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Deadline for 1040 Clients versus CPA firms

Posted on
Bill Meador
Bill Meador

One of the constant problems for CPA firms with individual clients is getting all of their information in time to prepare, review and file the return before the October 15th deadline. However, there are always clients that stretch the process to the last minute no matter how many times you ask for the information. I once worked at a firm where there was a client that was the last tax return we filed by the October 15th deadline three years in a row.

As a result, we kicked around the following idea in the firm. 

Since some individual clients are always going to be lazy, lets send out a letter that essentially says the following (but in a nice tone of voice):

We want all of your personal tax return information by June 30th. Unless your situation is very unusual, there is no reason (except for Schedule K-1s) for your information to come to us after that date. Therefore, if any or all of your personal tax information (except for K-1s) arrives to us after June 30th then your tax return preparaton fee will automatically be increased to at least XXX or 130% of last year's tax return fee. 

Although most people thought it was a good idea in theory, no one was willing to risk scaring away clients. Therefore, I thought I would put it to the group for discussion.

Bill Meador, CPA

www.advicefortaxpreparers.com 

 

 

 

 

Replied on
Dan Schmidt, CPA
Dan Schmidt, CPA

I like the idea of building this into the engagement letter.  We tried something similar this year but on the front end - we offered a 10% discount for all returns for which we had the paperwork by Feb 28th.  Only 3 clients took advantage of this though.  So now we have a carrot or stick argument - which one is the best way to motivate clients?

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Replied on Edited on
Bill Meador
Bill Meador

My gut reaction is that you could have offered a 30% reduction and it would not have made a material difference. The carrot you offered is only getting a few good clients to send their information earlier. My previous firm had clients complain because the firm institutued a policy that any client with an outstanding bill of more than 60 days could not have additional work done on their audit or tax return. But those clients suddenly "found the money" to pay the bill when they realized they could not lean on the staff or the manger to do the work before paying the invoice.

Since the economy is pushing more and more client to see their tax return fee as negotiable, I think this is one of the few ways to push back with a reasonable middle ground. Basically, if you want to keep your fees at a reasonable level then you have to get me the information by June 30 so I can take advantage of allocating my firm's staff time over the summer. If not then your going to pay much more than the standard return and you knew the rules in your engagement letter in January.

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