How to Get Competitive Quotes on O&G Tax Prep Fees

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Beatle Boots
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How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Beatle Boots » Thu Jan 17, 2019 12:57 pm

Dilema: Have some oil & gas (O&G) mineral royalty interests (annual revenue = $20,000) and had a longtime accountant (not CPA) prepare the federal and state returns (Oklahoma, Colorado, Texas). The Accountant's charges were very reasonable, but he passed about 4 years ago. His practice was sold and the successor accountant/book-keeping guy, raised his fee about 50% after year 1. I Wasn't crazy about the fee increase and there have been some other minor concerns, but my main concern is cost.

If it weren't for the O&G interest, I could probably use a 1040A since my income/expenses etc. are very UNCOMPLICATED. I assume if a CPA or accountant was familiar with O&G matters in general, he could easily do these returns. I live in an O&G producing state. I am not interested in doing these taxes myself.

I would like to obtain competitive quotes from O&G Tax Accountants, and or CPAs for this work. I am trying to figure out exactly how to do this since I have never seen this matter discussed. Oh yes, I am wanting to "keep my cards close to my vest" in order to obtain the best results. Also, I do not want to entrust a potential loosing bidder with maintaining a permanent copy of my 2016 tax returns.

I came up with the following methodology. Please critique me or offer alternative solutions.

Obtain a single hard copy all of my 2016 tax returns. Go thru and redact my name, social security numbers, O&G owner Interest numbers, name and contact info for the 2016 accountant, etc. Find all the local CPA and Accountants etc., that advertise experience in O&G taxes. Walk into their brick & mortar office and tell them I am obtaining competitive quotes for annual tax preparation services. Assuming they are interested, I ask them to look at returns (containing copies of supporting documents which are mostly 1099s, ammortization schedules, etc.). I tell them I do not want them to retain a copy of my taxes for their records. I ask them to provide an estimated service fee (quote) with a guesstimate of future anticipated price increases and intervals.

If they balk, I walk ....to the next CPA, Accountant on the list.

In the end, I evaluate the offers received and obtain clarification for questions I may have and give the work to the "best value" offeror (may or may not be low bidder).

Above is the simple process that came to mind and I have used this methodology to purchase many goods and services over the years. I have saved lots of money with variations of this approach.

Would like critiques, comments, etc. especially from O&G Tax CPAs or Accountants, etc. on alternative approaches to get competitive best value quotes on O&G tax preparation fees.

Thanks and much respect to the contributors!

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BL
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by BL » Thu Jan 17, 2019 1:18 pm

If I were a tax-preparer, I would turn away your business with those requirements or quote a very high price. Why change my business for a single patron, who, odds are, would be a problem as well? (Not saying you are, just that I would be leery of that.)

Try doing last year's return with a last year's tax program that includes states just to see if you can do your own and to see how much or little work is involved. Compare to the completed 1040 from last year. Perhaps you can take over the job yourself.

Frankly, I wouldn't own this complicated business in 3 states, but it must be paying you well and worth paying the tax-prep fees.

Random Poster
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Random Poster » Thu Jan 17, 2019 1:32 pm

Beatle Boots wrote:
Thu Jan 17, 2019 12:57 pm
Dilema: Have some oil & gas (O&G) mineral royalty interests (annual revenue = $20,000) and had a longtime accountant (not CPA) prepare the federal and state returns (Oklahoma, Colorado, Texas).
I hope that the accountant wasn't charging you to do the state tax return for Texas.
Beatle Boots wrote:
Thu Jan 17, 2019 12:57 pm
I came up with the following methodology. Please critique me or offer alternative solutions.

Yeah, good luck with that plan, particularly during the first quarter of any year.

Just do the taxes yourself. They aren't difficult, and if are just a royalty owner getting royalty checks, completing the Schedule E for the federal return isn't hard at all and the applicable tax laws don't change very much from year to year. I can't imagine that the OK and CO returns would be particularly challenging either.

ETA: You say that you aren't interested in doing the taxes yourself, but why not? You'll know more about your taxes and your oil and gas interests and the interplay between them if you handle the taxes yourself....

Topic Author
Beatle Boots
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Beatle Boots » Thu Jan 17, 2019 3:56 pm

My misstatement, the accountant wasn't charging for O&G return for state of Texas.

Actually, I could do the work, and I am a CPA (worked entirely in a different area than taxes) although I prepared some tax returns for family and friends of mine over the years. Not something I enjoy. The reason I don't want to do my own taxes, besides hating tax preparation, as a non-practioner is this. You have to do all this freaking nonrecurring state tax law reasearch for a once a year project that takes many hours to ensure you do it correctly. If I were a practioner, I would be comped by preparing multiple returns. Recently retired and have many other (more interesting things to do) than do my own taxes once a year.

That is why I want to outsource this work in a nutshell.

Also, I realize I screwed myself for 2017 tax season. I know it is too late for this year. If I pursue this approach, will most likely be for 2018 tax year.

Last Point that hasn't been addressed yet. I understand that CPA/Accountants may not like my approach, "Reverse Bid Auctioning" and I wouldn't be surprised if I get a 50% reject rate. Fair enough.

However, noone has yet posted, yet, an alternative method for obtaining fair market value in the area of specialised tax preparation services. I am still interested in this and would think other readers would be interested as well.

Thanks for your posts!

livesoft
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by livesoft » Thu Jan 17, 2019 3:59 pm

Friends of mine have O&G assets. I suppose you may have some friends as well. Have you asked them for recommendations?
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Topic Author
Beatle Boots
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Beatle Boots » Thu Jan 17, 2019 7:33 pm

livesoft wrote:
Thu Jan 17, 2019 3:59 pm
Friends of mine have O&G assets. I suppose you may have some friends as well. Have you asked them for recommendations?
Unfortunately I moved to a new city and don't have many local contacts with this knowledge. Want to keep tax prep locals. In regard to relatives that also received a legacy interest in O&G, they are looking for me to provide leadership since I am the financial guy (hate taxes).

Thanks though for the comment.

One last point for consideration to my CPA / Accountant piers:

I don't see any reason why CPA / Accountant service fees should NOT be "market based competitive". What makes these professional service providers so special? If they don't want to give me an up front quote, that is fine, but some of them will.

I don't think this is an unreasonable ask nor do I think Tax CPA or Accountants are "special".

Example: I went to the dentist a couple of weeks ago for my exam. Unfortunately the dentist found that half of a back tooth had fallen off and a cavity had popped up in the remaining portion. I assume a portion of this work was "custom" or unique to the situation of my mouth (similar to my O&G taxes). The Dentist quoted me a fixed rate to fix the cavity. I was free to accept it or walk. Since it was Dec 30th and the last day of my dental insurance, I did some quick web based research using local comparative pricing and called the dentist back and said: fix it today and you have the job. The dentist fixed the tooth. I paid my half and billed the other half to the insurance company. I now have a big smile on my face. I don't see why a CPA would mind looking at prior year tax documents (complete) and providing a fairly firm estimate assuming no significant income / expense changes in the future year.

Thanks!

Random Poster
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Random Poster » Thu Jan 17, 2019 8:21 pm

Beatle Boots wrote:
Thu Jan 17, 2019 3:56 pm


However, noone has yet posted, yet, an alternative method for obtaining fair market value in the area of specialised tax preparation services. I am still interested in this and would think other readers would be interested as well.

Well, the fair market value rate for oil and gas tax services in, say, Midland, Texas, is probably not the same rate that is charged in, say, Corpus Christi, although the former likely has more options and perhaps more competent people. Just going door to door to find out what that value rate is though probably isn’t going to tell you how competent they are, or how they compare to someone else in another city.

What do you think the tax prep should cost and how did you come up with that number? And considering that you probably need the tax preparer more than they need you, why go into this scheme making things difficult for yourself? Maybe you’ll end up with a reasonably priced preparer, but that might be the only benefit you get out of this arrangement.

Greenman72
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Greenman72 » Fri Jan 18, 2019 3:13 pm

Beatle Boots wrote:
Thu Jan 17, 2019 12:57 pm

I came up with the following methodology. Please critique me or offer alternative solutions.

Obtain a single hard copy all of my 2016 tax returns. Go thru and redact my name, social security numbers, O&G owner Interest numbers, name and contact info for the 2016 accountant, etc. Find all the local CPA and Accountants etc., that advertise experience in O&G taxes. Walk into their brick & mortar office and tell them I am obtaining competitive quotes for annual tax preparation services. Assuming they are interested, I ask them to look at returns (containing copies of supporting documents which are mostly 1099s, ammortization schedules, etc.). I tell them I do not want them to retain a copy of my taxes for their records. I ask them to provide an estimated service fee (quote) with a guesstimate of future anticipated price increases and intervals.

If they balk, I walk ....to the next CPA, Accountant on the list.
FYI - I am a CPA, and I do a lot of tax returns with O&G on them. I live in Midland, Texas. Texas does not have a state income tax.

If you came to my office, I would ask you for all these things. I would ask to make copies for my records. If you said no, then I would probably not offer an opinion. Rather, I'd think you were a jerk who was wasting my time. (Of course, I wouldn't tell you that. But your price just went up a little.)

I would tell you the standard line of "it depends". I would say that it was a function of time and complexity, and it's difficult to know in advance how much the charge would be. A lot of it depends on whether you own royalty interests or working interests. (WI are much more complex and time-consuming.) And I would not quote you a firm price. However, I imagine that the price will start at $500 at work its way up from there.

I know that St. Jack (RIP) is famous for saying "You get what you DON'T pay for." Sometimes this is true. Sometimes it is not. I would be extremely hesitant to go with somebody just because they're cheap.

Greenman72
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Greenman72 » Fri Jan 18, 2019 3:32 pm

Beatle Boots wrote:
Thu Jan 17, 2019 7:33 pm

I don't see any reason why CPA / Accountant service fees should NOT be "market based competitive". What makes these professional service providers so special? If they don't want to give me an up front quote, that is fine, but some of them will.

I don't think this is an unreasonable ask nor do I think Tax CPA or Accountants are "special".

Example: I went to the dentist a couple of weeks ago for my exam. Unfortunately the dentist found that half of a back tooth had fallen off and a cavity had popped up in the remaining portion. I assume a portion of this work was "custom" or unique to the situation of my mouth (similar to my O&G taxes). The Dentist quoted me a fixed rate to fix the cavity. I was free to accept it or walk. Since it was Dec 30th and the last day of my dental insurance, I did some quick web based research using local comparative pricing and called the dentist back and said: fix it today and you have the job. The dentist fixed the tooth. I paid my half and billed the other half to the insurance company. I now have a big smile on my face. I don't see why a CPA would mind looking at prior year tax documents (complete) and providing a fairly firm estimate assuming no significant income / expense changes in the future year.

Thanks!
I don't think that I am "special" and I do think that my services are "market based competitive". However, we have no idea how much time or effort we will have to put into it, while the dentist probably does. And there is no way to know, even if we have a copy of last year's tax return. Here are some things that impact your price that I can't tell by looking at last year's return.

Are you going to drop your stuff off on Apr. 14 or Feb. 5?

Can I extend you and file it in June or July?

If you have a Sch. E or C (which you do, since you have O&G), did you keep track of your expenses and itemize them? Or do you expect me to do that? Even if you did do it, is it in a format that I can understand?

Do you make ES payments? Do you make state ES payments? Do you keep records of it? Do you ACCURATELY tell your CPA how much you paid?

Are you going to call me every day and say "Well, I dropped it off three days ago. Why hasn't it been filed yet?" in March. (Sorry dude, there are only about 450 people in front of you.)

If I need more information, are you going to return my phone calls? Or e-mails?

Are you going to sit down and examine the tax return with a microscope? Are you going to question every single line item? After all, many of the things that we put on a tax return are somewhat subjective on whether they are deductible, and WHERE they are deductible.

Basically--all of these questions point to one thing. Are you a pain in the ass? And based on what I've read here, the answer is "yes". Don't misunderstand me. I will still prepare your tax return. But I will charge you for being a pain in the ass.

ivk5
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by ivk5 » Sat Jan 19, 2019 7:07 am

^ this whole post above makes my day

Topic Author
Beatle Boots
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Beatle Boots » Sat Jan 19, 2019 11:18 am

Greenman72 wrote:
Fri Jan 18, 2019 3:32 pm
Beatle Boots wrote:
Thu Jan 17, 2019 7:33 pm

I don't see any reason why CPA / Accountant service fees should NOT be "market based competitive". What makes these professional service providers so special? If they don't want to give me an up front quote, that is fine, but some of them will.

I don't think this is an unreasonable ask nor do I think Tax CPA or Accountants are "special".

Example: I went to the dentist a couple of weeks ago for my exam. Unfortunately the dentist found that half of a back tooth had fallen off and a cavity had popped up in the remaining portion. I assume a portion of this work was "custom" or unique to the situation of my mouth (similar to my O&G taxes). The Dentist quoted me a fixed rate to fix the cavity. I was free to accept it or walk. Since it was Dec 30th and the last day of my dental insurance, I did some quick web based research using local comparative pricing and called the dentist back and said: fix it today and you have the job. The dentist fixed the tooth. I paid my half and billed the other half to the insurance company. I now have a big smile on my face. I don't see why a CPA would mind looking at prior year tax documents (complete) and providing a fairly firm estimate assuming no significant income / expense changes in the future year.

Thanks!
I don't think that I am "special" and I do think that my services are "market based competitive". However, we have no idea how much time or effort we will have to put into it, while the dentist probably does. And there is no way to know, even if we have a copy of last year's tax return. Here are some things that impact your price that I can't tell by looking at last year's return.

Are you going to drop your stuff off on Apr. 14 or Feb. 5?

Can I extend you and file it in June or July?

If you have a Sch. E or C (which you do, since you have O&G), did you keep track of your expenses and itemize them? Or do you expect me to do that? Even if you did do it, is it in a format that I can understand?

Do you make ES payments? Do you make state ES payments? Do you keep records of it? Do you ACCURATELY tell your CPA how much you paid?

Are you going to call me every day and say "Well, I dropped it off three days ago. Why hasn't it been filed yet?" in March. (Sorry dude, there are only about 450 people in front of you.)

If I need more information, are you going to return my phone calls? Or e-mails?

Are you going to sit down and examine the tax return with a microscope? Are you going to question every single line item? After all, many of the things that we put on a tax return are somewhat subjective on whether they are deductible, and WHERE they are deductible.

Basically--all of these questions point to one thing. Are you a pain in the ass? And based on what I've read here, the answer is "yes". Don't misunderstand me. I will still prepare your tax return. But I will charge you for being a pain in the ass.
----------

Interesting points. None of them really address the address the fundamental question of "transparency" and why a consumer can't get a "FMV estimate of professional Accounting fees". However, let me provide a little more background and info. Regarding the questions, comments, above.

I have been an auditor for over 30+ years primarily involved in auditing contracts, billings, rate agreements, etc.. I have so much experience in "over-pricing" I guesse you can say that it is in my DNA not to trust someone where there are no exisitng internal controls to prevent over-pricing. In my experience, when someone implicently tells me "Trust Me", my estimate is very reasonable. I immediately DONT trust theme.

My concern with this transaction is this. I want a long term relationship with a reliable accurate accountant, preferably younger (lots of the old guys that do this work are dieing off). I am not seeking the absolute low bidder. With the screening method I posted above, I can get competitive pricing and do some internet researching to screen out BS address reputation/quality concerns.

My family used the old guy accountant for 25 years. I used him on my own for 10+ years. The guy told me I was one of his best clients because my documentation was excellent as an accountant can. For instance, I have a separate folder for each O&G county, state. I date each 1099 since there are so many revisions. I provide Excel summary documents infront of each folder (O&G, 1099-Int) that cross-references back to the supporting docs. I normally turn my file in mid-march since that is about the time the last revisisons come in. When I get my returns back, I generally scan them and do some comparisons to prior years returns. I believe I have had 2 questions for the Accountant after submission during the last 10 years. I send off my signed returns for the completed year, my Estimated Tax payment for the future year, and the check to the Accountant on April 15. THE END!

All this well organized, cross-rerferenced documentation (redacted form) would be available for review ONLY to each Accountant if they agreed to provide a bid. check) in a properly formatted cross-referenced maner!

Back to why I want to determine FMV: If I can ensure I can get a FMV estimate in year 1 (my BASELINE); I can continue with my desire for a LT fruitful relationship where everyone is happy and a routine process is set in motion. Once I have my baseline, I can figure out a value for future rate increases. If the Accountant raises 50% and the work content stays static I will most likely bolt.

Now back to all the questions one of the responders had. No offense man but you set yourself up.

May I assume that you ask and obtain answers to all these questions before you take on any new business clients? If not, then don't you have to "Assess Risk" at the highest level for each of the clients to properly place them in a "high risk category"? If not, why not?

Finally, if you had 1 or 2 years of the last tax returns (including all supporting documents cross-referenced, etc.), why wouldn't this be enough information for you to provide a cost estimate?

I am thinking auto mechanic here or dentist physically inspecting physical damage....which means the Accountant has all the documents to answer all questions asked by one of the responders.

Not really interested in getting a debate. I am sure practioners are rolling their eyes, this guy is a pain in the butt. Whereas, I am thinking...isn't this what the whole "Disrupter Business Model" about?

Thanks for taking time for your comments and I appreciate your constructive comments.

Gill
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Gill » Sat Jan 19, 2019 11:27 am

Beatle Boots wrote:
Sat Jan 19, 2019 11:18 am
I am sure practioners are rolling their eyes, this guy is a pain in the butt.
Yup.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Olemiss540
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Olemiss540 » Sat Jan 19, 2019 6:55 pm

This is one reason I prepare my own taxes. It seems you put in more than 90% of the work organizing, why not just file? It couldn't be 3 hours and will save you the hassle of dealing with these people thinking you are going to be a big pain in the backside.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Greenman72
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Greenman72 » Sat Jan 19, 2019 10:47 pm

Gill wrote:
Sat Jan 19, 2019 11:27 am
Beatle Boots wrote:
Sat Jan 19, 2019 11:18 am
I am sure practioners are rolling their eyes, this guy is a pain in the butt.
Yup.
Gill
Agreed. You sound worse than an engineer.

Tallis
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by Tallis » Sun Jan 20, 2019 9:00 am

Beatle Boots wrote:
Thu Jan 17, 2019 3:56 pm
The reason I don't want to do my own taxes, besides hating tax preparation, as a non-practioner is this. You have to do all this freaking nonrecurring state tax law reasearch for a once a year project that takes many hours to ensure you do it correctly. If I were a practioner, I would be comped by preparing multiple returns. Recently retired and have many other (more interesting things to do) than do my own taxes once a year.
Your oil interests must be much more complicated than mine. I get 1099s from production companies in two states. I enter them in Turbotax. I print out the tax forms, sign and mail them. I admit that the first year I spent a bit of time on state revenue department web pages to make sure I understood how severance tax works, but since then it's just been a few extra minutes on the computer.

Sure, that means that I'm trusting Turbotax to get the laws right, but if I hired a CPA I'd be trusting her, wouldn't I?

But my situation is different, since I'm already doing my taxes and you don't want to do yours.

Have you tried out your plan? I'd be interested in learning how it worked, and what the range of prices was.

jminv
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by jminv » Sun Jan 20, 2019 9:16 am

Ask friends/family/neighbors who they use and how much it costs them. That's probably the way to find a 'deal'. The way you are going about it will probably mean it costs more than it otherwise would.

I would just do it myself since I like analyzing things and this quote collection will probably take longer than learning how to file them yourself. I know you said you don't want to do that, though.

Since no one else pointed it out, I will - you could look at selling your O&G interests and be done with the tax angle after this year.

afan
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by afan » Sun Jan 20, 2019 9:32 am

The project you propose could eat up a large share of your income from the business.

This approach might work if you were soliticing bids on a large projects- hundreds of thousands of dollars, annually, over many years. I am not a CPA but I cannot imagine going through all this to get a single client who would pay a few thousand at most and who is likely to bail after a year. Would be be a terrible business decision.

For the amount of work you are asking them to do to be considered you should expect to pay them. Trying several accountants would be in effect having several do your entire returns on a trial basis. They will not do that for free.

A simpler alternative would be seeking preparers who will quote you hourly rates. Then use your own background to estimate how many hours it will take.

Try to make this look simple and offer to pay them for it:

Contact several and ask them to review your last few years returns to check them for accuracy. When you get the bills you will have a good estimate of relative costs among the CPAs.

If you did this with three accountants that would be three times the cost of doing the returns once. Maybe more depending on how much time they spent on the old returns.

If you really want to try every local accountant, depending on the size of your town that could cost far more than the profit from the business. This is a long term project and not realistic to expect results in time for this tax season. You could start it now and hope to have a decision by late 2019 so you pick someone for 2019 taxes.

Unless you are spending more than $20,000 on tax preparation it hardly seems worth the effort on your part. If you are spending more on tax preparation than the business produces in profits then get rid of the leases.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

riverguy
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Re: How to Get Competitive Quotes on O&G Tax Prep Fees

Post by riverguy » Sun Jan 20, 2019 10:47 am

If you want to sell them and get rid of the hassle, send me a PM with info on the properties and I can make you an offer to purchase.

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