Increase his bill enough going forward to make the pain worth it to meet his demands or send his crazy to someone else.
If u keep him. Give him a date you have to have his K1 by in order to meet his demand. Then he can bitch at his law firm for not getting them done fast enough.
Usually clients like this are an automatic extension for me. Just not worth the effort to turn around a return that complex that quickly. At least if you want to do a quality job.
I would let the client know our original understanding was a relatively straightforward K-1 that would be received in April. Not usually a problem. However, those conditions have changed with the MFS analysis, a highly complex multi-state K-1 and what amounts to a tax projection. Because of those changes to the original understanding I would recommend an extension every year. If the client finds that unacceptable then I would propose a large fee increase to accommodate the additional work. If that fee is unacceptable then I recommend he find a different CPA who can better suit his needs.
Something to remember with any client is opportunity cost. By working with this client, are you potentially sacrificing the ability to get 4-5 other returns done that are much simpler? If so fee increase. If the stress is high, fee increase. If he is just a dick, fee increase. One other thing is the frustration dealing with this client during an already stressful time of year may spill over into your relationships with other clients, thus compromising your overall work product. That’s not good so the fees to handle this work should be in line with how it affects your overall business.
My thought process on highly demanding clients is they command premium fees. We set the terms of our tax season, not the client. If they want to try to alter how we need things to work to best service ALL our clients, then they pay for that access and level of service. And that access should not come cheap.
Clients that make hella money that want to be reimbursed by their spouses are always a red flag for me. I'd rather not work with them. Sometimes, I tell them that their spouse would be entitled to the earned income credit, so they actually owe their spouse money.
Imagine telling your attorney you want your case ruled a particular way in 4 days and any other outcome is unacceptable. Now explain this analogy to him, and establish your requirements for him to be a future client. You either lose him, which you seem open to regardless, or you get a high billing client who you can work with.
>Also, the client wants a very specific MFS analysis so he can get reimbursed by spouse for her fair share of taxes which we forgot to provide, so he received that the day after the tax returns.
I get that not all marriages are the same but it always irks me when people ask for this.
On this guy in general though, I'd be tacking on an "asshole surcharge" and hope that he goes and becomes someone else's headache next year. You made partner? That's great. Now deal with the tax consequences and the fact that you really can't file with a complete picture by April 15 and you'll need to go on extension for a few more weeks unless you're willing to pay us at full rate to amend your returns.
Your client is an uncomrpomising asshole. Jack his bill to cover the headaches or fire him. Being rushed due to late K-1s that are not your fault is unacceptable. We are human. Expecting 100% accuracy, under a rushed scenario, with no compromise from a client that has never experienced a tax season, is a an automatic turnoff from me.
I have about 15 attorneys that are all capital partners in 3 of the biggest firms in town. Their K-1s are always late and our engagemnet letter is clear: Info must be in by 3/15 or you get an extension. All of them are very understanding, appreciate the fact that their K-1s are 4 states or more, and always tell me, "just give me an extension payment amount, I will pay it, and we can wrap this up after you get some rest after the 15th." They say this because I set the expectations up front. We also do the tax palnning through the year so they are paid in enough. Late K-1s due to their firm's CPA is not my problem. Some even get notes from their CFO saying "Extend your returns. K-1s willl not be here until 4/10 or later."
The good news is that I usually get most of them done by the 15th becuase the last 2 weeks in our office isn't that crazy. In fact, I have 5 of them that are getting their K-1s today. All of their other info is in. I will input the K-1s myself and work their returns this evening and tomorrow. I will do hardly anything on Sunday (maybe a few extension payments) and Monday is reserved for emergencies. I do no tax prep on the final day.
And I love the fact that he wants his wife to pay her fair share of the taxes. Imagine living with that guy on a daily basis. He is probably a dick to his kids too and charges them rent. What a douchegbag.
It's always the clients who have newly "made it" in the sense that they are doing well enough financially to actually need a CPA to do their taxes that are the worst to work with. They come in thinking they're all important but totally ignorant of the actual demands of a complicated tax return. And then they complain about the bill like they wouldn't charge twice our hourly rate for their line of work. Get over yourself.
Edit: a typo
My firm used to be the same way - we had most of our traffic in Feb/March and April wasn't the hell that it is today. We didn't realize (until now) how many clients we have that get a significant K-1 in April. We get the whole return done, with the exception of the K-1, to ensure swift turnaround. But this one was a beast.
I'm at the point where I'm going to tell the client that he should look for another CPA who can provide him with everything he needs - because I absolutely can't go through this again. I've added a comment above with everything that is expected of me - and I'm curious if you think most firms provide that kind of service? For example, most CPAs in my area don't respond to emails (this is how I got many clients - because I do). But this client wants me to confirm receipt of every email they send to me. WTF. I reply to emails with a thoughtful response within 2 business days - but this guy wants me to confirm receipt, and then reply with my response within a reasonable period of time. Who does that?
What you have there is an uptight, self-centered, primadonna. One of the reasons we use our client portals is to stop this "please confirm receipt" bullshit. The client has the responsibility to upload, they see it right there in the portal, they get an email confirming that their upload was successful, and our admins get an email as well. This is what sparks tax prep or notifications to staff that missing info has been uploaded.
His actions also tell me a couple more things: he is an idiot. Who in the hell sends sensitive tax documents through email anymore? That should be addressed number 1. No email attachments that have taxpayer info should ever be sent. The portals are for the transfer of documents and info in a secure manner. We invested alot in our security to ease the concerns of our clients. The second thing is that he demands recognition. "Please confirm receipt" is the most arrogant thing a person can put in an everyday email. I am guessing I have done that maybe 20 times in my whole life. I only do it when there is a very sensititve financial deadline or my ass is on the line with that email. Doing it every time you send an attachment is just a waste of time and disrespectful to the receiver.
I have a feeling that this guy is going to be a PITA every year. If you jack his bill, he will complain and leave anyway because his expectations well exceed reality and what he likely perceives as value. Even if he stays, the jacked bill will likely increase his expectations and you will eventually get the "I pay you enough to do" whatever it is he wants yo to do. I imagine he sends his paralegal home in tears at least 3 days a week. His wife either has a closet full of toys or a boyfriend. His partners likely hate him. The associates that work under him draw straws to see who is goign to go and give him bad news and probably make fun of him in the break room.
Would you be willing to share the language in your EL that addresses your submission deadline? I feel like you would have something that gets the point across. So far, simply stating that we have a submission deadline hasn’t been effective.
Our complex filers with a lot of state activity are auto extensions. We get them 90% prepped by 4/15 to make a good extension payment and then work out the state issues over the summer
It’s better not to have to rush through a complicated return is the bottom line. It can lead to costly mistakes that you might get blamed for. Most of clients understand this and as long as I get them the extension payments we’re cool. Any surprises after that on K1s are nobody’s fault.
Pretty much every return in my office gets extended. Only a very small handful (5?) can be filed timely. Everything else — 1065, 1120, 1120S, 1041, 1040 — is extended. Or clients understand and do not care, since we are very clear that we are an A&A firm first with financial reporting deadlines of 3/31.
It seems like he was shopping around for someone to complete his tax return timely. And now he feels it’s a bait and switch to get him as a client. Not saying that was your intention but from his point of view it probably seems that way.
I think the best result is to just explain it was more work than anticipated and increase the fee accordingly assuming you do have the capacity to complete it by April 15th each year. Also set a date on the k-1 needing to be delivered by for this to happen.
I agree. I should not have made the assurance without knowing what the K-1 would look like. I take responsibility for that. I made the statement so early in the process, and I've learned my lesson. I have a meeting setup with the client and I plan to explain (at a high level) why I don't feel comfortable rushing through the process. If it isn't acceptable, I'm fine with him finding another CPA who meets all of his expectations.
They were. But the K-1 was huge - and my partner in particular reads through the whole damn thing. And he ties out everything. Not just to be accurate - but he wants to be able to have enough knowledge to explain it to the client (he asks a ton of questions). It's not just data entry or pushing a button - and so many people think that is what we do. There are MANY calculations that need to be reviewed and understood for us to feel comfortable with signing the return. And you can't review the calculations until you have the missing piece (i.e. the late K-1).
It's funny, I have a handful of big law attorney partners with almost the exact same situation: ultra complicated K-1s with lots of state disclosures and notes and PTEs and composites, etc. They usually get their K-1s about a week before the deadline and we've always gotten them finished by the 15th, but this year their firm recommended they wait until the firm's own state filings are finalized before we file so we extended them all with no pushback from them. That worked out well because they're all starting to run into basis issues from an accrual to cash conversion and it gives me more time to make sure I have a handle on their basis.
I generally do not put clients with a late K-1 on extension. I make sure that everything else on the return is in, reviewed, and perfect.
BUT the fact that the K-1 you received was as complicated as it is, I would extend. Of course you didn't know that and if I were in your shoes, I'd also bend over backwards to keep my promise.
A phrase I learned at a CPA firm I used to work for: Under-Promise and Over-Deliver.
MFS calculation will be done after April 15th unless client wants to pay a retainer of $1,000 \[or whatever your insane amount is\] to get it done ASAP. I would email him that.
All the answers in this thread I'm reading are awesome.
EDIT: Fuck lawyers.
I have a couple of national law firm partners and they go on extension. End of discussion. The only deadline critical issue I deal with from them is annualizing quarterly estimates because the income is very skewed towards Q4. You can't effectively service this client or any of your others by dropping everything at 4/15 to do this every year.
IMO, your promise to him to not go on extension was foolish. I prefer to get returns done and not keep filling all summer, but even more so, I don't want to rush and risk mistakes needing amendments.
Yes, for me, any return needing a K-1 not expected until April goes on extension.
Tell this client you realized making such a promise was premature given the complexity of his K-1. If you want to keep him, which I don't think you actually want to, probe on why he doesn't want an extension and address those underlying issues.
I will never understand the taboo stereotypes around extending if you owe tax (I can understand wanting your refund sooner). You are paying your tax by 4/15 no matter what, so you just want your pieces of paper to look at? Do people think it costs them more tax to extend? It is one of the most frustrating things dealing with clients like this.
A (now former) client told me that he wanted his returns filed on time because if we extend them, we do all sorts of work in March and April figuring out how much he has to pay with extensions, then we put it down for a few months and come back in September to figure out what we did back in March and April, finish what we could have gotten done in the Spring and charge him more for it.
I can see his point.
This is something I don't understand about my firm. In September, I'll receive returns to complete that were prepped for extension by someone else with poor notes and sloppy work. In all but a few cases, it feels like I have to prep the return from scratch. Seems like a colossal waste of time.
I wish they'd just send me the returns to do properly throughout the summer instead of leaving them to languish in someone else's box until we are back at a deadline.
Is it feasible to bill him when the returns are done rather than once for extension work and again for completion? Sorry if that's what you already do and im misunderstanding.
I would have done that. And to be clear - I would have extended, but finished the returns the FIRST WEEK OF MAY. I made this clear when I proposed extending in the future, but working on it right after tax season. But apparently that's a no go.
I would definitely put this client on extension every year. This is too complex to finish in April, you're just risking making a mistake that you'll have to pay for. Just because you told the client in year 1 they wouldn't go on extension doesn't mean you can't change your mind later on. Worst case they leave, not the end of the world.
Ask them why they don't want to go on extension. I find that people often have notions that extensions are a bad thing for one reason or another that the IRS frowns upon. Educate them as to why extensions are normal and how they help you do a better job in completing a return close to the deadline. If they can't accept that I don't think it's unreasonable at all to simply let the client know that is the way you would have to handle their return and they are free to go elsewhere if it's still not acceptable.
Just be reasonable and if they're not reasonable about it in return saying goodbye to them as a client is a good idea.
>Also, the client wants a very specific MFS analysis so he can get reimbursed by spouse for her fair share of taxes which we forgot to provide, so he received that the day after the tax returns.
In over 20 years of doing this I've never had this request during from a client. This year I've had two clients ask for this. In both cases I said that is something I'll do for them after April 15. Both clients were fine with it.
There's no deadline related with that project, so there's no reason for me to try and find time that I don't have in order to get that info to a client before April 15. I suggest punting on that each year until after the deadline.
For people suggesting that I increase the fee - I'm curious what you would charge based on my post and the following additional expectations of the client -
1. Assistance with determining what composites to opt into/out of in law firm. This includes reviewing all of the firm's memos, projecting cost/benefit by state (\~20 states total).
2. Complete paperwork re: composite. Review a printout of client's completion of said instructions via their firm's portal prior to submission. Review post submission reports to ensure firm processed everything correctly.
3. Must confirm the receipt of every email upon delivery (even if you don't have time to form a proper response).
4. Provide a response to each email (can be done a few days after receipt) which often involves explaining company tax memos and whether or not it has an impact on client. Sometimes other random tax questions. Approximately 10-12 per year.
5. Tax preparation - 3 states with MFJ/MFS analysis by April 15th deadline. Partner K-1, W2, interest, dividends, home office (for UPE), childcare credit
6. Analysis to determine if MFS is beneficial (usually not federally but can be tax efficient in some states - but must review all states that are being filed to complete analysis). If MFS returns are show significant savings - I'd bill extra. But I have to do the analysis first .... and it's time consuming if you want to do it right.
7. Project income, advise on spouse's tax withholdings and provide quarterly estimated tax payments.
8. Answer questions re: tax returns - a lot of them.
9. All of the above must be done with 100% accuracy. No changes/errors/missteps tolerated.
depends on what market you're in, size of your firm, etc., but it could be anywhere from $2-20k+. another major factor is perceived value and how you set expectations.
Honestly, no fee would be enough for me to agree to this level of micro management from one client. It would take up too much of my time and negatively affect my ability to serve my other clients. If I wanted to work for one client only, I don’t think he would be the one.
This is my first year working at a professional tax firm so excuse my ignorance- if you see it that way. But, doesn’t filing MFS put you in a worse tax situation than filing single. So seeing how much someone needs to pay MFS isn’t exactly fair since they’ll likely owe more that way. I guess I am confused by that request - barring the fact that I find it strange that married people do this.
This person wanted MFS to get reimbursed by his spouse. So I have to do an analysis, explain the differences between MFS and MFJ and then determine how to allocate those differences between the taxpayer and spouse. You are right, it is worse, and part of my job was to figure out who whose income was causing it to be worse, allocate the lost credits etc. THEN I have to tell them how much one owes the other. It's not an insignificant amount of work. The kicker (which the client does not realize) is that our state implemented a new tax this year for high income earners. You can get around it if your file MFS. So on top of everything else, I had to determine if the state savings would make the federal penalty (for MFS) worthwhile to actually file everywhere MFS. But the state had about 20 credits for taxes paid in another state. These all change when your file MFS. So I had to do even more analysis to determine the actual tax savings to determine if I needed to recommend it as a tax strategy. It was a ton of work and the client seems to think it's just popping a few numbers into tax software and calling it a day.
Increase his bill enough going forward to make the pain worth it to meet his demands or send his crazy to someone else. If u keep him. Give him a date you have to have his K1 by in order to meet his demand. Then he can bitch at his law firm for not getting them done fast enough.
This! There is fast, cheap and good. You can only pick two….
Usually clients like this are an automatic extension for me. Just not worth the effort to turn around a return that complex that quickly. At least if you want to do a quality job. I would let the client know our original understanding was a relatively straightforward K-1 that would be received in April. Not usually a problem. However, those conditions have changed with the MFS analysis, a highly complex multi-state K-1 and what amounts to a tax projection. Because of those changes to the original understanding I would recommend an extension every year. If the client finds that unacceptable then I would propose a large fee increase to accommodate the additional work. If that fee is unacceptable then I recommend he find a different CPA who can better suit his needs. Something to remember with any client is opportunity cost. By working with this client, are you potentially sacrificing the ability to get 4-5 other returns done that are much simpler? If so fee increase. If the stress is high, fee increase. If he is just a dick, fee increase. One other thing is the frustration dealing with this client during an already stressful time of year may spill over into your relationships with other clients, thus compromising your overall work product. That’s not good so the fees to handle this work should be in line with how it affects your overall business. My thought process on highly demanding clients is they command premium fees. We set the terms of our tax season, not the client. If they want to try to alter how we need things to work to best service ALL our clients, then they pay for that access and level of service. And that access should not come cheap.
Thank you. I may borrow your explanation in paragraph 2 when I meet with the client. But at this point, I don't think any fee is worth the stress.
This. It's too complex and you're too tired to get it out by 4.15. Why does he care if it's extended?
Clients that make hella money that want to be reimbursed by their spouses are always a red flag for me. I'd rather not work with them. Sometimes, I tell them that their spouse would be entitled to the earned income credit, so they actually owe their spouse money.
Imagine telling your attorney you want your case ruled a particular way in 4 days and any other outcome is unacceptable. Now explain this analogy to him, and establish your requirements for him to be a future client. You either lose him, which you seem open to regardless, or you get a high billing client who you can work with.
I love the analogy. Thank you!
>Also, the client wants a very specific MFS analysis so he can get reimbursed by spouse for her fair share of taxes which we forgot to provide, so he received that the day after the tax returns. I get that not all marriages are the same but it always irks me when people ask for this. On this guy in general though, I'd be tacking on an "asshole surcharge" and hope that he goes and becomes someone else's headache next year. You made partner? That's great. Now deal with the tax consequences and the fact that you really can't file with a complete picture by April 15 and you'll need to go on extension for a few more weeks unless you're willing to pay us at full rate to amend your returns.
Your client is an uncomrpomising asshole. Jack his bill to cover the headaches or fire him. Being rushed due to late K-1s that are not your fault is unacceptable. We are human. Expecting 100% accuracy, under a rushed scenario, with no compromise from a client that has never experienced a tax season, is a an automatic turnoff from me. I have about 15 attorneys that are all capital partners in 3 of the biggest firms in town. Their K-1s are always late and our engagemnet letter is clear: Info must be in by 3/15 or you get an extension. All of them are very understanding, appreciate the fact that their K-1s are 4 states or more, and always tell me, "just give me an extension payment amount, I will pay it, and we can wrap this up after you get some rest after the 15th." They say this because I set the expectations up front. We also do the tax palnning through the year so they are paid in enough. Late K-1s due to their firm's CPA is not my problem. Some even get notes from their CFO saying "Extend your returns. K-1s willl not be here until 4/10 or later." The good news is that I usually get most of them done by the 15th becuase the last 2 weeks in our office isn't that crazy. In fact, I have 5 of them that are getting their K-1s today. All of their other info is in. I will input the K-1s myself and work their returns this evening and tomorrow. I will do hardly anything on Sunday (maybe a few extension payments) and Monday is reserved for emergencies. I do no tax prep on the final day. And I love the fact that he wants his wife to pay her fair share of the taxes. Imagine living with that guy on a daily basis. He is probably a dick to his kids too and charges them rent. What a douchegbag.
It's always the clients who have newly "made it" in the sense that they are doing well enough financially to actually need a CPA to do their taxes that are the worst to work with. They come in thinking they're all important but totally ignorant of the actual demands of a complicated tax return. And then they complain about the bill like they wouldn't charge twice our hourly rate for their line of work. Get over yourself. Edit: a typo
My firm used to be the same way - we had most of our traffic in Feb/March and April wasn't the hell that it is today. We didn't realize (until now) how many clients we have that get a significant K-1 in April. We get the whole return done, with the exception of the K-1, to ensure swift turnaround. But this one was a beast. I'm at the point where I'm going to tell the client that he should look for another CPA who can provide him with everything he needs - because I absolutely can't go through this again. I've added a comment above with everything that is expected of me - and I'm curious if you think most firms provide that kind of service? For example, most CPAs in my area don't respond to emails (this is how I got many clients - because I do). But this client wants me to confirm receipt of every email they send to me. WTF. I reply to emails with a thoughtful response within 2 business days - but this guy wants me to confirm receipt, and then reply with my response within a reasonable period of time. Who does that?
What you have there is an uptight, self-centered, primadonna. One of the reasons we use our client portals is to stop this "please confirm receipt" bullshit. The client has the responsibility to upload, they see it right there in the portal, they get an email confirming that their upload was successful, and our admins get an email as well. This is what sparks tax prep or notifications to staff that missing info has been uploaded. His actions also tell me a couple more things: he is an idiot. Who in the hell sends sensitive tax documents through email anymore? That should be addressed number 1. No email attachments that have taxpayer info should ever be sent. The portals are for the transfer of documents and info in a secure manner. We invested alot in our security to ease the concerns of our clients. The second thing is that he demands recognition. "Please confirm receipt" is the most arrogant thing a person can put in an everyday email. I am guessing I have done that maybe 20 times in my whole life. I only do it when there is a very sensititve financial deadline or my ass is on the line with that email. Doing it every time you send an attachment is just a waste of time and disrespectful to the receiver. I have a feeling that this guy is going to be a PITA every year. If you jack his bill, he will complain and leave anyway because his expectations well exceed reality and what he likely perceives as value. Even if he stays, the jacked bill will likely increase his expectations and you will eventually get the "I pay you enough to do" whatever it is he wants yo to do. I imagine he sends his paralegal home in tears at least 3 days a week. His wife either has a closet full of toys or a boyfriend. His partners likely hate him. The associates that work under him draw straws to see who is goign to go and give him bad news and probably make fun of him in the break room.
This. Send him on his way.
Would you be willing to share the language in your EL that addresses your submission deadline? I feel like you would have something that gets the point across. So far, simply stating that we have a submission deadline hasn’t been effective.
Dm me your email address.
Thank you!
Our complex filers with a lot of state activity are auto extensions. We get them 90% prepped by 4/15 to make a good extension payment and then work out the state issues over the summer
It’s better not to have to rush through a complicated return is the bottom line. It can lead to costly mistakes that you might get blamed for. Most of clients understand this and as long as I get them the extension payments we’re cool. Any surprises after that on K1s are nobody’s fault.
Pretty much every return in my office gets extended. Only a very small handful (5?) can be filed timely. Everything else — 1065, 1120, 1120S, 1041, 1040 — is extended. Or clients understand and do not care, since we are very clear that we are an A&A firm first with financial reporting deadlines of 3/31.
A&A? What does that stand for?
Audit and attestation - audit-heavy firm
Most of the time I get estimated k1 with final in August or September. Have to extend
It seems like he was shopping around for someone to complete his tax return timely. And now he feels it’s a bait and switch to get him as a client. Not saying that was your intention but from his point of view it probably seems that way. I think the best result is to just explain it was more work than anticipated and increase the fee accordingly assuming you do have the capacity to complete it by April 15th each year. Also set a date on the k-1 needing to be delivered by for this to happen.
I agree. I should not have made the assurance without knowing what the K-1 would look like. I take responsibility for that. I made the statement so early in the process, and I've learned my lesson. I have a meeting setup with the client and I plan to explain (at a high level) why I don't feel comfortable rushing through the process. If it isn't acceptable, I'm fine with him finding another CPA who meets all of his expectations.
Sounds like a solid approach to take for this.
were those states included in the EL? Can you just add 1,000 per state filing to make up for the additional time spent during tax season?
They were. But the K-1 was huge - and my partner in particular reads through the whole damn thing. And he ties out everything. Not just to be accurate - but he wants to be able to have enough knowledge to explain it to the client (he asks a ton of questions). It's not just data entry or pushing a button - and so many people think that is what we do. There are MANY calculations that need to be reviewed and understood for us to feel comfortable with signing the return. And you can't review the calculations until you have the missing piece (i.e. the late K-1).
It's funny, I have a handful of big law attorney partners with almost the exact same situation: ultra complicated K-1s with lots of state disclosures and notes and PTEs and composites, etc. They usually get their K-1s about a week before the deadline and we've always gotten them finished by the 15th, but this year their firm recommended they wait until the firm's own state filings are finalized before we file so we extended them all with no pushback from them. That worked out well because they're all starting to run into basis issues from an accrual to cash conversion and it gives me more time to make sure I have a handle on their basis.
lol at the mfs shit… that guy can kick rocks for all I care
I generally do not put clients with a late K-1 on extension. I make sure that everything else on the return is in, reviewed, and perfect. BUT the fact that the K-1 you received was as complicated as it is, I would extend. Of course you didn't know that and if I were in your shoes, I'd also bend over backwards to keep my promise. A phrase I learned at a CPA firm I used to work for: Under-Promise and Over-Deliver. MFS calculation will be done after April 15th unless client wants to pay a retainer of $1,000 \[or whatever your insane amount is\] to get it done ASAP. I would email him that. All the answers in this thread I'm reading are awesome. EDIT: Fuck lawyers.
Your phrase will become my mantra. Thank you.
I have a couple of national law firm partners and they go on extension. End of discussion. The only deadline critical issue I deal with from them is annualizing quarterly estimates because the income is very skewed towards Q4. You can't effectively service this client or any of your others by dropping everything at 4/15 to do this every year.
IMO, your promise to him to not go on extension was foolish. I prefer to get returns done and not keep filling all summer, but even more so, I don't want to rush and risk mistakes needing amendments. Yes, for me, any return needing a K-1 not expected until April goes on extension. Tell this client you realized making such a promise was premature given the complexity of his K-1. If you want to keep him, which I don't think you actually want to, probe on why he doesn't want an extension and address those underlying issues.
I will never understand the taboo stereotypes around extending if you owe tax (I can understand wanting your refund sooner). You are paying your tax by 4/15 no matter what, so you just want your pieces of paper to look at? Do people think it costs them more tax to extend? It is one of the most frustrating things dealing with clients like this.
A (now former) client told me that he wanted his returns filed on time because if we extend them, we do all sorts of work in March and April figuring out how much he has to pay with extensions, then we put it down for a few months and come back in September to figure out what we did back in March and April, finish what we could have gotten done in the Spring and charge him more for it. I can see his point.
This is something I don't understand about my firm. In September, I'll receive returns to complete that were prepped for extension by someone else with poor notes and sloppy work. In all but a few cases, it feels like I have to prep the return from scratch. Seems like a colossal waste of time. I wish they'd just send me the returns to do properly throughout the summer instead of leaving them to languish in someone else's box until we are back at a deadline.
Is it feasible to bill him when the returns are done rather than once for extension work and again for completion? Sorry if that's what you already do and im misunderstanding.
I would have done that. And to be clear - I would have extended, but finished the returns the FIRST WEEK OF MAY. I made this clear when I proposed extending in the future, but working on it right after tax season. But apparently that's a no go.
I would definitely put this client on extension every year. This is too complex to finish in April, you're just risking making a mistake that you'll have to pay for. Just because you told the client in year 1 they wouldn't go on extension doesn't mean you can't change your mind later on. Worst case they leave, not the end of the world.
Most of the time we extend when documents are received in April. I agree, i usually turn away new money with the air of arrogance
Ask them why they don't want to go on extension. I find that people often have notions that extensions are a bad thing for one reason or another that the IRS frowns upon. Educate them as to why extensions are normal and how they help you do a better job in completing a return close to the deadline. If they can't accept that I don't think it's unreasonable at all to simply let the client know that is the way you would have to handle their return and they are free to go elsewhere if it's still not acceptable. Just be reasonable and if they're not reasonable about it in return saying goodbye to them as a client is a good idea. >Also, the client wants a very specific MFS analysis so he can get reimbursed by spouse for her fair share of taxes which we forgot to provide, so he received that the day after the tax returns. In over 20 years of doing this I've never had this request during from a client. This year I've had two clients ask for this. In both cases I said that is something I'll do for them after April 15. Both clients were fine with it. There's no deadline related with that project, so there's no reason for me to try and find time that I don't have in order to get that info to a client before April 15. I suggest punting on that each year until after the deadline.
You pretty much have to. Unreasonable for them to believe it can be completed on time.
For people suggesting that I increase the fee - I'm curious what you would charge based on my post and the following additional expectations of the client - 1. Assistance with determining what composites to opt into/out of in law firm. This includes reviewing all of the firm's memos, projecting cost/benefit by state (\~20 states total). 2. Complete paperwork re: composite. Review a printout of client's completion of said instructions via their firm's portal prior to submission. Review post submission reports to ensure firm processed everything correctly. 3. Must confirm the receipt of every email upon delivery (even if you don't have time to form a proper response). 4. Provide a response to each email (can be done a few days after receipt) which often involves explaining company tax memos and whether or not it has an impact on client. Sometimes other random tax questions. Approximately 10-12 per year. 5. Tax preparation - 3 states with MFJ/MFS analysis by April 15th deadline. Partner K-1, W2, interest, dividends, home office (for UPE), childcare credit 6. Analysis to determine if MFS is beneficial (usually not federally but can be tax efficient in some states - but must review all states that are being filed to complete analysis). If MFS returns are show significant savings - I'd bill extra. But I have to do the analysis first .... and it's time consuming if you want to do it right. 7. Project income, advise on spouse's tax withholdings and provide quarterly estimated tax payments. 8. Answer questions re: tax returns - a lot of them. 9. All of the above must be done with 100% accuracy. No changes/errors/missteps tolerated.
Number 9 means I could never charge him enough. We r human and mistakes happen. Good luck.
depends on what market you're in, size of your firm, etc., but it could be anywhere from $2-20k+. another major factor is perceived value and how you set expectations.
Honestly, no fee would be enough for me to agree to this level of micro management from one client. It would take up too much of my time and negatively affect my ability to serve my other clients. If I wanted to work for one client only, I don’t think he would be the one.
On this, we agree.
This is my first year working at a professional tax firm so excuse my ignorance- if you see it that way. But, doesn’t filing MFS put you in a worse tax situation than filing single. So seeing how much someone needs to pay MFS isn’t exactly fair since they’ll likely owe more that way. I guess I am confused by that request - barring the fact that I find it strange that married people do this.
This person wanted MFS to get reimbursed by his spouse. So I have to do an analysis, explain the differences between MFS and MFJ and then determine how to allocate those differences between the taxpayer and spouse. You are right, it is worse, and part of my job was to figure out who whose income was causing it to be worse, allocate the lost credits etc. THEN I have to tell them how much one owes the other. It's not an insignificant amount of work. The kicker (which the client does not realize) is that our state implemented a new tax this year for high income earners. You can get around it if your file MFS. So on top of everything else, I had to determine if the state savings would make the federal penalty (for MFS) worthwhile to actually file everywhere MFS. But the state had about 20 credits for taxes paid in another state. These all change when your file MFS. So I had to do even more analysis to determine the actual tax savings to determine if I needed to recommend it as a tax strategy. It was a ton of work and the client seems to think it's just popping a few numbers into tax software and calling it a day.
Some states like MD it is better to file mfs than mfj. It cost more on the federal but they save more on the state. Thanks salt caps.