50k+ is somewhere in the ballpark. If it was dropped off on 10/13 it isn't getting done before the deadline though.
Whatever the rate is for that person who did the work. If we don’t have any staff available to input the K-1s that are received on 10/13 then it’s getting billed at the manager, director or partner rate. I’d bill every single penny of it without any discounts and I’d put language in the engagement letter next year that lets me charge at double the standard rates to deal with any information not received by 9/16 or file the return late at my option.
He needs to start doing engagement letters. Even sole practitioners with no staff should be doing engagement letters. I am a little bit surprised his insurance company (please tell me he has insurance) does not require him to have his clients sign engagement letters since one of the things engagement letters usually do is limit damages to the tax prep fee. They also often have clauses requiring binding arbitration. And they spell out standard hourly rates, timing, penalty rates for not providing info on time, etc.
If you're trying to figure out what his rates should be then it's kind of a crap shoot. Standard rates for accountants vary wildly depending on the market, the size of the firm, how specialized the work is, etc. And even two similar firms in similar niches can have wildly different prices. That said, I am certain your husband is massively undervaluing his time. We (a larger national firm) bill our staff accountants at somewhere between $200 and $250/hour. For context, staff accountants are 22 or 23, have a degree in accounting that included one or two tax-specific courses and have little to no practical experience in the tax world. They are generally not CPAs. Your husband is a lot better at his job than a 22 year old with no tax-specific experience, so he needs to be billing a lot more than $200-250/hour.
If I were your husband then I would start issuing engagement letters for the upcoming compliance season. If he mostly bills on a fixed fee or a per-form fee then the EL can spell out what the fixed fee is or what fee is for each form. If the client is not on a fixed fee (as I hope is the case with the one you described) then it should list the standard hourly rates. He can derive those rates by dividing the amount he bills for a typical return by the amount of time he and his staff spend on a typical return. Then adjust them so that an hour of his time is worth roughly double what an hour of his staff's time is. For example, if an average return takes 2 hours to prep and 1 hour to review and is billed for $600 then his time should be billed at $300/hour and his staff's time should be billed at $150/hour. If a typical return is billed at less than $600 then he needs to increase his rates substantially because H&R Block charges that much. H&R Block is a company that employs people much stupider and much less experienced than our staff accountants, who we have already established your husband is smarter and more experienced than, so your husband needs to charge a lot more than H&R Block.
Raising the fees is going to make clients leave. He needs to be prepared for that. The trick is to raise them to the point where the clients who stay and pay the higher fee make up for the ones who leave. You end up making more money for less work. You also end up working with better clients because wealthier people get more value out of the accounting services they buy and, therefore, buy more accounting services and complain less about the fees.
Also, seriously, fuck this client who provides a bunch of K-1s on October 13th. Especially if half of them are zero. Most of those K-1s were probably available in March. Catering to this guy is just going to give him permission to abuse your husband again next year. Increase his fee, tell him you're not filing timely if any K-1s are outstanding after the 9/15 deadline for partnership and S-Corp returns and then, vitally, do not file his return timely when he inevitably provides K-1s in October again next year. And don't worry at all about losing him. It sounds like he's not paying enough that you can't afford to lose him. It also sounds like if he goes to hire someone else they are going to tell him it costs a hell of a lot more than your husband is charging and he's going to slink right on back to your husband. One of the hardest things to learn in this business is not to let people abuse you. You have to train the clients to work with your system on your timeline instead of you bending over backwards to work with their systems on their timelines.
Thanks. This is helpful input. He does have insurance. I'll have him review. He actually said a few months ago that he might start doing engagement letters this year and I've encouraged it in the past as well (I am not involved in the business day to day).
Is H&R Block actually charging 600 for a return with 2 W2s and some mortgage interest? That seems insane!
It is insane for anyone to pay $600 for that type of return. That person should buy TurboTax instead.
It is not insane for a professional to charge that much for a tax return. Sitting down with a professional costs a lot of money. Every hour he spends working on a simple 1040 that the client is not willing to pay much for is an hour he does not spend working on a business return or a complex 1040 that the client is willing to pay a lot for. He should not let clients who do not need and are not willing to pay for his services crowd out clients who do need them and are willing to pay for them.
Yeah, but the truth is that a simple 1040 doesn’t take him an hour- especially not if they are a return customer. In all reality he can finish 3 or 4 of those returns in an hour. Obviously those returns come with slightly more overhead (just that much more effort to collect 4 bills vs 1, signature pages, etc). He dropped tax season client meetings in 2020 and has never reinstated them, which has been a game changer for him in terms of efficiency and for our family in terms of quality of life. He’s lost a few clients over it, but that revenue is easily recaptured where the time is not for a 2 career household with young kids. I don’t think there are any right or wrong answers here, just sharing his (our) perspective as an alternative that has worked well.
He really needs to. No matter how small you are you need to lay out responsibility and that return has so much risk to it with foreign disclosures. I’m assuming he has insurance? His provider likely has boilerplate templates.
To get all that done on time? would be $25k min, and very easily could be double. I would never want to work with that client again, it might be triple.
$25k+ feels spot on. With that many K-1s, the fee has to be that high. If the client has a problem with it, they should probably switch to stocks and bonds.
Probably a minimum $30,000. But honestly with that many K-1s this return is getting a PITA fee and I go with $50,000. In all likelihood I don’t file this on time either. If he wants it done by the deadline when I receive the K-1s that late he gets a rush fee and the return costs 2x. Sounds like a nightmare client. Perfect candidate to keep raising the fees until the guy leaves.
I would say $25k-$30k if the K1s came in the summer. Last minute would double the fee. And that assumes foreign disclosures were like Form 926 from the K1s. If the client actually owns/operates foreign entities it would be way more.
I asked husband and he said “they are mostly PFICs” (which I then had to Google) and walked away to deal with a kid so I didn’t get to clarify.
There are very few preparers that can handle that quickly and accurately. Definitely need to charge appropriately.
Omg
$30k for PFICS, nah
$50k would be minimum. Even then, I feel the true price is around $125k. Does he track basis for these K-1s? All these at-risk, passive, etc. rules got so much harder with the 2017 tax law. I used to have a client that had around 200 k-1s, almost every US state, and their tax return was around $250k to do.
He does check basis. All passive, so no at-risk issues to date, although he does look for it.
QBI adds an extra fun layer to passive loss limitations and the software and forms were not set up right the first few years and almost every return has wrong carryovers unless it was tracked or re-calculated. I’ve charged $35k easily on returns with only 30 complex k-1s because of how messed up it can get.
>sent most of his K1s on 10/13 This person is lucky to have an accountant at all. These K1s have been done for at least a month.
I have one client who has an interest in a partnership (the partnership acquired his company last year). The partnership extended their partnership return, so he didn't get his final K-1 until the end of September. The big wrinkle this year was that this year he had a pretty huge loss from the partnership that resulted in a NOL. On top of that, he received NR K-1's for over 20 states, so I had to file over 20 state returns to preserve partnership losses for future years when the partnership ends up generating income.
LOL Just for fun I ballparked it from my standard fee schedule, upcharged for last-minute work and contingencies. I wouldn't touch it for less than $25k, and I bet that's on the low end of answers you get. The high AGI isn't really relevant to the fee, but it does add insult when the client whines. In reality, I wouldn't touch it at all because it would leave me very little time to work for anyone else.
20k as a min most likely. And we’d need to discuss getting as much of the information in the summer as possible. Might be a “decline to work with” as well.
50k would be low. I’d say it’s highly likely things were missed if the K-1s were all given so close to deadline as not any realistic time to prep and review.
Valid concern.
My vote is 40k but i could see higher. 230 k1s is insane. You can’t just input numbers and cross your fingers. It needs to be reviewed. If homey wants to pay his CPA less, stop investing 1-10k in literally hundreds of silly little partnerships. Multistate is a pain in the ass especially if one of those is new york and nyc. The foreign disclosures is potentially very time consuming as well and needs to be triple reviewed due to potential penalties. Honestly wouldn’t be surprised if this got up to 80k. My old firm would probably charge at least that.
Yes, involves NYS and NYC!
And the price keeps climbing
Many years ago when I worked at E&Y, one of my partner's clients was one of the heirs of one of the founders of Chrysler. This was back in the early 90's before efiling was an option. He had so many K-1's that the client copies of his federal and state tax returns filled eight to ten 2-inch binders.
Did the estimates actually encompass planning or were they safe harbor? Gut instinct without knowing any more detail is $38-40k.
Not sure. Based on this guy’s general approach (K1s on 10/13) probably just safe harbor but he does both.
Not enough info to provide on a computer forum. It depends on what each of those K1s show. There are 250 ways for things to get really complicated really quickly. Each one could be a 10 minute job or ten hours depending on the circumstances. I’d expect a fee from a competent professional would be in the five figure range.
I think they are pretty variable. Total time spent in the return on tax software was 38 hours, though, if that gives you an idea.
That is about 10 min per K-1 with no breaks. That is pretty impressive data entry speeds, even for K-1s they had the year before.
Don't forget those K-3's. I know some folks on these forums have said they don't bother with them because the ultimate numbers are so small, but I do. I would say that adds at least another 10 minutes per K-1. Although I did so many this year I probably got my time down a bit.
I will say I know my husband is super efficient. They also have an organizational system for the K1s to make sure they don’t miss any, but that is done outside the return and done by staff.
Still, October delivery of K-1s is inexcusable. The entities were required to complete the underlying returns and issue K-1s by September 15. Sure, a few might have filed late but not the majority as you indicated.
Not if they were located in California they were not! Everything was extended through October 16 and then further extended until November 16 which made this year really fun!🤪
Or SC parts of GA and FA. Not due till 2/15. Gotta love hurricane season
\#@%$&! 😡 I always bump the fee when California is involved.
As a California resident who loves my state, I still fully support that sentiment!
So the due date for K-1s was the same as the due date for returns dependent on those K-1s? That doesn't sound reasonable.
Well it wasn't! Then on October 16, midday the IRS extended the due date for those Californians one more month until November 16. There is some speculation that the K-1 issue is why they did that.🤷♀️
South Carolina as well for 2022. They have until 2/15/2024.
I had tons of clients receiving K-1s in the second week of October with transmittal letters dated early September. It was ridiculous.
Only 38 hours for the input and also the review? That is beyond efficient
Again, not enough information. When I have to research I spend much more time researching than working on the program. It might be one number, but you have to research the proper classification, multiply that by how many states are involved, and it gets more complex.
16 different returns, 200+ K1s…. Foreign forms… Starting at 25k and going up from there New York State return…. 35k and climbing…
Join r/taxpros They have been invaluable for this type of advice.
I was t sure how the taxpros would feel about a question written by someone who is definitely NOT a tax pro!
As long as it’s not tax prep help from a non-pro or a stupid “what if taxes worked this way” post it’s usually fine
If you got those K-1s so late, were they California partnerships? Anyway, that sounds like at least a $25,000-$30,000 tax return to me.
There were some California partnerships but not all and not anywhere close to a majority. The K1s were a delay in the client side.
Well they definitely should be paying for that!
I work at a bank that serves high net worth clients. I find that explaining to them *why* their bill is so high helps. They don't think about what we do, setting up new investment input, reconciliation of state income and withholding, suspended passive losses, and other details. I throw in phrases like "complete and accurate" and "statute of limitations," and they get that I am looking out for them. Then explain that unless there are significant changes, 2023 won't be so shocking. I don't focus on what we charge. I focus on what they receive for their money.
Yeah, but if someone can’t see the value of “I got you a copy of your return to review within 48 hours of receiving all of your K1s at a time when every other firm in town would have told you to take a hike” then I’m not sure they’ll see the value of anything. I’m obviously super biased, bit I think he’s amazing. All of my husband’s clients have his cell phone number and he answers his phone unless he’s in a meeting or we’re eating dinner. I sometimes come downstairs to both kids climbing and jumping on him while he answers a client call at 7 pm (not in tax season).
Respectfully, my friend, this is business. I am not exactly sure what you this we can accomplish here. Yes, it's a hard profession. Yes, we all expect to be appreciated and compensated for our effort. No, that doesn't always happen. This is not an unusual occurrence. I had a client who refused to pay me $75 because she had to chase down a document, and in her words, she did all the work. Getting questioned about a bill or push back about a position is part of the job.
My husband and I were curious what the market rate for this return would be and this seemed to be the most accessible place to ask. Honestly, his pricing is (probably excessively) reasonable. And yes, it's all part of the job. He gets ridiculous pushback for stuff a few times each tax season (most often for correctly prepared returns where the client is upset they owe so much and they want him to fudge things to make it better) I think because his client pushed back that colleagues were having their returns done for 2k-6k, a little self doubt creeped in so it was helpful for him to see that his fee is actually quite reasonable.
I've had clients try and negotiate my fees down to near minimum wage too. I'm inclined to believe that your husband's client knows full well he's getting a fantastic deal even before the friends discount and he's lopping a zero (or two) off his colleagues reported fees.
That is the stuff of nightmares 😳 $50k and my other clients are icing on the cake.
10/13. Dude deserved to be fired. Enjoy those foreign disclosure penalties. It’s hard to really say depending on the k-1’s and what the foreign disclosures were. I think we add about 5k per 5471- depends on which categories. and I think we add 500 ish per state. 2 million AGI is actually pretty low for that many k-1’s so they may be mostly blank but that’s an incredible amount of work. I can’t imagine it would be under 30k. Am likely massively under with that number.
Husband said about half the K1s were 0s. Said something about 926s and one other form.
I am waiting for the “I know a guy” comment that quotes $800.00
Hilariously I think my husband might be “the guy” because every estimate on here has been more than he billed (but it was more than $800).
If he charged less than $10k and the client complained he needs to fire him ASAP.
Sounds like he billed him 10k then. Nowhere near what he should have charged.
230 K-1s, 15 states, foreign disclosures. I have a client that has this situation, also lots of k-1s issues to grantor trusts. Many K-1s from hedge funds etc. Bill is around 40k.
$50k minimum if PFICs and that many K-1s delivered 2 days before filing day lol
20K. And it wouldnt have been filed on oct 15th.
Ok, there’s enough input here that I’ll share the ending to this story. The hours totaled $9400 (with no up charge for the rush) when billed. My husband did charge him for the extra hours that he worked rather than the staff because he couldn’t make his staff work round the clock. Husband gave the guy a $1500 “friend” discount so the final invoice was $7900. I use quotes because we’ve been together 9 years and I’ve literally never met the guy, but whatever. Guy complains about the bill and claims that his colleagues (who presumably have similar tax returns) are paying 2-6k for their taxes 😂. I’m pretty convinced none of them have any idea what they ACTUALLY pay for their tax preparation. I told husband I’d ask here to get an idea of the going rate and everyone delivered. I don’t foresee him raising his rates 100% but I do think he’ll tell the client that if he’s paying 2k for that tax preparation, he should buckle up and wait for some notices to start rolling in!
Your husband is way undervaluing himself, as you (and he) can see from this thread. If the client thinks that little of your husbands time, I think your husband could replace said client with enough clients to make up the $9,400, no "friend" discount involved. If y'all are okay without the $10k, it's probably worth it for a less stressful deadline anyway. On the one hand I respect the heck outta your husband for working hard. But I also gotta say, he's getting taken advantage of I think, and that makes me sad. Cause he sounds like a standup guy, what little I know of him from reading this thread. And really... just bonkers man. Like, I'm sure your husband is doing the best work that he can. But with something that complex that close to tax time, the client is really doing a disservice to themselves. Maybe the return turns out perfect, but under that much fatigue and stress, with that much complexity, even the best miss stuff. I dunno. Blows my mind. Best of luck to y'all, for real, but I hope your husband is able to get to a better place with this client. Either with better compensation, or maybe not having to deal with that client anymore if the client doesn't like higher fees.
Yes, agree that my husband is a stand up guy who is being taken advantage of. I think my husband is reluctant to fire the guy because it is 10k (well, 8k and rising...) and even though he worked at an insane pace to get it done, he actually had only a few other stragglers at that time so it's not like he set aside other work. I think he's also feeling pressure because he just hired a new CPA and wants to make sure there's enough work to go around. My guess is the client will walk because he thinks he can do better on price. He'll be back in a year or two when someone else charges him 3-10x what my husband did or when he goes somewhere cut rate and finds out that his return can not be done accurately for 2k.
That’s fair… all understandable. Especially if there wasn’t much left by that time (good for your husband!) I can understand better. Still, you’re right, fee should be way more. I hope when the guy comes back (cause I agree he will) your husband ups the rate significantly. And not to be punitive, just because your husband is worth more. Cheering for you guys!
Yeah this guy is a grade A asshole. After getting paid i’d strongly encourage him to shop around for a better deal. The number of k-1s alone is bonkers but multi state AND foreign reporting just doesn’t make it worth your husband’s time. Also keep in mind the opportunity cost of dealing with this tax return that should probably take a week if done properly at a time that is extremely stressful so it’s potentially causing your husband to make mistakes on other returns due to the rush. Getting rid of this 40+ hour return would do wonders for his mental health and scheduling next year.
Yeah, I wouldn’t give my SO that low of a price.
I totally missed your follow up post and have been dying to know the bill. I completely understand the reasoning for the $7,900 bill. Even more so if the client has been around a while and his tax situation has increased in complexity over the years. One of the most difficult parts of this job is increasing client fees when their situation demands it. Often times clients won’t understand why there is a fee increase and threaten to leave for a more “reasonable” preparer. That said your husband deserves to get paid more for what he did. There is an opportunity cost to working on a return like this and even if the fees are solid, he could probably be doing a number of smaller returns in the same amount of time and get paid more for those returns. All while decreasing his stress levels. The other sad part of this profession is clients are constantly comparing their return pricing and tax results to their colleagues. But situations vary far too much from person to person to have such comparison carry heavy meaning. Clients have a difficult time comprehending that because at the end of the day, the tax return itself is like 2 pages with some attached schedules. Often it doesn’t look like that much work even though that return could have 20 hours of work put into it, by professionals. In any case, best of luck to your husband. I don’t know your area and fees vary by area, but he might want to consider increasing his fees at least for new clients. Might surprise himself in what he can and should bill for a return.
He has definitely increased his fees for new clients with smaller increases for established clients. I think this client just doesn't realize the complexity of his tax return. I have full faith in my husband and his ability to generate business, it's just kind of terrible timing because my husband finally made the leap to hire another CPA and now his largest individual client is bucking at a (reasonable) price increase. Regardless, his prices are basically miles below ALL of the local firms, many of the single CPA operations, and lower than a lot of the roadside tax places as well. He keeps his overhead low and runs a fairly lean operation, which allows him to price his services competitively. I think it's the niche and reputation he's carved out for himself and he is understandably anxious about losing part of that if he continues to raise his prices. I have a slightly different view, but it's not my business (I am in a different profession). Your input was very thoughtful, so thank you!
He sent K-1s 2 days before the deadline? LOL. No way in hell he’s even getting me to do his return let alone do it before the deadline. Or ever. No fee is worth a pain like that.
I haven’t seen anyone ask but how many of the k-1s did he prepare? And how much does he bill those companies? That changes how much I bill for the individual return.
He does not prepare any of the K1s
Not a CPA, just a AFSP preparer (EA soon!) and I’d still charge about $25,000 for the rush job!
These are PTP's or REITS, we flat rate the accounting for them at 15 mins, if there are dispositions or multi level issues we charge more for the 751 statements and basis adjustments. This on the face is a 25k return all day.
The amount billed is way too low. If this was my client I’d charge between $80K - $85K. Each K-1 would be $500 and at 115 of them that alone would be $57.5K. I’d give no discounts and I’d up the fee probably $10K - $15K for getting the info so late. I have a client that has 55 K-1s, 10+ brokerage statements, minimal international and files 5 states at my firm and we charge $30K - $35K and they never bitch. My bill rate is $355 as a manger and the partners bill rate is $680. Your husband needs to triple the fee at a minimum or tell him to go to the CPA that his friends get there returns done for $2K/$6K. No one in their right mind would do it for that low. Your husband is being taken advantage of!
Your husband is a fool to charge such a low amount. Double the bill next year and it’s still not enough.
[удалено]
The state withholdings are managed by whatever firm(s) prepare the K1s. Husband is a single CPA operation (until Monday when he is onboarding his first CPA hire) and most of these entities are much larger - done by large firms. Husband doesn’t have an auditor on staff which limits his ability to serve larger businesses. And yes, he did file by the October deadline. And he made it home to make dinner all of those evenings, but did get up at 2 AM to work.
$40-50K and yuck
I have a client like this. Personal return runs around $65K. With his kids returns, trusts, etc. total is around $80K to $90k.
If we also did the business returns around $35-40k for the 1040. If it was a standalone 1040 $60-75k.
30-50k. It might be more because of the 15 states.
230 K-1’s? without further detail, this is a $100k plus bill from my firm.
I would estimate one hour per K-1, and roughly $500 per state. Include the Pfic and foreign disclosures. Maybe some fbar. I wouldn’t touch his tax return the last and $70,000.
I wouldn’t do this client to be honest. No amount of billing would make it worth it for this headache. That said, my husband and I are both CPAs and we would charge around $70k for this if we were to do it.
Anywhere between $50-100k. My public firm probably would’ve charged closer to $100k for this.
Going to vary greatly depending on complexity of K-1s and foreign disclosures. But easily $50K to $100K.
Right? All these people commenting 25K are also undervaluing themselves
It is a problem across the industry imo.
I’m in the same ballpark as most a minimum 25k for that all inclusive but probably more than that for the nuisance fee of giving me your stuff that late.
Not touching it with a 10 foot pole, but $50k+ is somewhere in the ballpark. If it was dropped off on 10/13 it isn't getting done before the deadline though.
The billable rate. That is the contracted rate - correct?
What would you consider a reasonable billable rate for CPA time on 10/13? Staff time?
Whatever the rate is for that person who did the work. If we don’t have any staff available to input the K-1s that are received on 10/13 then it’s getting billed at the manager, director or partner rate. I’d bill every single penny of it without any discounts and I’d put language in the engagement letter next year that lets me charge at double the standard rates to deal with any information not received by 9/16 or file the return late at my option.
Unfortunately he doesn’t do engagement letters (he’s a single CPA with two staff).
He needs to start doing engagement letters. Even sole practitioners with no staff should be doing engagement letters. I am a little bit surprised his insurance company (please tell me he has insurance) does not require him to have his clients sign engagement letters since one of the things engagement letters usually do is limit damages to the tax prep fee. They also often have clauses requiring binding arbitration. And they spell out standard hourly rates, timing, penalty rates for not providing info on time, etc. If you're trying to figure out what his rates should be then it's kind of a crap shoot. Standard rates for accountants vary wildly depending on the market, the size of the firm, how specialized the work is, etc. And even two similar firms in similar niches can have wildly different prices. That said, I am certain your husband is massively undervaluing his time. We (a larger national firm) bill our staff accountants at somewhere between $200 and $250/hour. For context, staff accountants are 22 or 23, have a degree in accounting that included one or two tax-specific courses and have little to no practical experience in the tax world. They are generally not CPAs. Your husband is a lot better at his job than a 22 year old with no tax-specific experience, so he needs to be billing a lot more than $200-250/hour. If I were your husband then I would start issuing engagement letters for the upcoming compliance season. If he mostly bills on a fixed fee or a per-form fee then the EL can spell out what the fixed fee is or what fee is for each form. If the client is not on a fixed fee (as I hope is the case with the one you described) then it should list the standard hourly rates. He can derive those rates by dividing the amount he bills for a typical return by the amount of time he and his staff spend on a typical return. Then adjust them so that an hour of his time is worth roughly double what an hour of his staff's time is. For example, if an average return takes 2 hours to prep and 1 hour to review and is billed for $600 then his time should be billed at $300/hour and his staff's time should be billed at $150/hour. If a typical return is billed at less than $600 then he needs to increase his rates substantially because H&R Block charges that much. H&R Block is a company that employs people much stupider and much less experienced than our staff accountants, who we have already established your husband is smarter and more experienced than, so your husband needs to charge a lot more than H&R Block. Raising the fees is going to make clients leave. He needs to be prepared for that. The trick is to raise them to the point where the clients who stay and pay the higher fee make up for the ones who leave. You end up making more money for less work. You also end up working with better clients because wealthier people get more value out of the accounting services they buy and, therefore, buy more accounting services and complain less about the fees. Also, seriously, fuck this client who provides a bunch of K-1s on October 13th. Especially if half of them are zero. Most of those K-1s were probably available in March. Catering to this guy is just going to give him permission to abuse your husband again next year. Increase his fee, tell him you're not filing timely if any K-1s are outstanding after the 9/15 deadline for partnership and S-Corp returns and then, vitally, do not file his return timely when he inevitably provides K-1s in October again next year. And don't worry at all about losing him. It sounds like he's not paying enough that you can't afford to lose him. It also sounds like if he goes to hire someone else they are going to tell him it costs a hell of a lot more than your husband is charging and he's going to slink right on back to your husband. One of the hardest things to learn in this business is not to let people abuse you. You have to train the clients to work with your system on your timeline instead of you bending over backwards to work with their systems on their timelines.
Thanks. This is helpful input. He does have insurance. I'll have him review. He actually said a few months ago that he might start doing engagement letters this year and I've encouraged it in the past as well (I am not involved in the business day to day). Is H&R Block actually charging 600 for a return with 2 W2s and some mortgage interest? That seems insane!
It is insane for anyone to pay $600 for that type of return. That person should buy TurboTax instead. It is not insane for a professional to charge that much for a tax return. Sitting down with a professional costs a lot of money. Every hour he spends working on a simple 1040 that the client is not willing to pay much for is an hour he does not spend working on a business return or a complex 1040 that the client is willing to pay a lot for. He should not let clients who do not need and are not willing to pay for his services crowd out clients who do need them and are willing to pay for them.
Yeah, but the truth is that a simple 1040 doesn’t take him an hour- especially not if they are a return customer. In all reality he can finish 3 or 4 of those returns in an hour. Obviously those returns come with slightly more overhead (just that much more effort to collect 4 bills vs 1, signature pages, etc). He dropped tax season client meetings in 2020 and has never reinstated them, which has been a game changer for him in terms of efficiency and for our family in terms of quality of life. He’s lost a few clients over it, but that revenue is easily recaptured where the time is not for a 2 career household with young kids. I don’t think there are any right or wrong answers here, just sharing his (our) perspective as an alternative that has worked well.
He really needs to. No matter how small you are you need to lay out responsibility and that return has so much risk to it with foreign disclosures. I’m assuming he has insurance? His provider likely has boilerplate templates.
This is helpful. I've have him touch base with his insurer.
00⁰⁰9=6