Category: Client Management

Cost of Client Procrastination on your Tax Practice!

We are now in what I affectionately call the Second Tax Season. While it is not usually as base as the first one of the year, it can get pretty hairy. If you are like I used to be, you would pick up your hours as the extension deadlines approach. In some cases, working 60-70 hours a week (or possibly more). 

So, the question becomes, why do we do this? The simple answer is we love our clients. We love them so much, we take their abuse. Yes, I said abuse. Seems like a strong word, but follow this with me for a few minutes.

You work really hard from January to mid-April. You take a little bit of rest, but then it is back to work on the extended returns for the information you had most of their info. Then there is that final 10-20% of returns you have in your office to do, but you can’t. Why not? Because you are missing 50-80% of the information you need to prepare the return.

So, what do you do? You start sending emails to these clients to request that missing info. As time moves on, and their excuses keep piling in on why they cannot produce that info, you start having your staff calling them to get the info into your office.

Days turn into weeks, weeks into months, and now the deadline is upon us. This is when you send the final email about two weeks before the final deadline. You tell them that if it is not filed on time they will incur late filing penalties which can be very expensive.

Well, that lit the fire under their butts and they finally get the information to you with 10 days (or less) for you to get the return done. What do you do?

Well, if you are like most tax professionals, you just grin and bear it. You hunker down and get the return done. You get it done on time, bill them the same amount you did last year and we all move on.

BUT WHY?!! Why do we do that?

We take this abuse! You don’t have to, nor should you take this abuse from anyone! It doesn’t matter if they have been a client 15 years, or their your mother or brother. There is no excuse for them making their emergency your emergency.

Here is a list of 10 … Continue reading

Client Communication and how to avoid the “You didn’t tell me” plus How to Get Friggin’ Paid!

Today, we embark on a mission—a mission to fortify your practice, protect your interests, and ensure you receive the compensation you deserve. As General Patton once inspired his troops in WWII, I am here to galvanize you, the valiant tax professionals, to stand firm in the face of challenges and emerge victorious in your IRS representation cases.

The Battle Plan: Document Everything

In the trenches of tax representation, one of the most formidable adversaries we face is the dreaded “But you didn’t tell me that” client. These clients, whether through selective memory or genuine misunderstanding, can pose a significant threat to your practice. The solution? Documentation.

  • Reduce to Writing: After every significant discussion, reduce it to writing. Send an email summarizing the main points, decisions, and actions required. This not only serves as a reminder to the client but also as a protective shield for you.
  • Certified Mail: For critical communications, send letters via certified mail. Even if the client doesn’t claim the certified mail, the regular mail will reach them. Keep the returned certified mail unopened as evidence.
  • Client Acknowledgment: Always request a reply from the client acknowledging receipt of your communication. This can be an email, a signed letter, or a duplicate copy of the letter they sign and date.

Strategic Communication: Clarity and Precision

To prevent misunderstandings, clarity and precision in communication are paramount. When advising clients on actions like making payments to the IRS while you wait for returns to be prepared, a Form 433-A to be compiled, or Appeals to respond, be explicit. Explain the consequences of changes in their financial situation, such as winning the lottery or receiving a raise, and how these could affect their resolution status such as dropping out of Currently Not Collectible or adding a new liability can kill their Installment Agreement or Offer-in-Compromise.

The Art of Getting Paid: Ensuring Fair Compensation

In this battle, your time and expertise are your greatest assets. Ensure you are compensated fairly for your services.

  • Engagement Letters and Retainers: Always use engagement letters and require retainers up front before starting any work. This applies to any type of professional work you do for a client. For tax return preparation, a retainer of at least 50% is advisable. For IRS representation cases, secure a retainer of $3,000 to $5,000 for exams.
  • Value-Based Flat Fees: For collections cases, consider a value-based flat fee structure. Collect 100%
… Continue reading

Raising Fees – Why is it so hard?

Welcome to our exploration of a topic that many tax professionals and licensed practitioners often grapple with: raising fees. Despite the ever-present dynamics of inflation and market forces, numerous professionals find it incredibly challenging to increase their rates. In this post, we’ll dive into several key reasons behind this hesitation and examine how it affects your clients, profits, and overall psyche.

**Existing Clients vs. New Prospects**

One major distinction to keep in mind is the difference between existing clients and new prospects. Generally, it’s easier to raise fees for new clients than for those who have been with you for some time. Let’s start by discussing why increasing fees for existing clients can be so daunting.

**Fear of Losing Long-Term Clients**

The primary concern here is the fear of losing clients. Many professionals worry that a fee increase will drive away loyal long-term clients. This concern, while valid, is often overblown. Most clients understand that fees need to increase over time due to rising costs such as software upgrades, memberships, and staff salaries.

**Practicality and Perspective**

In practical terms, a reasonable fee increase of 3-10% is often barely noticeable to most clients. For example, raising fees by 3-5% annually allowed me to retain 98% of my clients during my 14 years of practice. More importantly, the clients who stayed valued the quality of service even with the increased fees.

**Client Loyalty and Economic Sensitivity**

Another factor is client loyalty. Long-term clients might feel unfairly treated with a fee hike, but the reality is that loyalty is not easily broken by marginal increases. Economic sensitivity is another concern; professionals hesitate to raise fees for fear that clients can’t afford them. However, economic conditions on tax returns don’t always represent the clients’ full financial scenario.

**Valuing Your Services**

Not raising your fees may inadvertently undervalue your services. Lack of confidence in the value you bring can make fee increases seem daunting. Yet, charging higher fees often enhances the perceived value and worth of your services.

**Consistency and Predictability**

While maintaining steady fees provides a predictable experience for clients, small, gradual increases can condition them to expect and accept changes. This method helps avoid larger, more shocking increases down the line.

**Fear of Negative Feedback**

The fear of negative feedback also plays a role. While some clients may complain, the impact is generally minimal if you provide excellent service. Occasionally, you might lose a few clients, but those … Continue reading