Tax preparation fees -- what is normal?


B

Basil Greenley

This is my first year filing as an S-Corporation. I just
received the invoice from my CPA. It was around $5,000 (this
is his fee, not the tax bill). I'm not here to bitch about
the fee since he saved me *far* in excess of $5k in taxes.
I'm only posting this because this is my first year using a
CPA for corporate filing [I only had W2 income in the past]
so I want to know if this fee is normal. Does it seem too
low, too high, or just about right?

Basically he filed all of my federal and state (California)
forms. He set up some leasing agreements [I won't get into
the details, but it has to do with being able to write off
some expenses for my car]. He set up a medical reimbursement
plan so that I can write of my medical stuff.

Again, this tax guy is excellent and there's no question in
my mind that he is "worth it." He totally is. The amount of
his fee doesn't bother me. I'm just checking in with you
guys to see if his fee is comparable to what you guys are
paying for similar services for small S-Corp taxes.

This is my first post to a moderated newsgroup. I'm not sure
what the protocol is here. I'm using a bogus reply address
for spam reasons and a bogus name. Do I need to provide a
real email address in order for my post to appear [i.e. is
there some kind of challenge-response]? I guess I'll know
the answer if my post doesn't show up!! :)

Anyway, thanks for any tips that you might share.
 
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M

Michael T Wing CPA

Basil Greenley said:
Basically he filed all of my federal and state (California)
forms. He set up some leasing agreements [I won't get into
the details, but it has to do with being able to write off
some expenses for my car]. He set up a medical reimbursement
plan so that I can write of my medical stuff.
It's really hard to comment on the reasonableness of this
without knowing a lot more about the work that was actually
performed and the basis upon which you were being billed (by
the hour, by the form or project, etc.).

But, I can say this: I would guess a reasonable fee for a
first year S-corp return, federal and California, to be
somewhere between $750 and $1,000. This assumes that no
significant amount of bookkeeping, accounting or computer
setup was done by the accountant. (If you gave him a
"shoebox" of canceled checks, that's a whole 'nother
situation. <g>) So, I would guess that any fee OVER that
amount related to the additional services that were
performed, and it's ~real~ hard to comment on that without
more specifics.

Or, here is another way to look at it: $5,000 bucks divided
by (say) $150 per hour would indicate around 30 hours of
work. Do you think that is likely the amount of time he
devoted to the project?

(Special California disclaimer: If the guy has a fancy
office in downtown Los Angeles, DOUBLE all of the above
rates. <g>)

MTW
 
S

shagnasty

Basil Greenley said:
This is my first year filing as an S-Corporation. I just
received the invoice from my CPA. It was around $5,000 (this
is his fee, not the tax bill). I'm not here to bitch about
the fee since he saved me *far* in excess of $5k in taxes.
I'm only posting this because this is my first year using a
CPA for corporate filing [I only had W2 income in the past]
so I want to know if this fee is normal. Does it seem too
low, too high, or just about right?

Basically he filed all of my federal and state (California)
forms. He set up some leasing agreements [I won't get into
the details, but it has to do with being able to write off
some expenses for my car]. He set up a medical reimbursement
plan so that I can write of my medical stuff.

Again, this tax guy is excellent and there's no question in
my mind that he is "worth it." He totally is. The amount of
his fee doesn't bother me. I'm just checking in with you
guys to see if his fee is comparable to what you guys are
paying for similar services for small S-Corp taxes.

This is my first post to a moderated newsgroup. I'm not sure
what the protocol is here. I'm using a bogus reply address
for spam reasons and a bogus name. Do I need to provide a
real email address in order for my post to appear [i.e. is
there some kind of challenge-response]? I guess I'll know
the answer if my post doesn't show up!! :)

Anyway, thanks for any tips that you might share.
The fee sounds high, but time involved can vary a lot. I
have some S-Corp returns that only take an hour, so $5000
would be pretty high for those. Others involve considerable
time corrrecting the client's books, researching tax
questions he raises, etc. so there is no good answer to
questions like "How much do you charge to do a tax return?"
They aren't like selling fungible goods.
 
P

Phoebe Roberts, EA

Basil said:
This is my first year filing as an S-Corporation.
He set up a medical reimbursement
plan so that I can write of my medical stuff.
Not going to get into the fees or the auto lease, but aren't
medical expense reimbursements to a >2% S-corp shareholder
treated as Box 1 wages, so all you're saving is the FICA
tax? Insurance premiums are a page 1 deduction, but not out
of pocket expenses.

Phoebe :)
 
G

Gene E. Utterback, EA

Basil Greenley said:
This is my first year filing as an S-Corporation. I just
received the invoice from my CPA. It was around $5,000 (this
is his fee, not the tax bill). I'm not here to bitch about
the fee since he saved me *far* in excess of $5k in taxes.
I'm only posting this because this is my first year using a
CPA for corporate filing [I only had W2 income in the past]
so I want to know if this fee is normal. Does it seem too
low, too high, or just about right?

Basically he filed all of my federal and state (California)
forms. He set up some leasing agreements [I won't get into
the details, but it has to do with being able to write off
some expenses for my car]. He set up a medical reimbursement
plan so that I can write of my medical stuff.

Again, this tax guy is excellent and there's no question in
my mind that he is "worth it." He totally is. The amount of
his fee doesn't bother me. I'm just checking in with you
guys to see if his fee is comparable to what you guys are
paying for similar services for small S-Corp taxes.

This is my first post to a moderated newsgroup. I'm not sure
what the protocol is here. I'm using a bogus reply address
for spam reasons and a bogus name. Do I need to provide a
real email address in order for my post to appear [i.e. is
there some kind of challenge-response]? I guess I'll know
the answer if my post doesn't show up!! :)

Anyway, thanks for any tips that you might share.
I can't speak for California - my office is in Annapolis,
MD. S corp returns START at $1,500 and go up (sometimes
quickly) from there - the average is around $2K. Personal
returns START at $250 and go up (again, sometimes quickly)
from there - the average is around $350. Our hourly rate is
$150.

So if I was asked to quote a ballpark for your 1120S & 1040
I'd say $2,350, maybe more. That leaves somewhere around 17
or 18 hours of time to spend on the MSA and leasing
agreements (at $150 per hour) to get the total up to $5K.

Sounds about right to me, give or take a buck or two!

Gene E. Utterback, EA
 
M

Mark Rigotti, CPA

Basil Greenley said:
This is my first year filing as an S-Corporation. I just
received the invoice from my CPA. It was around $5,000 (this
is his fee, not the tax bill). I'm not here to bitch about
the fee since he saved me *far* in excess of $5k in taxes.
I'm only posting this because this is my first year using a
CPA for corporate filing [I only had W2 income in the past]
so I want to know if this fee is normal. Does it seem too
low, too high, or just about right?

Basically he filed all of my federal and state (California)
forms. He set up some leasing agreements [I won't get into
the details, but it has to do with being able to write off
some expenses for my car]. He set up a medical reimbursement
plan so that I can write of my medical stuff.

Again, this tax guy is excellent and there's no question in
my mind that he is "worth it." He totally is. The amount of
his fee doesn't bother me. I'm just checking in with you
guys to see if his fee is comparable to what you guys are
paying for similar services for small S-Corp taxes.

This is my first post to a moderated newsgroup. I'm not sure
what the protocol is here. I'm using a bogus reply address
for spam reasons and a bogus name. Do I need to provide a
real email address in order for my post to appear [i.e. is
there some kind of challenge-response]? I guess I'll know
the answer if my post doesn't show up!! :)

Anyway, thanks for any tips that you might share.
Basil,

Well, depending on the amount of work done. Did you bring
the CPA a garbage bag full of receipts???

I do have a question for the group though.

Basil mentioned that his CPA setup a medical reimbursement
plan and some leasing agreements. Doesn't this sound very
similiar to the practice of Law? What about filing articles
of incorporation for clients does anyone do that?

Thoughts anyone????
 
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V

Vic Dura

Basil Greenley said:
Again, this tax guy is excellent and there's no question in
my mind that he is "worth it." He totally is. The amount of
his fee doesn't bother me. I'm just checking in with you
guys to see if his fee is comparable to what you guys are
paying for similar services for small S-Corp taxes.
I guess you are just doing a "reality check" which is a good
and wise business practice.

I'm not a tax-pro but the fee seems reasonable to me,
particularly for a high-cost state like CA.
 
E

Ed Zollars, CPA

Basil said:
Does it seem too
low, too high, or just about right?
As the other replies note, it's really tough to know without
knowing a *lot* more about both what exactly the CPA did in
terms of planning work and what shape your records were in
(in the view of someone with a background in accounting--I
don't meet many people who *think* their records are a mess,
though I've seen a lot of messy records <grin>).

My answer is that it could be any one of the three. I've
done (and do) "the work" for S corporations for far less and
for significantly more than $5,000. On the very low end
would be a return where the records are perfect (generally
someone with an accounting background is handling them),
there are very few potentially troublesome issues and the
client is not in a position to be able to do anything fancy
in terms of tax planning. Essentially, I'm just
transferring data to the 1120S and making sure I don't see
any obvious issues or opportunities (the latter is what I'm
generally really being paid for in that case).

On the high end would be the "shoebox" client with a high
net worth, lots of potential issues (messy records virtually
by definition mean you have exposure on Section 274 if any
expense covered there is on the return as well as problems
just determining *IF* there is an issue), brings the
information in a week before the final extended due date and
who wants to be stepped through the "steps" for everything
you do. For that return, $5,000 wouldn't begin to cover the
fee <grin>.

Most returns fall between those extremes.
 
F

Frederick Jorden

Basil Greenley wrote:
As the other replies note, it's really tough to know without
knowing a *lot* more about both what exactly the CPA did in
terms of planning work and what shape your records were in
(in the view of someone with a background in accounting--I
don't meet many people who *think* their records are a mess,
though I've seen a lot of messy records <grin>).

My answer is that it could be any one of the three. I've
done (and do) "the work" for S corporations for far less and
for significantly more than $5,000. On the very low end
would be a return where the records are perfect (generally
someone with an accounting background is handling them),
there are very few potentially troublesome issues and the
client is not in a position to be able to do anything fancy
in terms of tax planning. Essentially, I'm just
transferring data to the 1120S and making sure I don't see
any obvious issues or opportunities (the latter is what I'm
generally really being paid for in that case).

On the high end would be the "shoebox" client with a high
net worth, lots of potential issues (messy records virtually
by definition mean you have exposure on Section 274 if any
expense covered there is on the return as well as problems
just determining *IF* there is an issue), brings the
information in a week before the final extended due date and
who wants to be stepped through the "steps" for everything
you do. For that return, $5,000 wouldn't begin to cover the
fee <grin>.

Most returns fall between those extremes.
Reminds me of the estimate for a remodeling job by a local
good old boy. Without resort to paper pencil , paper or
calculator he came up with an estimate of $27,493.27. When
asked later on how he arrived at that price he said that
after he saw how the customer's house was furnished he
thought they could easily afford it! :)
 
E

Ed Zollars, CPA

Not going to get into the fees or the auto lease, but aren't
medical expense reimbursements to a >2% S-corp shareholder
treated as Box 1 wages, so all you're saving is the FICA
tax? Insurance premiums are a page 1 deduction, but not out
of pocket expenses.
Yeah, IRC Section 1372 would seem to create certain
problems--especially when combined with the attribution
rules that make the "hire the spouse" setup not work either
<grin>.

Now, that said, I suppose it is possible that an entity
could have been formed that would do legitimate (note that
key term <grin>) business with the S corporation, have that
entity be a C corporation, and that C corporation then adopt
the medical reimbursement plan. A structure like that
*might* have been what was created, and that *might* also
explain some additional fees.

But, yeah, it would be interesting to see the details of the
medical reimbursement plan.
 
E

Ed Zollars, CPA

Basil mentioned that his CPA setup a medical reimbursement
plan and some leasing agreements. Doesn't this sound very
similiar to the practice of Law? What about filing articles
of incorporation for clients does anyone do that?
I stay out of those areas, because I do think they are
treading in areas where I simply do not have sufficient
formal training to perform the service. True, I've *seen* a
whole lot of medical reimbursement plans and leasing
agreements, but most times when a client wants me to draft
something like that what they *really* are saying is they
are too cheap to pay the attorney and want to get it "on the
cheap" from you.

I presume they'll eventually do the same thing in the tax
arena--refuse to use me for what I do have expertise in, and
rather go to someone in a "related" industry to save a buck.

Frankly, what they are really doing is trying to get it
cheap, but still have someone to file a malpractice claim
against if anything goes wrong. I don't need that...<grin>
 
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D

Drew Edmundson

Ed Zollars said:
Basil Greenley wrote:
As the other replies note, it's really tough to know without
knowing a *lot* more about both what exactly the CPA did in
terms of planning work and what shape your records were in
(in the view of someone with a background in accounting--I
don't meet many people who *think* their records are a mess,
though I've seen a lot of messy records <grin>).
snip

Client's view their records like parent's view their kids --
we have all seen a homely kid but I have never talked to a
parent who had a homely kid.

Drew Edmundson, CPA (NC)
 
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H

Harlan Lunsford

This is my first year filing as an S-Corporation. I just
received the invoice from my CPA. It was around $5,000 (this
is his fee, not the tax bill). I'm not here to bitch about
the fee since he saved me *far* in excess of $5k in taxes.
I'm only posting this because this is my first year using a
CPA for corporate filing [I only had W2 income in the past]
so I want to know if this fee is normal. Does it seem too
low, too high, or just about right?

Basically he filed all of my federal and state (California)
forms. He set up some leasing agreements [I won't get into
the details, but it has to do with being able to write off
some expenses for my car]. He set up a medical reimbursement
plan so that I can write of my medical stuff.

Again, this tax guy is excellent and there's no question in
my mind that he is "worth it." He totally is. The amount of
his fee doesn't bother me. I'm just checking in with you
guys to see if his fee is comparable to what you guys are
paying for similar services for small S-Corp taxes.

This is my first post to a moderated newsgroup. I'm not sure
what the protocol is here. I'm using a bogus reply address
for spam reasons and a bogus name. Do I need to provide a
real email address in order for my post to appear [i.e. is
there some kind of challenge-response]? I guess I'll know
the answer if my post doesn't show up!! :)

Anyway, thanks for any tips that you might share.
Well, depending on the amount of work done. Did you bring
the CPA a garbage bag full of receipts???

I do have a question for the group though.

Basil mentioned that his CPA setup a medical reimbursement
plan and some leasing agreements. Doesn't this sound very
similiar to the practice of Law? What about filing articles
of incorporation for clients does anyone do that?
I'm with Phoebe above in that medical reimbursement plans
for S corp 2% owners are verboten, let alone a plan where
the s corp picks up the balance of medical bills not covered
by the insurance. But not sure how that would work for the
wife of a 2% shareholder who works as employee and is NOT a
2% owner. Intuition tells me no, however.

I don't see how it's the practice of law atall. In my files
I have several stock plans; somewhere! Just updating one
of these to fit a partciular client couldn't by any stretch
of the imagination be the practice of "law".

As to incorporation, again, I have the boiler plate form as
provided by both Georgia and Alabama secretaries of state.
I fill it in for client and client takes it to the
courthouse. My bill only speaks of "organizational
activities", since there's a lot more things to be done,
e.g. typing up minutes, boiler plated bylaws, form 2553, tax
number applications, etc. bills of sale for assets
transferred. But I do NOT charge for incorporation.

Cheer$,
Harlan LUnsford, EA n LA
 
Last edited by a moderator:

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