Tax Preparation Fees

Many friends (but none of my clients) have expressed concerns that they think their tax preparation fees are too high. Well, if they were too high, then the preparer would not be in business for too long for one of two reasons.

Preparing tax returns is hard work and includes keeping up to date on more tax law changes than most people imagine possible, being on top of the wide variety of clients and their tax issues, managing the constant pressure-filled deadlines and workload compression, and the many client calls and frustrating interactions where clients do not reply with missing data until the preparer makes excessive pleading calls, and of course occasional disagreements over the prices charged.

No, the fees are not too high.

Part of determining the fees is the time the return takes, its complexity and the level of staff that will need to work on the return and the added quality control by a top-level reviewer and the owner or partner, the amount of the income (greater income causes a greater responsibility and care and added opportunities to explore additional tax saving prospects), the volume of transactions reported (the return of a stock trader with 400 transactions or a client with 20 K-1s will take longer to prepare and review), internal consultations about the return where necessitated, whether all the information is provided upfront or piecemeal, the number of client interactions (some clients provide everything clearly organized and some need extra calls for the preparer to obtain explanations or clarity), and whether the results were expected or a surprise or clearly different from the prior year. We cannot use a fee schedule for each form, nor can it be priced blindly by the hour. An ongoing client’s return can be based on the previous year, which can be used as a guide, while an estimate for a new client is, at best, a guess of the price or an expected and hoped-for range.

I have used all of these and many others and since I got most of the clients that I proposed for, and lost very few clients over the years (with some clients having a 40- and 50-year longevity) and made a reasonably good living, was able to fully fund my retirement account and had money to grow my infrastructure and add technology and innovative services and even made an occasional profit many of those years my fees must have been appropriate and not too high…and not too low. I cannot look into the pricing practices of other accountants, but I feel most are like me.

What my clients, and those of other successful accountants, appreciated was the relationship, the availability, the care and concern, the meeting promised due dates, their experience and knowledge and their continuous ability to apply everything they could to their client’s situation. I and the others are true advocates for their clients’ interests while making sure that everything was fully within all legal bounds.

There are many additional services preparers and accountants perform beyond tax preparation. We do financial planning, assist with starting and operating a business, offer some investment advice, mortgage, personal credit, children’s college costs and employment fringe benefit suggestions and many other areas that clients find themselves involved or entangled with. All of these are available as separate consultations that are billed separately but the initial discussions, which many times provide solutions and a direction for the client, are part of the tax preparation interactions. We are our clients’ most trusted financial advisors and in many cases are the first person called when a client is confronted with a complex financial or life-changing situation.

A professional service is invisible, but in the case of tax returns, that service is manifested by a tax form. Every preparer’s tax returns are pretty much similar in appearance. What is not similar is the input and care and concern and the meetings and calls and extras the client is asked about what could be done for them or the planning we advise them about for the current or future years. None of this shows up on the form, but the planning shows up in reduced taxes, greater financial security for the client and an invaluable professional relationship.

The next time you question a fee think about all of the benefits and value from the entire relationship. If you do not feel the value is there, then perhaps it is time to move on to someone else. But if you recognize all the benefits from having that accountant as your total financial advisor, then write that check joyfully.