Time again to address the annual most important detail of your practice: How much should you raise your fees?
According to a recent survey by the National Society of Accountants, more than three out of four practitioners raise fees annually or every other year. The average fee hike nationwide for last season averaged slightly more than 6%.
This year, said preparers, will bring unusual billable work from recent gigantic financial concerns for some clients such as Obamacare.
Andrew J. Piernock Jr., of Piernock Accounting and Tax Services in Philadelphia, plans a 5% to 10% increase due to his spending more time on the ACA form, among other factors. “My year-end letter will include my fee increase, explaining the ACA form and any other tax reform that may or may not affect their return,” Piernock said.
Obamacare requires a host of new forms (Accounting Today) and in some cases time-consuming analysis of clients’ insurance. Not to mention hand-holding.
Key Largo, Fla.-based Enrolled Agent Jerry Gaddis of Tropical Tax Solutions has likewise warned clients that their bill will rise this year “because of the ACA,” he said. “If we have to reconcile insurance subsidies paid versus those earned, calculate the difference and include it on the return, that’s going to be a billable transaction. And that’s before trying to figure out if a client had government-approved health insurance or an approved waiver to avoid the individual shared responsibility payment. It’s going to be a lot of fun,” he added, “telling people they have to repay subsidies they never actually received.”
Slicing and dicing
Nationwide, fees last season (Accounting Today) were expected to average $261 for an itemized 1040 with Schedule A and a state tax return, the NSA survey found, compared with $246 reported the year before. The fee for non-itemized returns was also on the rise, to $152 for a Form 1040 and state return.
Other average fees nationwide: $218 for a 1040 and Schedule C, $590 for a 1065, $806 for an 1120 and $761 for an 1120S, $497 for a 1041 and $667 for a Form 990.
CFP Mary Langhorne at MGL Financial in Huntersville, N.C., charges by the form and plans to hike fees on about half the forms she handles. “My average non-senior citizen client will see an increase of 8% to 10%,” she said. “I’m grandfathering the fees for low-income senior citizens who are existing clients. They generally are only filing 1040A or EZ, and I’m maintaining a 20% discount for all senior citizens.”
“This will be my first rate increase in four years,” she added. “Part of the reason for raising rates is the increase in cost of the professional software. I’m also incurring increased expenses due to CPE. I have my RTRP and will participate in the new voluntary program.”
“I increased fees 35% last year so the only increases this year will be slight for the small number of clients whose fees I didn’t increase for one reason or another,” said Cheryl Morse, an EA at Emerging Business Partners, Wellesley, Mass.
Allen Beatty, an EA at Apple Tax Services, in Jackson, Ohio, plans no fee increases but may tinker with other prices. “I’ve been giving discounts to [clients] for loyalty,” he explained. “I’ve noticed that now my prices on those are often much less than my competitors’. Thus this past year I reduced some of these discounts and I’ll continue to reduce more this year.”
New services and new risks
“I’m new so I can’t be picky, but I have priced a few clients out of my practice,” said Key Largo’s Gaddis. “And I no longer take new EIC clients. The potential preparer penalty of $500 per failure to meet EIC due diligence is too steep for my blood.”
“I’m not considering an across-the-board increase in rates, but feel that it has become necessary to charge for extra services that I perform,” said John Stancil, a CPA in Lakeland Fla. “More and more clients now seek some measure of tax planning, and I have not charged sufficiently for that in the past. I anticipate an increase for those and any other extra services I perform.”
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