Category: Practice Management

Big Mistake Tax Pros Make – Taking on every client that walks in the door

August 3, 2023

Big Mistake Tax Pros Make – Taking on every client that walks in the door

I was on a webinar as a panelist for the TaxProMarketer when my good friend Nate Hagerty asked me what the biggest mistake tax professionals make. Of course, I told him one when he asked me the question and then offered a few more during the hour and twenty minutes we were on the Zoom webinar. Below is another mistake tax pros make in their practice (of course there are many others). See the post from July 23, 2023 “Including IRS representation work in tax prep fees for clients”.

Yes, I know it seems like it is hard to get people to call, email or knock on your door. When someone is ready to buy, we are eager to make them a client. But you should not work with everyone that is willing to work with you.

Look for the warning signs.

– You ask them to get you some form, document, or piece of information before your meeting with you and they have some excuse

– You mention your fees and they say “Can you do it for less? My prior guy charged me less than that.”

– They are complaining about the prior tax preparer and you look at what they did, and there is not much you would do differently

– They are in the process of suing their prior tax pro or filed a complaint with the state or IRS

– They are talking to you and have used 3 different preparers in the last 4 years

– They made an appointment with you and were 15 minutes late and make you go over the allotted time (especially when it is late in the day or on a weekend day)

– They schedule an appointment and either missed it or rescheduled at the last minute (2 or 3 times). I personally have a 2 strikes and you are out rule.

I could go on with many more. I hope you get the point. Working with these clients are only going to cause you stress, pain and suffering. If you have had a tax practice for any amount of time, I am sure you have enough of these kinds of people on your list. Why do you need another? Just because they can pay you what you ask?!

Oh, and if by chance you see any … Continue reading

Big Mistake Tax Pros Make – including IRS representation work in tax prep fees for clients.

July 23, 2023

A while ago, I was a guest speaker on a webinar with my good friend Nate Hagerty at TaxProMarketer.com. They were talking about using Google Ads to generate tax resolution leads and some promising statistics they had generated for some of their tax pro clients. The cool thing was this was specifically on tax resolution keywords.

Nate asked me what were some of the biggest mistakes tax resolution tax pros make. So, I thought I would share what I talked about and a few others mistakes we make (yes, I have made many of these myself. School of hard knocks is what they call it).

Big Mistake Tax Pros Make

Probably one of the biggest mistakes I see tax pros make is that they include tax resolution work (calling the IRS for transcripts, setting up an installment agreement (IA), or preparing financial forms) in with the tax prep fee for clients.

Most tax professionals don’t enough for tax prep let alone include additional services like IRS collections work. Same goes for exam/audit related work. Many practitioners get a CP2000 or correspondence exam notice from their clients and they will include it with the current year tax prep. Meaning you need to charge extra for these services (unless it can be determined that somehow the notice was due to your error).

DON’T DO IT! These services are way too valuable. In most cases, the collections or exam work is way more valuable than the tax prep. I charge $750 base fee for a 1040, $750 as a minimum for handling an IRS notice reply and $500 for a Guaranteed IA (GIA) (they owe less than $10k). The last national average I saw for a 1040 was about $280 and $540 for a business return. Most tax pros charge $25-100 for a GIA, if they charge anything at all.

First, these projects take extra time to deal with and second, they are separate engagements. If you do an engagement letter for a 1040, I bet if you look at the language used, it does not cover notice reply or any other representation work. That means you can (and should) charge separately for this extra work.

All the best,

Dan

Dan Henn, CPA, CTR™, NTPI Fellow
Managing Member
Tax Pro Academy, LLC… Continue reading

Big Mistakes Tax Pros Make – Not charging enough for your services

July 13, 2023

Big Mistakes Tax Pros Make – Not charging enough for your services

Here is one mistake that most all small office tax pros make. The problem is when we first started our practices, we wanted to generate revenue to offset the costs we were incurring. Even though we bought cheap software (ATX or Drake for example), we had a small office in our home or nearby and still had office supplies, a laptop or desktop computer, and color inkjet printer, these things still cost money. Plus we still had to generate enough cash to help pay personal bills.

So, what do we do? We sell our services very low to get people in the door. I have seen many people prepare a Form 1040 for $100-250 (and including their state return, if applicable). Then couple this with Mistake #3 (Not Raising Fees Annually), and then you can see why most tax pros don’t make a lot of money and are too cheap to spend/invest on new things.

One thing that I did well was always increase my client’s fees 5-10% every year. The first few years, I did not increase my base fee. Back in 2014, I set my base 1040 fee at $300. I then proceeded to increase that base fee $50 each year through the 2020 tax return season.

Then in the 2021 tax return season, I decided to do a dramatic increase of $150 for 1040 and $500 for business returns. I think this was the biggest reason that my gross revenue increased 20% that year. I did this by not greatly increasing the overall number of clients.

By the way, when I increase my base fee each year, this is for NEW clients. Existing clients get an annual increase (which was around 10% this past year for just about everyone)!

Oh, yes, some of you think that I don’t get that many new clients with fees that high. And you would be correct. I don’t need to. If I charge $2,000 for a business return and if I was charging $1,500 previously, I can get 3 clients at $2,000 vs 4 clients at $1,500 to make the same money. Would you rather have fewer clients making the same money than more clients and more work?

Plus, it is amazing that the higher you charge for your services, you get more respectful and better quality clients. I triple dog dare you to