Is it ever too early to think about next season’s fee increases? Not after last season, preparers said.
Kerry Freeman, an Enrolled Agent at Freeman Income Tax Service, in Anthem, Arizona, plans increases as much as 5 to 10 percent. “After the complexity of the Tax Cuts and Jobs Act, many states have overhauled their filing requirements and this will cause even more confusion to the general taxpayer,” Freeman said. “I spent thousands of dollars last year and will again spend thousands of dollars this year to have every tool in my belt to help my clients.”
“It’s a fact of life that our expenses are ever increasing. My office is in Silicon Valley, so rents are increasing,” said Lawrence Pon, a CPA/EA at Pon & Associates, in Redwood City, California. “Our labor costs are increasing since we need to pay our people more. Our vendors are increasing their prices. We have to raise our rates just to keep even.
“This might be a little too early to make pricing decisions. My fallback position starts at 3 percent and then I add to that depending on Congress and legislative changes,” said Terri Ryman of Southwest Tax & Accounting in Elkhart, Kansas. “Last year was a 10 percent increase due to the new 1040, all the new schedules and learning about qualified business income. I always increase at least 3 percent, and often up to 5 percent.”
‘Very good value’
According to the latest “Tax Professional Fee Study” from the National Association of Tax Professionals, more than one out of three respondents raise fees every year and 32 percent raise them every two years. The average charge for an individual federal return is $216.31, according to the NATP survey.
In its latest fee survey of members, the National Society of Accountants found that the cost of doing a 1040 (not itemized and with a state return) rose 7 percent from 2016 to 2018, from $176 to $188 (and up from $115 in 2007). NSA results also showed that the federal and state returns average hourly fee rose to $158, from $150 for 2016-17.
“If I raise my fees it will only be on the complex returns involving Schedules C or E,” said Morris Armstrong, an EA and registered investment advisor at Armstrong Financial Strategies in Cheshire, Connecticut. “My fees for the 1040 without these schedules are reasonable, and I’ve adjusted for the additional due diligence requirements applicable to the various credits.”
Some services commanded bigger hikes, according to NSA: Hourly fees also rose to $200 for offers in compromise (up 13 percent from $177) and to $151 for elder care-related services (up 15 percent from $131).
“We raised our prices significantly last season for businesses that had QBI calculations, and any other changes due to TCJA and non-TCJA issues, [as well as] the small annual cost of doing business increases for the others,” said EA Debra James at Genesis Accounting & Management Services, in Lorain, Ohio. “We’ll apply the same logic to cost increases this year.”
“I think my rates are below market and I provide very good value to my clients,” Pon added. “We’ve been spending a lot of time learning the new tax law and getting up to speed on updating our tax and financial planning advice.”
“It’s a juggling act on how much to raise prices and how the taxpayer will respect the knowledge and complexity of the return,” Freeman said. “Many see the service of filing taxes no different than changing oil on a car.”
Other fees have also gone up, according to the “2018 Intuit Rate Survey.” While there was a slight dip in the average rates for bookkeeping and accounting services ($73 in 2018 compared with $80 in 2016, the last year the survey was conducted), average rates increased for QuickBooks troubleshooting ($87 in 2018 compared with $82 in 2016) and training services ($90 in 2018, $77 in 2016).
