Estimated Tax Pricing

[Sarah Huang]

Hi tax experts,

I am getting a new client who needs help to pay his LLC's estimated tax quarterly. He will prepare a spreadsheet for the profit and lost / P&L. His current CPA firm charges him $450 each quarter and he is not happy. What is the pricing range I should charge please? 

Thank you in advance for any input!

[PhoebeRoberts]

At least $500 per quarter. Someone's always going to be cheaper; it doesn't have to be you.

[PhoebeRoberts]

I'd give them a rule of thumb ("book income times X%, rounded up" or similar) to apply to their own spreadsheet for no additional charge over the price of the tax return. But if a client wants skilled work done four times a year, they need to expect to pay for skilled work being done four times a year.

[Strongsilence-CPA]

$300 per quarter for first 3 quarters. Then, ask or argue or demand or persuade your client that he/she needs to do tax planning in December. For Tax planning charge $700 and tell the client why your value is especially important in December.

[BobKamman]

What kind of LLC pays tax?  Most of them are partnerships or S corps, so it's really the owners' taxes you are estimating and you need to know what else is going on with their finances.  If it's paying tax as a C corp, tell him that when he gives you the profit you'll multiply it by 21% and bill him $100. 

Or is he talking about quarterly payroll returns?  There are companies that do that, even for small business, better and cheaper than you.  

[rbynaker]

Too many variables.  How many states?  Is there PTET involved?  If we're just trying to avoid penalties I tell clients they can make safe estimates (for free) or they can pay me to calculate their tax return four times per year.  What they pay me I'm keeping.  If they pay the IRS too much, they get it back later.

[Strongsilence-CPA]

Hi BobK,

I assumed that the OP is speaking of an SMLLC.  

[Strongsilence-CPA]

If they pay the IRS too much, they get it back later.

Our value includes preventing this situation and I think the OP and her client desire a -0- return, or close. 

[BobKamman]

Sometimes our value includes telling clients to pay 8% interest to IRS while leaving their funds invested in stocks like INTU, which gained 12.5% just today.  That's exactly what I did with two returns I completed today. One client is paying $161 while their investment account grew by 20% last year.  The other is paying $671 while her IRA grew by 5% even though she had to withdraw 8% of it.  Both have most of their funds invested in mutual funds at Fidelity.  Past performance is no guarantee of future results but still -- there's more to life than worrying about taxes every two or three months.  

[Sarah Huang]

Good morning community family! All the response and advice make me feel so supportive! I love this community! 

My client should be SMLLC and he lives in Tennessee where has no state tax. Most likely he gets 1099 NEC and he is only employee and employer. I am still getting to know his business. I will found out more. Another question is

Should I send him an engagement/agreement to sign before I work on his estimated tax? If so, can you please share a draft with me? Or where I can get one please? 

Thank you in advance tax expert family! 

[Strongsilence-CPA]

I'm bookmarking this conversation, so I come back to it after 4/15.

Thought:  If I have the g/l, such as with QBO, I can see what my clients spends his money on. And sometimes seeing extravagances, such as $500 on bar tabs, I feel more justified in billing higher.

Advisory:  This morning, I reviewed my notes, and I was reminded that my client and I discussed reasonable compensation last year.  The client didn't take my advice so I'm putting a custom paragraph in the letter.  And adding $400 to his bill - I'm thinking of this as 1. I'm protecting you from the IRS, and 2. You can pay me now to keep you out of an audit or you can pay me later to (try to) defend you in an audit.

[thestanlee]

I'd provide them a rule of thumb ("book profits instances X%, rounded up" or similar) to observe to their personal spreadsheet for no extra cost over the charge of the tax return. But if a consumer needs expert work accomplished 4 instances a year, they want to anticipate to pay for expert work being accomplished 4 instances a year.

[Strongsilence-CPA]

Should I send him an engagement/agreement to sign before

I'm not sure.  AICPA or the insurance carrier AON have good resources about this type of engagement.  Membership is expensive but worth it.

[sjrcpa]

Yes get an engagement letter/agreement signed before you start work. In addition to what StrongSilence said, your professional liability insurance carrier probably has them, too.

He left the prior CPA bc he didn't like the fees.

I agree with the others - I prefer not to do this quarterly calculation crap for a small business. I have them pay safe harbor estimates. They can tell me if anything major changes. If I do end up doing the quarterly work, I'll charge at least what Phoebe said.

[BobKamman]

As @sjrcpa said, "I agree with the others - I prefer not to do this quarterly calculation crap for a small business."

I think it's all very 20th-Century.  Tax practitioner as secular guru requiring constant communication when really you should just be running your business.  Maybe a quarterly email in the first year, to check on whether the initial plan is still viable.   And whether it's time to elect S Corp status.  Bill at an hourly rate if it gets to be more than 10 minutes, more than twice a year.