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tax preparation fees

2021 Fee Increases

By Jason Watson, CPA

Posted Sunday, May 16, 2021

No one likes price increases, but they are a fact of life. WCG takes fee increases very seriously, and only after a lot of reflection and analysis. So many crusty old CPA firms simply add $25 every year to the tax preparation fee… or 5%… or some other arbitrary number. While that seems to work for some, it does not sit well with us. Arbitrary numbers to an accounting firm??!!

And! We commonly hold fees steady for two years and sometimes three years because we understand the perception of annual increase as it relates to being arbitrary. In other words, we believe a fee increase is only warranted because of changes in economic conditions (or of course changes in your tax and accounting world) which move at glacial speeds.

Well, the time has come and WCG is increasing its tax preparation fees for 2021 tax returns (due in 2022) and business advisory fees for 2022.

Historical Economic Data

What we are about to demonstrate probably doesn’t make anyone feel better. And that’s OK. But we hope to provide a foundation for our analysis.

Housing
The median sale price of a home in Denver was $215,000 in 2009. In 2020, that number is $450,000. This represents a compounded annual increase of 6.3% each year. Sure, lower interest rates have increased buying power and therefore prices, but going from 4.0% to 3.0% mortgage rates can’t push needles that much.

Consumer Price Index
Early 1980’s is used as a baseline at times for comparison when reviewing consumer price index (CPI) figures as generated by the Bureau of Labor Statics. In 2010, the U.S. as a whole had an index of 218 where Colorado was 212… basically, Colorado was cheaper to live in as compared to the U.S. average. In 2019, these numbers were 256 and 267 respectively which tells us that Colorado is now more expensive to live in versus the U.S. as an average. Over 300 sunny days a year and no bugs seems to appeal to a lot of people.

Tax Accountant Salaries
According to Robert Half, an employment agency for the accounting and finance industries, a senior tax accountant earned $56,250 to $ 74,500 in 2010. Today that range is $68,820 to $128,205. What is interesting is the ceiling is increasing at a much faster rate than the floor. The floor has seen an increase of 22% which is standard inflation (see below), but the ceiling has increased 72%. We are not sure what to make of this, but our Senior Tax Accountants earn between $80,000 to $100,000 as published on our careers page.

Inflation
The cumulative U.S. inflation from 2010 to 2021 is 22.5% which suggests that a $500 tax return today would have been $408 in 2010.

Ok… you’ve had enough of this. The challenges that WCG faces, and most tax and accounting firms, is hiring qualified talent and being able to pay wages that are commensurate to skill with an underlying cost of living tone. Our industry is probably not alone. Let’s not get started on the whole “nobody wants to work” complaint or the “minimalist” generation.

Do you want another fun fact?

WCG’s wages, excluding partner compensation, is about 40% of revenue. If we add in health benefits and our decent 401k match, our wage budget starts to hit closer to 42%. Most professional services such as attorneys, accountants, architects and perhaps some engineers try to earn revenue that is 3 x wages. Said in another way, wages should be 33% of direct billings. WCG has seen this percentage increase over the years. Salary budgets for qualified tax accountants, as a percentage of revenue, have accelerated recently primarily due to cost of living (including housing).

We are not trying to complain… just highlight some realities that we face. Ok, perhaps a little bit of complaining.

The Competition

The speed and volume which data comes to us is blazing. Even as recent as 20 years ago it was tough to know if you are paying too much for something… is the product or service that you are receiving worth the price being paid? Consider this- large durable goods, such as automobiles, could not enjoy a geographical price adjustment. The manufacturer often published prices in sales literature, and it didn’t matter if the automobile was sold to someone in Los Angeles or someone in Toledo, Ohio (humor us and assume that Toledo has a much lower overall cost of living than the City of Angels). As such, a person in Los Angeles might have a purchasing power advantage because their wage base might be higher than other locations.

So what has the internet done to the practice of tax and accounting. Two things-

  1. It has presented a landscape for a firm like WCG to pioneer and improve the online tax accountant, and
  2. It has created the automobile phenomenon above where our fees to someone in Los Angeles seem reasonable and perhaps highway robbery to someone in another geographical area. Interesting enough, our primary client base is in Colorado, California, Texas and the eastern seaboard. CA, NY, TX and FL round out the top four states in terms of economic and contributors to the nation’s GDP… so… do our fees seem reasonable to these areas based on local economic conditions, or is simply a population equation? We digress…

What we are perhaps clumsily trying to say is that our little boutique firm tries to find a fee range that makes sense to most people. Another sidebar, a huge part of our success has been found in the publishing of our fees on our website. This too has done two things-

  1. Gives the prospective client forward-looking cost structure to the services they need, and
  2. Takes fees off the table. Far too often the discussion of fees comes up after the deliverable (tax return). That is insane. Imagine buying a car without a sticker price? At time of delivery, the associated fee should be a distant memory.

Back to the subject… It is often said that competition validates your product, so naturally looking to the competition is a great litmus test of where you fit in. In a 2018-2019, a survey conducted by the National Society of Accountants found the following fees for tax preparation-

  • Form 1040 + Schedule C (small biz), $630
  • Form 1040 + Schedule E (rental), $539
  • Form 1040 + Both, $766

tax preparation feesWCG’s fee range for individual tax returns (Form 1040) is $600 to $800. Frankly, we believe surveyed accountants are a bit puffy on these surveys and don’t necessarily count for discounts or write-downs… oh well. The survey remains telling.

What is also fun is when we see a receipt or invoice from the previous accountant… and what is even more fun is when the previous accountant is H&R Block. A store manager for Sam’s Club told us a long time ago; a third of our stuff is cheap, a third is the same price, and a third is higher… while in aggregate we have the same profit margins as anyone. But the perception is that everything at Sam’s Club is less expensive than the competition. Not true. Southwest Airlines has similar magic. $39 one way to Las Vegas… $329 to get home… but all you see is $39.

Back to H&R Block… they certainly have lower fees for the basic individual tax return (Form 1040). Sure, but we’ve seen some crazy high fees for a small business owner who also happens to have rentals coming out of H&R Block. They only advertise the basic tax return fee, and just like Sam’s Club or Southwest, the public assumes everything falls in line. “If a basic tax return is only $39, then it can’t be much more for a rental.” Test that logic… you’ll only do it once.

By the way, we are not bagging on H&R Block. We are glad they exist since they fill a need in the accounting industry, and do it well.

You Got a Raise

What is a bit humorous is when a client pushes back gently on a fee increase but we can see that they have received pay increases each year. Sure, people change jobs and typically get a sizeable bump in pay. But what really gives us a giggle is when we see rental income increase year after year, and we say to ourselves, “oh… hmmm… interesting… you’re increasing your fee to align with current economic conditions.” We probably don’t say that aloud since it sounds completely nerdy, but you get the idea.

We Gotta Deliver

When a company increases prices or fees, they better deliver. They should have always been delivering a quality product or service, but now the scrutiny is increased… at least in the short-term. WCG had a rough 2020 tax return season. Some of it was like a natural disaster, and some of it was completely within our control. Each year we perform a postmortem analysis on our tax season, and this year we sent out an email to all clients outlining some of the issues with our client experience. You can read that here.

As any thoughtful business does, WCG is continuously improving our client experience, and a part of that process is communicating to you our mistakes and challenges.

wcg cpa

Business Advisory Service Plans

WCG specializes in small businesses who generally have fewer than 100 employees. Why? We want to help people, and more importantly we want to help the business owner directly. Frankly speaking, once a business gets to a certain size management layers get in the way of owner access. Access allows us to ensure the owner(s) are leveraging the most out of their business for themselves and their families.

Because small business is a core competency for us, we have created business advisory service plans which include these really cool things-

A la Carte* Vail Telluride Aspen

2021 Tax Planning and Preparation

Tax Planning, Tax Projection Worksheets $350 to $500
Small Business Tax Deductions Optimization Included
Section 199A QBI Tax and Salary Optimization $300
Estimated Tax Payments (thru payroll or directly) inc. or $75 per
Business Entity Tax Return Prep (Form 1065, 1120, 1120S) $1,000 to $1,200
Individual Tax Return Prep (Form 1040, joint filing), One Owner $600 to $800
Expat / Foreign Income Calcs (Form 2555, FBAR, Form 8938) $300 to $500 Add-On Add-On Add-On
IRS Audit Defense NA
Situational Tax Law Research (up to 3 hours annually) $750

2021 Payroll

Reasonable Shareholder Salary Calculation (RCReports) $400
Monthly Shareholder Payroll Processing (up to 3 shareholders) $1,200
Employee Payroll Processing (up to 25 EEs, bi-weekly, direct deposit) $300 per month Add-On
Annual Payroll Processing (W-2s, other filings, up to five 1099’s) Included

Business Advisory Services

Consulting
Business Consultation, Periodic Business Reviews (PBR) $1,000 Quarterly Unlimited Unlimited
Complimentary Quick Chats (CQC) $250 to $500 Unlimited Unlimited Unlimited
Interfacing with Lenders, Attorneys, Financial Planners $500 Unlimited Unlimited
Financial Analysis
QuickBooks, Xero Consulting $500
Accounting Services (bookkeeping + analysis... see below) NA Add-On Add-On Add-On
Fractional Controller (monitoring 3rd party bookkeeping) NA Add-On Add-On Add-On
Financial Statements Analysis, Comparisons $1,200 Quarterly Quarterly
Cash Flow Management and Analysis $750 to $1,000
First Research Industry Reports, Industry-Focused Consulting $350 to $600
National and Metro Economic Reports $150
KPI Analysis, Benchmarking, Hot Sheets, Trend Analysis $750 to $1,000
Budgeting, Forecasting, Goal Setting $750 to $1,000
Strategy and Maintenance
C-Level Financial Advice and Strategic Planning (Fractional CFO) $2,000 to $3,000
Succession Planning, Ownership Changes Consultation $750 to $1,000
Annual Business Valuation $2,500 to $3,000
Annual Corporate Governance, Resolutions, Meetings $150
Annual Fee $3,420 $5,760 $8,160
Monthly Fee $285 $480 $680
(prorated based on onboarding date)

Custom! Unlike the modern day new car packages where you have to spend $8,000 for the moonroof, our Business Advisory Service plans can be customized specifically for you. The array above is simply a starting point. If you need more from us, let’s chat about it!

Tax Patrol Services

We also have Tax Patrol! This is a wonderful tax service for those who don’t need all the business advisory bells and whistles above, but from time to time want some love from an experienced tax consultant and business advisor. Have a quick tax question? Need to know the depreciation rules as you buy that new car? Wondering what your April tax bill is going to be in August? Tax Patrol is like ski patrol... you might not use it, but you sleep better knowing you have it.

A la Carte* Keystone Copper Breck
Individual Tax Return Prep (Form 1040, joint filing) $600 to $800
Business Entity Tax Return Prep (Form 1065, 1120, 1120S) $1,000 to $1,200
Tax Planning, Tax Projection Worksheets $350 to $500
Estimated Tax Payments Calcs Included
IRS Audit Defense NA
Complimentary Quick Chats (CQC) $250 to $500 Unlimited Unlimited Unlimited
Annual Fee $1,080 $1,500 $1,980
Monthly Fee $90 $125 $165
(prorated based on onboarding date)

Additional Business Services

The following are additional business services to get your venture launched and on the way. Some of these are teased out separately as one and done fees like formation and onboarding stuff.

Accounting, Payroll*

Monthly Accounting (bookkeeping + analysis) starting at $400 / month
Bi-Monthly Accounting (bookkeeping + analysis every 2 months) starting at $250 / month
QuadMonth Accounting (bookkeeping + analysis every 4 months) starting at $175 / month
Sales Tax, Personal Property Tax typically $75 / month, $150 / quarter
Employee Payroll (up to 5, bi-weekly) $50 or $160 / month
* Accounting fees are based on 2 bank account with less than 250 monthly transactions and include the QBO fee from Intuit. Custom quote is available if you have a lot going on such as third-party integrations (POS, time billing system), accrual accounting method, extensive benefits packages and / or industry specific issues (e.g, job costing in construction).

Employee payroll can be added to shareholder payroll for $50 per month if already using our Business Advisory Service plans above (e.g, Vail), or $160 for standalone. Custom quote for more than 5 employees and a referral to therapy.

Formation

Articles of Organization or Incorporation, Domestic Owners $425 + state filing fee
Articles of Organization or Incorporation, Foreign Owners $725 + state filing fee
Initial Report (if required) $125 + state filing fee
Employer Identification Number (EIN) Included
Single Member Operating Agreement (SMLLC) Included
MS Word Templated Bylaws Agreement (Corporations) Included
S Corp Election, Timely Election (made with formation) Included
Accountable Plan Included

Onboarding

Payroll Accounts Setup or Transfer $300 to $450
Accounting Setup or Transfer (Fractional Controller) $300
QuickStart QuickBooks Setup and Support (90 days) $750
S Corp Election, Timely Election (within 75 days) $250
Late S Corp Election Back to January 2021 $450
Examine Prior Tax Returns Included

Advisory Services Fine Print

A la Carte
A la Carte fee ranges are approximates. 85% of our clients fit into these fee ranges, but there are outliers. We have a handful of clients with over 30 rentals; their individual tax return is north of $2,500. We also are assuming one state; if your business spans the galaxy (keeping with our stormtrooper motif) then additional fees will be discussed with you prior to payroll setup or tax preparation. Typically each state is around $250 to $350 for tax preparation since it affects both your business and individual tax returns (frankly, state apportionment is a pain in the butt, but it is our pain… and states, especially California and New York, are crazy about it).

Prorated Fees
Some more things to consider- when a partial year remains, our usual annual fee is pro-rated to not charge you for services you didn’t use (like payroll and consultation). However, a large chunk of our annual fee is tax preparation which is typically a built-in fixed amount of $1,600 (both business entity and individual tax returns). Whether we onboard you in January, July or December, we have to prepare a full year tax return. This increases the monthly fee for the remaining months of 2021 but the monthly fee will later decrease in January of 2022 to reflect the amounts above. Yeah, we make it sound like 2021 is just around the corner.

Payroll Processing
We make very little profits on payroll processing… we offer it as a convenience to our clients. One throat to choke with a single call can be reassuring but if you want to run your payroll, go for it! Everyone thinks payroll is a piece of cake; write a check and done. Nope… we see a lot of mistakes being made by clients especially the handling of health insurance and HSA contributions since there are special rules for greater than 2% S Corp shareholders. Then again, we don’t mind fixing what was broken.

Tax Returns
You can prepare your own individual tax return as well… but the benefit WCG preparing both individual and business tax returns is that we slide things around depending on income limitations, phaseouts, alternative minimum tax (AMT), Section 199A deduction optimization, etc. Having our arms around both can yield some good tax savings!

colorado springs cpa

No BS

We are not salespeople. We are not putting lipstick on a pig, and trying to convince you to love it, even if Tom Ford’s Wild Ginger looks amazing. Our job remains being professionally detached, giving you information and letting you decide.

We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. Just because you can complicate the crap out of your life doesn’t mean you must. Just like Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea.

Our Business Expertise

As mentioned elsewhere we primarily focus on small business owners and their unique consultation and tax preparation needs. With over 40 full-time consultation professionals including Certified Public Accountants, Enrolled Agents and Certified Financial Planners on your team, WCG consults on custom business structures, multiple entity arrangements, S corp elections (even late S corp elections back to January), tax strategies, business coaching, industry analysis, executive benefits, retirement planning including individual 401k plans, exit strategies, business valuations, income tax planning and modeling, and tax representation. business advisor

We also work with business law attorneys for business owners who have additional needs such as drafting Operating Agreements, fee for service contracts, buying or selling a business including employee stock ownership plans and partner buy-ins. In addition, WCG coordinates with third party plan administrators such as Polycomp and RPS to create age-based profit sharing plans and cash balance (defined benefit) plans. We can run point on whatever your business needs to ensure that communication is effective and efficient allowing you to sell widgets.

Here are some additional resources you might find useful.

Jason Watson, CPA is a Founding Partner of WCG Inc., a business consultation and tax preparation CPA firm located in Colorado Springs and Denver, and is the author of Taxpayer’s Comprehensive Guide on LLC’s and S Corps which is available online and from average retailers.