Personal principles of tax preparation work

I have these four personal beliefs or principles that guide my tax preparation work. Publishing these as “beliefs” here does not mean that they reflect current realities in the industry.

  1. Tax preparation fees should be bench-marked in some manner simply because tax filing assistance is a service stemming from a government requirement that affects virtually everybody. Tax preparation clients represent the most diverse user group possible. This should mean that there is more social value in requiring public disclosure, in my opinion, than other types of services.
  2. Consumers deserve to benefit from the cost savings available through online tax filing services (as opposed to brick buildings and paper forms). Since I work almost exclusively online, I am able to offer CPA-preparered tax return services based on the published average industry fees that include the services of non-professional preparers.
  3. Tax return preparation should be the least important thing that your accountant or financial adviser does for you over the course of the year.
  4. Most taxpayers should be able to file their own tax returns. Our time together should be spent primarily focused on planning how to better manage taxes in the future.

These guiding beliefs are reflected in the two rules of tax preparation fees.

“My accountant disappeared”

This is the time of year when many individuals find out that, for some reason, the person who prepared their financial statements or tax returns in the past is no longer available. Self employed CPAs, accountants, tax preparers change their business circumstances with surprising frequency. Some speculate that they are simply sucked into a black hole. I’ve helped to clients in this situation already this past year. This disappearance can happen for a number of reasons: retirement, death, a physical illness, a mental disorder (depression, for example), relocation, a new job, a non-complete clause in an employment contract. It happens with surprising frequency.

I have a personal “inside line” on how this might happen. In 2006 I was stuck by a truck and had to give up all my clients suddenly. Many of these were lifelong relationships. Because of my head injury I wasn’t thinking straight, didn’t notify them properly and was acting more out of negative emotions and fear. I went back into practice last year (9 years later) but still have not contacted any of these earlier clients. Even now, my attitude toward these older clients has more to do with embarrassment, frustration and other negatives that have to be dealt with under these circumstances.

Ideally, an accountant would have a succession plan for the practice. I’ve given much thought to a succession plan for my own practice (and how I might be involved in other accountants’ practices) but I haven’t make any tangible progress on an agreement even after having approached more than two dozen potential candidates to discuss the topic. I haven’t found any other practitioners interested in a buy/sell agreement, for example. This will continue to be a goal for my practice until I find a solid solution.

I usually ask my clients during a review “What if I were no longer able to continue to …” but they do not seem too concerned with succession and continuity of their accounting. It would be a bigger deal than they realize, especially for those who have not bothered to gain an understanding of their own business record-keeping. Some of my clients, for example, would not know how to locate their physical or online electronic records. For most individuals and small business people the simplest and most effective way to address the issue, I think, is to have considered a clear response to the question: “What if my accountant disappeared?” Include a provision in your business plan or personal financial plan and let others (key employees, spouse, attorney or intended executor) know about your accounting contingency plans.

If you find that your accountant is no longer available this tax season and you can work with an online remote professional, I would welcome the opportunity to discuss how we can work together to pick up the pieces and move forward on a more stable plan for the future.

Tax preparation fees for 2015 tax returns

average tax preparation fees last year

average tax preparation fees last year 

I’ve drawn some attention lately, both positive and negative, for my two personal beliefs that: a) tax preparation industry fees should be bench-marked in some manner, and, b) that fees ought to be available to consumers in advance of making a request for service. I should be clear that this is purely a personal value, not a considered business decision and not something that I endorse for others in the industry.

These are my benchmark fees for online remote tax preparation services for 2015 tax returns. The benchmark fees are not the actual fee that I may charge. In fact little of my work involves solely the preparation of a tax return. The actual fee will be stated in an engagement agreement sent via email and work does not begin until we confirm the agreement in writing.

The term “benchmark fee”, as I use the it here, means that the fee is based on published average fees for the mid-Atlantic region reported by the National Association of Accountants. The Association reports fees from a wide range of tax preparers, not just CPAs. The figures below are increased by 5% over 2014 reported averages and then rounded up or down to the nearest $5 increment. The result, I believe, is a fee schedule that represents good consumer value for consumers who elect to use a CPA preparer through a cost-saving non-traditional online virtual professional service. In other words this fee schedule is intended and believed to be a good deal for an individual taxpayer working with a CPA to establish the lowest legal and sustainable tax liability. 

Benchmarked fees for 2015 federal income tax returns

Form 1040 (individual income tax return) with Schedule A and one state tax income tax return, e-filed, with taxpayer’s copy delivered electronically: $330

Schedule C (business): $200

Form 1065 (partnership):  $700

Form 1120 (corporation): $900

Form 1120S (S corporation):  $855

Form 1041 (fiduciary): $500

Form 990 (tax exempt):  $750

Form 940 (Federal unemployment):  $75

Schedule D (gains and losses):  $125

Schedule E (rental):  $140 per rental property

Schedule F (farm):  $175

The list includes only the most common tax forms, not all tax forms.

Tax preparation fees do not include accounting procedures necessary to obtain the figures for tax returns nor the cost of research to establish documentation of sustainable positions.