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Will you charge to amend for the Unemployment tax change?

christijoguhn
Level 3

Also- curious on rate in comparison to regular returns (as far as a percentage of fee)

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16 Replies 16
Ernie
Level 9

What unemployment tax change?

dascpa
Level 8

I've seen firms charge hundreds of dollars for amended returns that requires 5-10 minutes of work, especially when there are no attachments.  I've also seen companies charge more for wealthy clients which makes me angry.  A shirt in the store should cost the same to a wealthy and non-wealthy customer.  $50-$75 is fair.  Some higher, some lower depending upon circumstance.

Turtle43
Level 3

Now that IRS is accepting efile Amended Tax Returns (starting 2019 Amendments), it is more efficient for us.  I feel even though some amendments take 15 min, it takes time to review to make sure nothing else changed and for those who have state income tax returns, it will take more time to amend state as well.  I sometimes have to mail the amended returns to clients and have to print the Fed Package, State Package with Fed forms attached, tabbed the signature pages, give instructions and I even provide addressed envelopes.  I charge more than $100.

RockingCPA
Level 1

Regarding your comment about charging wealthy clients more I have a couple of questions:

  • Have you considered the risk factor of working a return with taxable income of $1M vs $20K? 
  • What are the potential penalties in the unlikely event you make a mistake?  We ARE human and mistakes happen. 
  • Do you give discounts to clients that don't make a lot of money to help them out?  If so, why would you charge them less than wealthy clients who can afford your fees? 
  • Why are tax rates for successful people higher than those with low income?  Since their fees should be the same shouldn't they pay the same tax rates?

Usually, my fees are higher for wealthy clients more because their returns are more complex, but the risk factor IS a consideration, as well.   My billing rate is $250/hour for any time above a minimum fee I set for returns with business income/expenses (Sch C, Sch E and 2106) vs returns without.  I will usually charge $125 or $250 to amend a return, based on the complexity. 

For the person that said it only takes 5-10 minutes are you also factoring in the phone calls, e-mails, tracking the amended e-file, notifying the client when has been accepted, are you printing a paper copy or providing a digital copy?  I doubt anything but an e-mail every takes only 5-10 minutes.  I'm terrible at estimating the time an engagement will take, and it always seems to take longer than I expect so I pad the time.  You can ALWAYS charge less and look like a hero, but it's hard to go back and ask for more.  PLUS, if you give a range of fees the client will only hear the lowest number.

dascpa
Level 8

Just because you're wealthy doesn't mean you have more complicated tax returns. I have and I'm sure you do, have clients whose W-2 is in the millions. That's not more complicated. But if the taxpayer invests in more items then the tax return has more stuff and of course that means more time and more billing. But it's based upon how "thick" their tax return is, not how many 000's are on each line. And the tax rates are higher due to liberal policies thinking that wealthy should pay more.  Even though they already do.

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BobKamman
Level 13

Not for the two that will take less than 15 minutes, but I could if I wanted to.  They are both long-time clients for whom I have done enough paid work, I would rather see them keep the few hundred dollars involved. 

Yes for the MFJ clients who might be able to get back $2,500 with superseding MFS returns.  Still waiting to see if IRS, in the way it likes to make up rules as it goes along, decides that $150K really means $75K for MFS filers.  

Just-Lisa-Now-
Level 15
Level 15

I told those that wanted to file earlier this season that if the law passed and we had to amend for unemployment, that my fee would be $75.   Only 6  opted to file and pay me to amend later, the other 30+ decided to wait to file.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
IRonMaN
Level 15

Since you started the question, I'm curious as to what your plans are.

Barber! Why didn't I think of this before? Getting paid to give out bad tax advice - need I say more? I've run with scissors for years so it is a natural fit.
garman22
Level 12
Level 12

I like @Just-Lisa-Now- gave my clients the option of filing or amending (if passed). 6-10 chose to file to secure the refund and said they will pay me my amended fee. I have 50'ish sitting. 

I charge $150 to amend. 

TaxGuyBill
Level 14

I'm curious why everybody is just assuming that we need to amend.

The IRS has not given any direction yet.  It is POSSIBLE they will just automatically change things.  While I suspect that amending may be required, we don't know that yet.

garman22
Level 12
Level 12

I figure amending is the way to handle vs adjusting on their end. But what you say "could" happen.

christijoguhn
Level 3

To me... it seems like the "easiest" for them...  because how many will NOT go through with it? 

Praying I'm wrong...  and that they just handle it themselves...  regardless- its going to spark letters, phone calls, and mayhem for us no matter what. 

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IRonMaN
Level 15

This question goes back to the question asked here over the years ---------- how much do you charge?  Just like that question, who cares what else anybody charges?  Like Bill mentioned, who knows, the IRS may just make adjustments and automatically send checks in the mail.  But for those that need to amend, keep in mind that what someone is going to pay for tax services in New York, Chicago, or LA is going to be different than someone in Frostbite Falls, Minnesota.  Also, who is your clientele?  It's harder charging someone barely scraping by on a W-2 wage than it is someone stopping by in their Rolls Royce.  Do what you think is fair to your clients - and yourself - and you should be fine.

Barber! Why didn't I think of this before? Getting paid to give out bad tax advice - need I say more? I've run with scissors for years so it is a natural fit.
BobKamman
Level 13

@IRonMaN " It's harder charging someone barely scraping by on a W-2 wage than it is someone stopping by in their Rolls Royce."

Yes, I can do five of those easy returns in the time it takes to do one that includes the burdens of wealth.  So I charge the rich guys twice as much.  

christijoguhn
Level 3

That is why I asked about a % of the regular bill.

If you charge say $100 for a return, and $50 for an amendment....  or full price to amend..  

 

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Just-Lisa-Now-
Level 15
Level 15

This should hit IRS.GOV soon...

looks like an adjustment on Line 8 (other income) with UCE as the description and a negative adjustment....if you already filed, DON'T amend yet, IRS may very well do it automatically.

New Exclusion of up to $10,200 of Unemployment Compensation
If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation.
The exclusion should be reported separately from your unemployment compensation. See the updated instructions and the Unemployment Compensation Exclusion Worksheet to figure your exclusion and the amount to enter on Schedule 1, lines 7 and 8.
The instructions for Schedule 1 (Form 1040), line 7, Unemployment Compensation, are updated to read as follows.
Line 7
Unemployment Compensation
You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you in 2020. Report this amount on line 7.
Caution. If the amount reported in box 1 of your Form(s) 1099-G is incorrect, report on line 7 only the actual amount of unemployment compensation paid to you in 2020.
Note. If your modified adjusted income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021 excludes from income up to $10,200 of unemployment compensation paid to you in 2020. For married taxpayers, you and your spouse can each exclude up to $10,200 of unemployment compensation. For example, if you were paid $20,000 of unemployment compensation and your spouse was paid $5,000, report $25,000 on line 7 and report $15,200 on line 8 as a negative amount (in parentheses). The $15,200 excluded from income is $10,200 for you and all of the $5,000 paid to your spouse. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation. Use the Unemployment Compensation Exclusion Worksheet to figure your modified AGI and the amount you can exclude.
If you made contributions to a governmental unemployment compensation program or to a governmental paid family leave program and you aren't itemizing deductions, reduce the amount you report on line 7 by those contributions. If you are itemizing deductions, see the instructions on Form 1099-G.
Caution. Your state may issue separate Forms 1099-G for unemployment compensation received from the state and the additional $600 a week federal unemployment compensation related to coronavirus relief. Include all unemployment compensation received on line 7.
If you received an overpayment of unemployment compensation in 2020 and you repaid any of it in 2020, subtract the amount you repaid from the total amount you received. Enter the result on line 7. Also enter “Repaid” and the amount you repaid on the dotted line next to line 7. If, in 2020, you repaid more than $3,000 of unemployment compensation that you included in gross income in an earlier year, see Repayments in Pub. 525 for details on how to report the payment.
Tip. If you received unemployment compensation in 2020, your state may issue an electronic Form 1099-G instead of it being mailed to you. Check your state's unemployment compensation website for more information.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪