Initial thoughts on the wrap up of tax season:
1. OVERALL: It was the roughest tax season in my 30+ years, yet it was not as bad for me as many others tax professionals reported. Tax accountants’ online discussion groups are filled with stories of excess stress, it’s health impact, and threats of retirement from some members of the profession. We know that tax preparers are, overall, a notably grey-haired group and many appear to be fed up. My ability to manage stress is likely tied to the lower number of clients I handle and the habit of establishing some relationship prior to agreeing to handle the tax return. The tax season ended with three snafus on April 15 – more embarrassing than harmful. My business coach pointed out that my final day account review email made it sound like I was dumping my clients at the closing of the tax service engagement.
2. REGIONAL DIFFERENCES: My clients’ collective experiences did not mirror what was reported nationally. I presume that is a geographic factor with our coastal metropolitan areas hit harder by tax law changes than most. Refunds were smaller among all of my clients who normally overwithhold taxes. A disturbingly larger portion of my clients are now making installment payments now for underpayment of 2018 taxes. Upper middle class professionals, around my age, with two homes (many of my clients have shore houses) and home offices were hammered by this tax law. Other blog posts focused on my frustration with inability to get clients to take proactive measures to adjust to the new federal tax law.
3. POLITICALIZATION: Taxes, like the rest of the world, have become highly politicized and divisive. That’s especially true with regard to health care penalty issues. It’s tough to develop a comfortable, productive and trusting relationship if world views are not aligned. In my community I’m more widely known as an environmental activist and small business promoter than as a tax preparer. It makes sense for me to focus on building close supportive relationships even if that means a slower rate of growth for my small practice.
4. TECHNICAL AND WORK FLOW: No significant technical glitches or work flow issues. I had three cases of stalled work due to lack of communication. I’m less than thrilled by the lack of integration between my CRM software, tax software and billing software. It is functional but has room for improvement. IRS was much better in every respect this season than I would have predicted.
5. PRICING: I received no complaints from returning clients about my pricing so I’m likely undercharging. My average fee for just personal tax return preparation was an average of median of $515 and an average of $550. The plan is to continue to increase at 10% to 15% per year.
1. TAX PLANNING: I see the strongest tax saving and planning opportunities available through employee benefit plans and qualified small business stock investments. I will focus my off-season efforts there. These can be productive areas of practice both for me and my clients. Apparently I’m not as excited about opportunity zones or the pass through deductions as other tax planners – despite having OZs in my two closest towns of Millville and Bridgeton NJ.
2. TAX REPRESENTATION: It is unclear how much more work will lie ahead in tax representation as a result of screw-ups under the new tax law. Representing clients in tax trouble is normally the largest component of my tax practice. While we have a reasonable estimate of the higher error rate of taxpayers this past year, the systems for auditing and correcting those deficiencies by IRS, the states and local tax collectors is unclear.
3. NONPROFIT: I had more trouble working with clients in the nonprofit sector this past year. This is primarily due to difficulties working with state charity regulators combined with unwillingness of nonprofits to pay for the required time it takes for this work. As a result, I’m not currently taking on any more pro bono or reduced fee nonprofit work.
4. MERGER: Finally, I am exploring the possibility of joining forces with a larger accounting firm. Larger firms don’t provide the same broad-based services to the smallest business clients – particularly those with less than a million dollars gross annual revenues – as I have done. That’s an issue we need to resolve before moving forward. The inherent internal conflict is that success in the small business service field is based on handling multiple lines of work for each client. However, that business model is less efficient in terms of overall revenue potential for the tax professional.