Self-confident taxpayers preparing their own returns have sailed into a positive iceberg of tax reform, sending many of them to professional tax preparers for help.
How to handle these often-panicky prospects? And how to charge them?
“[I'm] getting several calls a week from ‘TurboTax experts’ — experts because they’ve always done their own returns on TurboTax,” said Enrolled Agent Terri Ryman of Southwest Tax & Accounting in Elkhart, Kansas. “The major questions are, ‘I can’t find how to get exemptions for my kids’ or ‘What does QBI mean?’ I tell them I’m not familiar with TurboTax and they should contact the customer support number with questions.”
EA Jeff Gentner of Williamsville, N.Y., reported “a surge of new clients just like this: Some are confused by the look of the new 1040 and the TCJA, others are just upset with the results they are getting,” he said.
Kimberely Bates, an EA with Central Florida Tax Services in Minneola, Florida, reported being inundated with calls “from referrals, former clients who wanted to save money by DIY, clients trying to ask for a friend, you name it. Referrals always become new clients. To former clients I explain that a fee will be involved — some pay, some don’t,” she said.
“Happens all the time, usually originating from a significant other partner on an MFJ 1040 who is completely unaware of what they are signing but smart enough to get a second opinion, often times under a veil of discretion,” said John Dundon, an EA at Taxpayer Advocacy Services in Englewood, Colorado. “I find myself more often explaining the forms in plain terms for basic understanding as opposed to correcting mistakes.”
‘Catching that mistake’
Reform’s massive changes have driven many DIYers to seek help they might never have thought they needed before. “The cause is typically because of the reduced withholding or thinking they could deduct things on Schedule A as they could previously and now not being able to,” said Chris Hardy, an EA at Georgia-based Paramount Tax and Accounting.
“I receive these types of requests from employee and self-employed. They all reference wanting to lower their taxes. Most are surprised and believe that TurboTax isn’t providing all the solutions,” said Daniel Morris, a CPA and senior partner with Morris + D’Angelo CPAs, in San Jose, California.
When reviewing client-prepared returns, Bruce Primeau, a CPA and president at Summit Wealth Advocates in Prior Lake, Minnesota, does run across mistakes. “I reviewed a return yesterday where the client has two children. The return should have showed a Child Tax Credit of $2,500 but instead showed only $2,000. I emailed the client letting them know of the mistake and they corrected the return. No charge from us, as that type of benefit is included in the service package we deliver as a financial advisor,” Primeau said. “Another client-prepared return included the back-door Roth IRA strategy. The client received a 1099 that showed the $5,500 contribution as taxable and recorded it as such on the return … Catching that mistake saved the client almost $2,000 in additional combined tax.”
“This year, trade or business status is determined on the entity level and I’d think that many who receive K-1s … will be receiving a lot of information that they don’t know what to do with,” said Mary Kay Foss, a CPA in Walnut Creek, California. “Some of the professional software companies have been revising their treatment of 199A issues and the DIY programs are likely doing the same. Early adopters may have errors.”
Potential clients?
“I’m not seeing these calls,” Foss added. “The 199A provisions are confusing enough. I’d predict that many DIY taxpayers are going to have problems with this. I wish they were astute enough to realize that this is a good time for professional help.”
“I try to treat every person walking into my office as a potential client and I find that those that want my time during tax season to review their DIY tax forms are often not now or ever going to be clients,” said Kerry Freeman, an EA at Freeman Income Tax Service, in Anthem, Arizona. “They often don’t understand that reviewing their work takes the same or even more time. Many times they only bring the 1040 and some schedules and are not prepared for a proper review. Often I have to explain that my cost to review is always equal to preparing the return in the first place.”
“We find these types of customers to be Groupon shoppers,” Morris added. “Cheap and likely poor long-term investments.”
“When a client calls and says, ‘I have a friend who...,’ no matter what I explain that I can’t provide advice to someone who isn’t a client and I’d be more than happy to help their friend if they want to call to make an appointment and pay a small fee,” Bates said. “I’ve been getting new clients about half the time in that manner. I’m not providing free advice this year.”
“I don’t require returning clients to prepay,” Bates said, but first-time clients prepay for one hour of service, non-refundable but applied to the final invoice. “If someone attempted to do their own return and realized that it was beyond them, I don’t charge them extra to fix the problem. I anticipate that they’ll be returning clients or very good referrals,” Bates said.
“I tell them that I start from the beginning, as I would with any new client,” Gentner said. “I don’t want to see what they have done but will be glad to compare the returns once completed. Using this approach, my fees are the same as they would be for any new client. The clients I’ve acquired this way are usually not that fee-conscious and appreciate a second pair of eyes. If I get a call from a potential new DIY client who wants to discuss the fee more than the return, I usually politely end the conversation.”
Typical charges apply, Hardy said. “One prospect said they would email me their TurboTax return and I could just pick up from there — so my fee should be reduced!” he said. “I should charge them double because now I have to explain the new tax law changes one on one.”
“Have had about 10 new clients so far due to the fact that they can’t figure out how to get the return done,” Ryman said. “I don’t answer questions over the phone and I don’t help folks who are self-preparing returns: If they want to make an appointment and have me do the return, then I charge my regular fee. And that is at least 10 percent higher than last year.”
