2025 Tax Season: Build Your Wealth

You work hard and deserve to be financially rewarded for that work

Unless your tax firm is a non-profit, we are all here to provide excellent service to clients while earning money and building wealth for ourselves and our workers.

Let me be clear: there is no problem with charging less than your regular price for select clients (what I call low bono work) or doing free work by choice (pro bono work). Appropriately charging a typical firm client allows you to provide discounted services to a smaller subset of clients in financial need.

It is difficult to discuss pricing in general because every tax firm is different in terms of skill level, number of employees, services offered, and target market. However, in the current market environment of fewer practitioners and greater demand for services, prices should consistently increase over time, and a firm should not be materially less than other similarly situated firms.

Get Paid Before Doing Any Work

I have not had receivables since I started using Ignition because my firm’s minimum engagement fee must be paid when the engagement letter is signed. No work is done until an engagement letter is signed and the minimum fee is paid.

For annual tax return preparation engagements, there is an additional charge based on the complexity of the return and the value provided. The extra charge is collected via Ignition before the returns are released for review and signature.

With respect to the value component of the additional charge, if I identify a strategy to reduce tax on the tax return, I quantify the savings, and that is built into the additional charge. These savings are also told to the client when I deliver results.

For subscription engagements, payments are automatically collected via Ignition on the 5th of each month for services provided in that month. The initial payment is made when the engagement letter is signed. If a subsequent payment is unsuccessful, the client has five days to cure the issue; if they do not, services end.

I will not get into the controversial topic of how much a firm should charge as a minimum fee or for a tax return engagement. I recommend that practitioners move toward higher fees and smaller client bases. I will make two observations:

• A larger minimum fee allows you to have a smaller client base to meet your revenue goals and helps minimize price shoppers from your practice.

• You should immediately reconsider your pricing levels if your fees are lower than those of the tax preparation chains or programs like TurboTax.

Consider Add-On Services

I strongly recommend bundling services with the base tax return engagement to increase its value (and, thus, the price you can sell). Examples include:

• Limited post-preparation email and phone consultations,

• A year-end planning meeting,

• Estimated tax payment and withholding calculations, and

• Executing Form 8821 and/or Form 2848 to access taxpayer information, receive notices, or monitor IRS transcript information.

For example, I include three hours of post-filing compliance services as a separate service for each tax return engagement. This is not an optional service and covers things like processing issues, notice review, etc. Any work beyond the three hours can be handled through one of my subscription engagements.

If a client needs many different services (e.g., bookkeeping, payroll, planning, etc.), consider bundling all of those services and tax preparation into a fixed monthly fee that considers the value of the services being provided and the convenience of one firm seamlessly providing all of those services.

No Discounts

You do good work, and you deserve to be paid for it. Set your pricing and stick to it. If many people receive discounts, your published pricing is not honest because few people pay the advertised prices. Pricing should be transparent, honest, and based on the value of the services provided.

If you discount your fees for new clients, those clients will expect discounts going forward, and they possibly will leave if the discount is not provided. Discounts do not retain clients; your service and expertise keep clients returning year after year.

I will only discount if there is a significant price increase. I will phase in the increase for existing clients over three years, and new clients will pay the full price.

Pricing as an Exit Strategy

Most people want to retire eventually. Your firm’s average fee will directly impact the price at which you can sell your practice or book of business.

A client base on monthly recurring billing with appropriate value-based fees will fetch the highest price from a buyer, while a client base with below-market fees will receive the lowest price from a buyer. The latter may be hard to sell because few people want to manage a large, low-priced client base who are likely to leave due to pricing.

If you are more than three years from a proposed sale, you have time to re-orient your business pricing model to make your firm more desirable to buyers.

Join the Conversation

As a paid subscriber, you can discuss this topic in the comments section. Please keep the discussion related to this edition’s topic.

Learn More About Tom

Please take a look at my website to learn about the opportunities I offer the tax professional community.