I am an attorney who prepares a small number of returns for clients, for trusts that I administer, for gift taxes, and so on. I spend a great deal of money on the program plus REP fees each year. My fees are reasonable--neither much higher nor much lower than other tax preparers charge. But REP fees along generally consume between 15 and 30% of the total fee that I charge.
I imagine that the metrics work for folks who do a ton of returns, but I'm just wondering how folks think about these fees in the context of the smaller preparer. When REP fees of $90 or $150 for a single client exceed the cost of buying an off-the-shelf software program, I am having trouble wrapping my mind around why it costs what it does and whether I am doing something wrong!
Charge and hourly rate and add an "administrative" or "software" fee to cover the REP Fee.
If you go to court, do you charge for filing fees?
If the fees are more than "off the shelf" software, why don't you switch? [I think I know the answer, but I had to ask.]
Here's wishing you many Happy Returns
My question wasn't meant just to be whining. I am genuinely curious about how people think about the fees. For example, what answer would YOU give to why you don't use off the shelf software?
As for going to court, not all courts charge filing fees but when a court charges a $40 fee to file a motion that would have cost the client $500 or $5,000 to draft, the "drag" that the filing fee imposes is modest.
Over my many years buying things I have learned that a really good tool can last many lifetimes and a really poor tool may only be good for one use. Lacerte is a tool that does the job I want done with minimal effort (most of the time) and I believe it is worth the extra cost to keep this very sharp tool. If you can find an "off the shelf" bit of tax software that makes you happy and does the job with minimal effort, then use it. Each time I try a new software, I long for the one that makes me really comfortable doing my job, i.e. Lacerte.
I have used a very early CCH software that was an abominable disaster. I currently use or play with ProConnect Tax, ProSeries and ProSystems FX, and Tax Act and yet I am still here with Lacerte. (Maybe I did drink the Kool-Aid!)
Here's wishing you many Happy Returns
I understand the quandary about the cost of Lacerte. I've had a couple of colleagues switch from Ultra Tax to Drake due to the cost differences. But they still keep a basic version of Ultra Tax to double check what they get out of Drake or for more complicated returns. That's an extra layer of effort I don't have the time or patience for. At this point in history there's enough anxiety built into a tax practice without introducing even a minimal lack of confidence in one of the most important tools we use.
I actually converted from CCH ProSystem fx to Lacerte in 2003 because it was so much more affordable and more user friendly. I told my CCH sales rep I changed because of the cost and he said "You should have told me, I could have given you a better price!". That never sets well with me.
Although I get unlimited processing for 1040 & my home state Individual, I use the REP fees for all modules to determine my base fee for each tax return type. I don't consider the software an incidental component, more like a staff member.
First, my engagements may be different than yours as tax preparation is my primary service. Your original post indicates that preparing fiduciary returns is an auxiliary service you provide along with your estate administration practice, correct? I imagine most of your billing is based on billable hours?
I bill tax preparation by the form as it is an easier method for my clients to understand in relation to the value of my service. It also makes it easier for me to estimate a fee for a prospective client. And to be honest - I absolutely hate dealing with time keeping.
I determine my base fee to include the actual costs of software, supplies, labor plus an overhead cost componenet (encompassing occupancy, continuing ed, technology, data security, etc) and then a profit component - in my simple mind this means how much do I expect to receive in exchange for the portion of my life I'm giving up to provide this tax return. That's how I've determined my "Base Fee" just to open a file and prepare the most basic version of that type of return. Then I assign a fee for the various schedules required to be filed with that form which reflect time at my hourly billing rate. The client is given the invoice with the base fee assigned to the primary form (1040, 1041, 1065, 1120, etc) and charges for supporting forms detailed below.
Most years I adjust the base fee to accommodate the increases in my major costs - labor, software overhead. The whole thing needs to be reviewed some years to make sure I'm still keeping all of my bases covered. This is one of those years.