I usually don’t write about the “tax preparation space,” but with everything I have witnessed over the last 36 months, I felt compelled to address fee increases this month in my column, as so many of you have a traditional tax and accounting practice in addition to your tax resolution business.
Reason No. 1: Changing Legislation
There have been four (yes, four) major tax bills signed into law in the last three years. This is unprecedented. Accountants had to deal with the CARES Act, the PPP Program, The American Jobs Act and the American Families Plan. All of this means it is taking you longer to prepare 1040s now than it did in 2019.
Reason No. 2: Responding to Notices, Notices and More Notices
The IRS issued 14 million “math error” notices in 2021 (compare that to just 629,000 in 2019). The IRS is on schedule to issue another 15-20 million in 2022. These are being generated regarding stimulus check payments and the advance child tax credit payments issued to taxpayers.
The vast majority of these are incorrect that you need to respond to on behalf of your client. This major “time suck” will take about 30% or more additional time than it did in 2019. Are you sensing there is a theme here?
Reason No 3: The IRS is Swamped with Calls
In 2019, the IRS received about 100 million telephone calls from taxpayers. Last year, with all the new tax law changes, that jumped to 286 million phone calls. Only 11% (that’s right, only 11%) of those were connected to a live person at the IRS. Have you seen the wait and hold times increase trying to get a PPS or ACS agent on the phone lately?
The time spent trying to get a hold of the IRS needs to be factored into your fees as well. Now, to be fair, these wait times have been drastically reduced in 2023 due the IRS hiring 6,000 new customer service representatives.
Reason No. 4: The Changing of the Guard in the Accountant Space
Many older Accountants have simply “walked away” due to the craziness of the last two tax seasons. This means there is more demand (people getting their returns prepared) than supply. It’s macroeconomics 101.
Reason No. 5: Continuing Professional Education (CPE) Investment
In order to keep up and grow your knowledge with all the new tax law changes, most accountants are having to spend more of their money and time learning about all the new tax changes to accurately prepare returns this season.
Reason No. 6: COLA
The inflation rate is pushing 7% in just one year. Have you noticed that everything is more expensive now? Your clients have. As an example, used car prices are up over 30% higher this year compared to last.
For all the reasons mentioned here, it is going to take you much longer to prepare tax returns than it ever did before. Are you still charging the same fees you did in 2019? In 2020? Have you only increased fees by 5% or 10%? If you have not included this new reality into your tax preparation fees, you are operating in the stone age.
Don’t undervalue or underestimate your worth. It is time to raise your fees.
Michael Rozbruch, CPA, is founder and CEO of Roz Strategies, an eLearning, training and coaching services company that trains and helps CPAs, enrolled agents and attorneys build highly profitable practices through proven marketing systems and strategies. Rozbruch is a pioneer in the tax resolution industry, with a proven “in-the-trenches” track record as evidenced by accumulating 168 month-over-month consecutive revenue growth culminating in $23 million in revenue in just one year alone.
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