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How I Transitioned to Offering Tax Consulting

Updated: Feb 13, 2021

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If you specialize in taxation, you become a very popular person between the months of January and May. In fact, in the past, we made 40 percent of our annual income during those months.

However, like everyone else, accountants need to eat and pay bills all year long. About three years ago, I decided to change course and and offer tax consulting and advisory services to supplement my tax season income, and I never looked back.

A word about these services: You are being paid to do tax planning and help your clients save money. And as we all know, during tax filing season, there is only so many laws we can take advantage of. For example, we can recommend an HSA or IRA contribution. However, tax planning and consulting require a lot of time and work, and you have to charge accordingly.

We have gotten out of the practice of payroll compliance. Accounting professionals no longer do after-the- fact payroll for clients largely because we usually have our own live payroll companies. In fact, there are so many cheap options out there that it became too labor intensive and not profitable for us to continue this practice. So what you really need to focus on is the tax planning work you do for your clients.

Often, accounting work is automated; in other words, bank and credit card transactions are fed into the cloud-based software you use. If you’re like me, you have staff accountants sort these transactions. Then, quarterly, you go through these accounts with a fine-tooth comb. After the review, the quarterly tax planning work takes place.

I charge a retainer for this planning. This is in addition to what I charge for accounting work and the preparation of tax returns. Especially with the passage of the TCJA, it is prime time to add tax consulting and planning to your list of services. When I have completed the planning, I send the report to the client and review it with them either in person or over the phone. I give details on how they can save money.

There has been a lot of talk about “value pricing.” From the articles I have read, I have gleaned that value pricing boils down to charging a flat rate for a service, rather than billing hourly. For monthly accounting, I charge a flat rate.

However, for advisory/consulting/tax planning work, I charge a retainer, which is whittled away with my hourly rate. Once the retainer is diminished to $500, I recharge it. I believe in my tax planning skills so much that if I don’t save the client double what my fee is, I give them a refund. To date, I have never had to do this.

I know that it is a common in this business to offer a free consultation. However, what I have found in 25 years is this can turn into a complete waste of time.

For example, I will talk to a lot of clients and often hear that they have spoken to another accountant, who said something else. I am a busy person and would rather spend my time doing billable work. As a consequence, I have begun charging a $200 consultation fee, which is credited back to you if you become a client. I have found this cuts down on the time I spend giving free advice, and it weeds out the price shoppers.

Another word on fees. Each year, the National Society of Accountants releases the average fees charged by accountants to do tax returns. I am always shocked by how low they are.

I raised my fees drastically six years ago. I was reviewing a tax return from a big-name tax preparation company and saw they were charging triple what I was. Here’s how these businesses work: Generally, they offer the general public a free tax preparation course that lasts six weeks. Then, they hire the students at the end of the class.

I rationalized raising my fees because of my extensive experience and the fact that I am licensed. The end result was that I lost about 40 percent of my client base. However, these were replaced by new customers who were willing to pay my higher fee because they appreciate quality.

In closing, it is good to review your business model every year and make tweaks. Don’t be afraid of losing clients. There will always be others who will appreciate what you do and be willing to pay you for the services.

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