When it comes to increasing your rates, there are plenty of factors to consider. Did you invest in any continuing education or certifications in order to better serve your clients? Were there any changes to the complexity of tax law in the past year? Perhaps you opened or expanded a brick-and-mortar location for your practice. Regardless of the kinds of changes your business undergoes, it is recommended that you examine your rates yearly to determine whether — and by how much — you should raise or lower your rates.
Primary Factors When Considering Rate Increases
According to a 2018 study conducted by the National Association of Tax Professionals (NATP), the average amount charged to complete an individual federal return is $216.31 — and that number only continues to increase year after year. Business and corporate returns demand even higher preparation fees due to their general complexity. A variety of factors contribute to this change, including new legislation and the addition or removal of certain forms (as was seen with the new 1040 in 2018).
Accounting for inflation and market fluctuation is critical to deciding whether or not your rates should be altered in order to maintain your level of desired profitability. The majority of tax preparation practices, for instance, increase their rates by a fixed percentage every year. Others choose to take into consideration local competition before determining their rates, often opting for an increase of between 3 and 5 percent. Naturally, you know your practice and local market conditions better than anyone else, and the choice to charge your clients more is ultimately is yours — a little competitive research, however, never hurts.
Tax preparers must also invest in updated tools, technology, and education to ensure that they are serving their clients to the best of their ability. These additional costs must be taken into account when making the decision as to how much rates change year over year. If you’ve invested in any new software — or even if your employees have put in extra hours in order to learn new skills — it’s important that you adjust your rates accordingly.
How to Explain Rate Increases to Your Clients
Then there’s the matter of perceived value on the part of your clients. The majority of customers paying a professional to file their returns are completely unaware of what goes into doing so. The complexity of a given return, how many forms are required, and how many hours it takes to complete the process are only a few of the factors that contribute to what the customer is charged. There’s also the increasing cost of accounting and bookkeeping services, a portion of which must be weighed when determining the end total.
Fortunately, most customers are willing to pay a slightly higher price if they better understand what they’re getting for their money. Some prefer an itemized breakdown of your services, while others are content with an explanation of the steps involved in completing their federal and/or state returns. The most important element, as always, is trust. Ensure that they feel confident that you’re charging them fairly, and your reasonable rate increases shouldn’t be an issue.
Affordable Tax Preparation Software Helps Your Customers
The software you use to serve your clients plays a significant role in their overall satisfaction with their filing experience and your practice. The price and usability of that software, of course, inevitably trickles down into the amount you charge for your services. TaxAct Professional® provides affordable, intuitive tools for tax preparers of all types and sizes, saving you time and money — invaluable benefits that are passed on to your clients with every return you file. Find the right TaxAct Professional product for your individual practice today.