Pricing and Estimates

Yesterday, Kelly Phillips Erb tackled pricing on her Taxgirl blog. But I would like to expand on what she said based on what I see in my practice. I get calls and visits all the time wanting to know what it could cost them for me to prepare their return. And I am sure that I lose clients all the time, not because my price is too high but because I won’t give them a solid price.

Each tax pro is different and each has a different pricing policy. Some have set fees, others price by time, others price by the form. I price by form. At the beginning of the season, I set up a base price for a Federal/Kansas, one W-2 return with nothing else. I offer to sit down with taxpayers and look at their papers and give them a price estimate. If they don’t like the price, they are just out a little time. That seems to satisfy many people but many start listing the forms they have thinking I can give them an estimate off the top of my head. I can’t without more info.

A typical call can serve as an example. The taxpayer is looking for someone to do a parent’s return. They have Social Security, some interest, and a couple of small pensions. I could give them a broad range estimate but there are too many unanswered questions to target a price.

• Are they required to file? I need to know how much interest, pension and SS income they have. The requirements are different for the Federal return vs. a Kansas return.
• Is any of their Federal income not taxable in Kansas? This would require a special schedule for the Kansas return.
• Do they want to file even if they are not required to? Was there any withholding on the pensions to be refunded?
• If they are required to file a Federal return, how much interest do they have? That might mean a Schedule B is required. It might also require a Kansas intangibles return.
• Do they qualify for Food Sales Tax refund? Besides the income the taxpayer has, I would need to know their age.
• Do they qualify for the Homestead Rebate? I would need their age, other income that isn’t taxable and their property tax/rent information for that.

I think you get my point. Price is important for many taxpayers. But for preparers who price based on forms or time, it can be a trap. There are too many variables to consider when pricing a return and many aren’t discovered until we actually see the materials the taxpayers bring in. That’s why I suggest the potential client bring in the return for review before I give them more than a basic price.

When you call a new preparer to see what their price could be, ask about their base price, average price and how they price. But don’t get mad because they won’t give you a set price over the phone or won’t guarantee the estimate is what you will pay. In the example I set up above, there is a $80 difference between the top and bottom price.

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Comments

[Cindy]

Good points Trish, but I also tell clients that if price is what is most important to them, I am not the preparer for them...