Accountant Fees

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josephny
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Accountant Fees

Post by josephny »

I am primarily in the real estate investing business (buying, improving, leasing, managing, holding for long term).

I have dozens of LLCs, some that own the property, some that manage, some basically pass-through for investors.

Some LLC's tax returns are filed on their own (when there is more than myself as the owner), and some on my personal schedule E.

I've been working with my current CPA for decades, and we've developed a fee arrangement where he chages different prices based on the work performed for each LLC.

For example, an LLC that owns property and in which I am the sole member (and therefore the taxes get filed on my 1040 schedule E) are charged annually $500 for the taxes and $2,400 for "bookkeeping." I use quotes because I'm not 100% clear what is included in bookkeeping.

An LLC that files separately because it has more than myself as a member is charged $1,375 for the taxes and $2,400 for bookkeeping.

An LLC that does not own property and is used as a pass-through between the LLC that owns property and the individuals (or another LLC) who are members is charged $500 for the tax return and $0 in bookkeeping.

My personal taxes are charged $1,200 (no bookkeeping fee).

While it might be inappropriate to consider the total fees, together it becomes quite a large sum of money.

Does anyone have any insight into whether I've got a fair and reasonable arrangement? Or should I make some changes?

Thank you.
VallBall
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Re: Accountant Fees

Post by VallBall »

Your real estate setup sounds similar to mine. I have about 20 LLCs. I do my own bookkeeping. My accountant charges $350 per LLC and about $800 for my personal returns. Been with him for about a decade. I think they started at $250 each and have slowly creeped up. I am very happy with his service though and he is very responsive to any questions I have throughout the year.
HomeStretch
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Re: Accountant Fees

Post by HomeStretch »

josephny wrote: Tue Jan 28, 2025 5:42 am I use quotes because I'm not 100% clear what is included in bookkeeping. …
It seems like a large portion of your annual tax fees are for bookkeeping. So it makes sense to figure out what this covers. Do you have an engagement letter from your tax professional that specifies service and cost? What services do you receive above tax return preparation? Are you able to do this yourself and eliminate the bookkeeping fee?
realclemsongrad
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Re: Accountant Fees

Post by realclemsongrad »

josephny wrote: Tue Jan 28, 2025 5:42 am I am primarily in the real estate investing business (buying, improving, leasing, managing, holding for long term).

I have dozens of LLCs, some that own the property, some that manage, some basically pass-through for investors.

Some LLC's tax returns are filed on their own (when there is more than myself as the owner), and some on my personal schedule E.

I've been working with my current CPA for decades, and we've developed a fee arrangement where he chages different prices based on the work performed for each LLC.

For example, an LLC that owns property and in which I am the sole member (and therefore the taxes get filed on my 1040 schedule E) are charged annually $500 for the taxes and $2,400 for "bookkeeping." I use quotes because I'm not 100% clear what is included in bookkeeping.

An LLC that files separately because it has more than myself as a member is charged $1,375 for the taxes and $2,400 for bookkeeping.

An LLC that does not own property and is used as a pass-through between the LLC that owns property and the individuals (or another LLC) who are members is charged $500 for the tax return and $0 in bookkeeping.

My personal taxes are charged $1,200 (no bookkeeping fee).

While it might be inappropriate to consider the total fees, together it becomes quite a large sum of money.

Does anyone have any insight into whether I've got a fair and reasonable arrangement? Or should I make some changes?

Thank you.
My single member Corp is also charged at 1300$. I don't remember the fees for bookkeeping exactly but remember it to be 1% of revenue or something like it. I declined and do it myself. I have been with the same firm since 1997. Finding a good accountant is not easy. I would stick with them for long haul if you are happy with their competence.
Topic Author
josephny
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Re: Accountant Fees

Post by josephny »

HomeStretch wrote: Tue Jan 28, 2025 8:05 am
josephny wrote: Tue Jan 28, 2025 5:42 am I use quotes because I'm not 100% clear what is included in bookkeeping. …
It seems like a large portion of your annual tax fees are for bookkeeping. So it makes sense to figure out what this covers. Do you have an engagement letter from your tax professional that specifies service and cost? What services do you receive above tax return preparation? Are you able to do this yourself and eliminate the bookkeeping fee?
There is no engagement letter.

I have asked exactly what constitutes bookkeeping but cannot get an answer.
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AerialWombat
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Re: Accountant Fees

Post by AerialWombat »

As both a real estate investor and a retired tax accountant that also used to advise other tax accountants on setting their fees (amongst other things), I’ll tell you that you are definitely paying at the high end for what you’re describing.

Especially those bookkeeping fees. $200 per month for an LLC that just owns one property is high. If you’re in a VHCOL area, maybe I could see it, but as a national comparison it’s up there.

What you might consider doing is finding an independent self-employed bookkeeper that charges you a flat rate for ALL your bookkeeping, then just provide your tax accountant with the resulting financial statements so they can prepare your tax returns.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
mbwalker98
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Re: Accountant Fees

Post by mbwalker98 »

josephny wrote: I have asked exactly what constitutes bookkeeping but cannot get an answer.
This alone would be reason to consider a different accountant.
KeithSmith34
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Re: Accountant Fees

Post by KeithSmith34 »

AerialWombat wrote: Tue Jan 28, 2025 10:15 am As both a real estate investor and a retired tax accountant that also used to advise other tax accountants on setting their fees (amongst other things), I’ll tell you that you are definitely paying at the high end for what you’re describing.

Especially those bookkeeping fees. $200 per month for an LLC that just owns one property is high. If you’re in a VHCOL area, maybe I could see it, but as a national comparison it’s up there.

What you might consider doing is finding an independent self-employed bookkeeper that charges you a flat rate for ALL your bookkeeping, then just provide your tax accountant with the resulting financial statements so they can prepare your tax returns.
To play the other side, he did say "property" which could imply multiple properties or he is self managing a large commercial space/retail shopping center with hundreds of transactions a month and then the fee looks extremely reasonable.

I think it all comes down to the specific transactions and details of each specific entity and what it all entails to give a complete answer.

I agreed it is a red flag you couldn't get a clear answer on what the bookkeeping entails, and I think it would be good to explore some other options/quotes from other bookkeepers/accountants in your area to see how they might compare.
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josephny
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Re: Accountant Fees

Post by josephny »

AerialWombat wrote: Tue Jan 28, 2025 10:15 am As both a real estate investor and a retired tax accountant that also used to advise other tax accountants on setting their fees (amongst other things), I’ll tell you that you are definitely paying at the high end for what you’re describing.

Especially those bookkeeping fees. $200 per month for an LLC that just owns one property is high. If you’re in a VHCOL area, maybe I could see it, but as a national comparison it’s up there.

What you might consider doing is finding an independent self-employed bookkeeper that charges you a flat rate for ALL your bookkeeping, then just provide your tax accountant with the resulting financial statements so they can prepare your tax returns.
My bookkeeping needs change every year (mostly grow), and I do have a flat fee per company.

Problem is there are different accounting work requirements for different companies, so that's why the fees vary.

The $200/month/LLC are for multifamily properties -- I don't know if that changes the assessment of $200 being high. I hope it does, because there really aren't many transactions.
123
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Re: Accountant Fees

Post by 123 »

If expenses of holding real estate expenses are becoming too high or an annoyance it might be time to liquidate and move to index funds. The expense ratio of Vanguard Total Stock Market Index ETF (VTI) is 0.03%

What is the expense ratio of your real estate holdings?
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AerialWombat
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Re: Accountant Fees

Post by AerialWombat »

josephny wrote: Tue Jan 28, 2025 10:40 am The $200/month/LLC are for multifamily properties -- I don't know if that changes the assessment of $200 being high. I hope it does, because there really aren't many transactions.
The number of transactions is the important part. If we're talking a 4-plex, then it's high. If we're talking one or two dozen units, then it's about right. More than a couple dozen units, then you're getting a bargain for $200/mo. That would be my rough, off the cuff assessment based on unit count.

Again, I'm looking at it from a national average fee perspective. I just noticed the NY in your username, so that shifts things upward a bit.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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josephny
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Re: Accountant Fees

Post by josephny »

123 wrote: Tue Jan 28, 2025 10:48 am If expenses of holding real estate expenses are becoming too high or an annoyance it might be time to liquidate and move to index funds. The expense ratio of Vanguard Total Stock Market Index ETF (VTI) is 0.03%

What is the expense ratio of your real estate holdings?
Hard for me to see how comparing the expense ratios of VTI and actively managed, closely held RE holdings is useful. Particularly when there are so many other moving parts to liquidating real estate.
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josephny
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Re: Accountant Fees

Post by josephny »

AerialWombat wrote: Tue Jan 28, 2025 11:13 am
josephny wrote: Tue Jan 28, 2025 10:40 am The $200/month/LLC are for multifamily properties -- I don't know if that changes the assessment of $200 being high. I hope it does, because there really aren't many transactions.
The number of transactions is the important part. If we're talking a 4-plex, then it's high. If we're talking one or two dozen units, then it's about right. More than a couple dozen units, then you're getting a bargain for $200/mo. That would be my rough, off the cuff assessment based on unit count.

Again, I'm looking at it from a national average fee perspective. I just noticed the NY in your username, so that shifts things upward a bit.
Yes, NY, where everything costs more than everywhere else.

Good to know that number of transactions is an important metric in fee setting.
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neurosphere
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Re: Accountant Fees

Post by neurosphere »

josephny wrote: Tue Jan 28, 2025 5:42 am For example, an LLC that owns property and in which I am the sole member (and therefore the taxes get filed on my 1040 schedule E) are charged annually $500 for the taxes and $2,400 for "bookkeeping." I use quotes because I'm not 100% clear what is included in bookkeeping.
Look at lines 3 through 19 on your schedule E. If you provide the final numbers for the preparer to transfer directly to those lines, you are the bookkeeper. If the accountant has to do math to figure out what goes where and the totals, they are doing bookkeeping. An exception would be line 18 (depreciation) which is an expense which is perhaps not necessarily "bookkeeping" in nature to calculate/advise on.

So who tracks, categorizes, organizes, and totals all the transactions for the rental properties? That's bookkeeping. :D
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
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Re: Accountant Fees

Post by josephny »

neurosphere wrote: Tue Jan 28, 2025 11:30 am
josephny wrote: Tue Jan 28, 2025 5:42 am For example, an LLC that owns property and in which I am the sole member (and therefore the taxes get filed on my 1040 schedule E) are charged annually $500 for the taxes and $2,400 for "bookkeeping." I use quotes because I'm not 100% clear what is included in bookkeeping.
Look at lines 3 through 19 on your schedule E. If you provide the final numbers for the preparer to transfer directly to those lines, you are the bookkeeper. If the accountant has to do math to figure out what goes where and the totals, they are doing bookkeeping. An exception would be line 18 (depreciation) which is an expense which is perhaps not necessarily "bookkeeping" in nature to calculate/advise on.

So who tracks, categorizes, organizes, and totals all the transactions for the rental properties? That's bookkeeping. :D
Sounds like that should work, but I don't know how to answer. I pay the bills and monitor the income. Those transactions are done through a bank. Then they are entered into Quickbooks. Quickbooks does the calculations.
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Re: Accountant Fees

Post by neurosphere »

josephny wrote: Tue Jan 28, 2025 11:44 am
neurosphere wrote: Tue Jan 28, 2025 11:30 am

Look at lines 3 through 19 on your schedule E. If you provide the final numbers for the preparer to transfer directly to those lines, you are the bookkeeper. If the accountant has to do math to figure out what goes where and the totals, they are doing bookkeeping. An exception would be line 18 (depreciation) which is an expense which is perhaps not necessarily "bookkeeping" in nature to calculate/advise on.

So who tracks, categorizes, organizes, and totals all the transactions for the rental properties? That's bookkeeping. :D
Sounds like that should work, but I don't know how to answer. I pay the bills and monitor the income. Those transactions are done through a bank. Then they are entered into Quickbooks. Quickbooks does the calculations.

WHO enters them into quickbooks? Who assigns each transaction to the appropriate income/expense category? Who creates the year-end output total for each expense category? That's the work. It's the compiling and correctly categorizing that's the hard part. After that, all quickbooks does is addition and subtraction within each category. If all you are doing is giving access to your QB to the accountant as a way of transmitting the final numbers...that's not really bookkeeping on their end. You've done the bookkeeping. But if they go through and review, move items, correct items, verify transactions...that's indeed bookkeeping services.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
ZWorkLess
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Re: Accountant Fees

Post by ZWorkLess »

Those rates sound batshit cray-cray to me. I’d shop for a new CPA.

Personally, we have a small biz with 20 employees in an S-CORP (gross income in the low 7 figures), an LLC that holds the small biz’s commercial RE including the “rental” for our small biz and another income stream from a residential rental on the same piece of land. Meanwhile, we had another LLC holding a rental in another state for 4 years for one of our college kids that got rent from 3 sources for that one. So 3 different corp returns.

And For many years, we also had 3 irrevocable trusts for each of our 3 kids - each trust got its own return. Plus, each kid had to have a return for themselves with both earned and unearned income. And a regular joint return for my spouse and I that includes W4 income, distributions, an RMD, etc, etc.

Multiple income streams from each corp, RMDs, typical investment account earnings, etc. Bought/sold/refi’ed RE probably on average one thing a year over last decade or two. Our CPA gets into our Quickbooks online for the main 2 corps and does all the tricky stuff for the general journal adjustments, etc. Answers questions anytime we call — a few times a year. For my rental LLC, I just handed him a spreadsheet with expenses and income and he did everything else. Once our kids (in their 20s)“launched”, he’s also done their returns as needed and even did a more complicated return for our eldest and her husband last year when they had some RE questions/complications/etc. He also meets with us in person in our own offices at least a couple times a year (officially quarterly, but usually we only bother twice a year.)

Our ENTIRE bundled annual CPA bill is under $4k/yr last I checked. You’re being taken to the cleaners, IMHO. That said, we live in a low income state with average cost of living. FWIW, I also personally know the CPA and know he’s doing JUST FINE (boglehead level fine) financially, so it’s not like this is a backwater quack who is working out of a shack and living on ramen.
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josephny
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Re: Accountant Fees

Post by josephny »

neurosphere wrote: Tue Jan 28, 2025 12:03 pm
josephny wrote: Tue Jan 28, 2025 11:44 am

Sounds like that should work, but I don't know how to answer. I pay the bills and monitor the income. Those transactions are done through a bank. Then they are entered into Quickbooks. Quickbooks does the calculations.

WHO enters them into quickbooks? Who assigns each transaction to the appropriate income/expense category? Who creates the year-end output total for each expense category? That's the work. It's the compiling and correctly categorizing that's the hard part. After that, all quickbooks does is addition and subtraction within each category. If all you are doing is giving access to your QB to the accountant as a way of transmitting the final numbers...that's not really bookkeeping on their end. You've done the bookkeeping. But if they go through and review, move items, correct items, verify transactions...that's indeed bookkeeping services.
I used to enter most of them, but then Quickbooks Desktop stopped allowing paying bills from within QB, so now the accountant downloads all the transactions into QB. Categories and account assignments are already set up.

Year end reports, as well as all financial reports, are created by QB.

He has to make a bunch of GL entries, for example breaking down payment to the bank according to principal, interest and RE taxes paid, and issue 1099s, and other year-end things.

I'm the one that corrects incorrect transaction assignments.
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Re: Accountant Fees

Post by neurosphere »

josephny wrote: Tue Jan 28, 2025 5:09 pm
I used to enter most of them, but then Quickbooks Desktop stopped allowing paying bills from within QB, so now the accountant downloads all the transactions into QB. Categories and account assignments are already set up.

Year end reports, as well as all financial reports, are created by QB.

He has to make a bunch of GL entries, for example breaking down payment to the bank according to principal, interest and RE taxes paid, and issue 1099s, and other year-end things.

I'm the one that corrects incorrect transaction assignments.
Thanks for that. I would say that all of those activities you listed are bookkeeping duties and would not be considered straight "tax preparation". It's a separate question as to whether you're getting good value.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
KeithSmith34
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Re: Accountant Fees

Post by KeithSmith34 »

ZWorkLess wrote: Tue Jan 28, 2025 4:30 pm Those rates sound batshit cray-cray to me. I’d shop for a new CPA.

Personally, we have a small biz with 20 employees in an S-CORP (gross income in the low 7 figures), an LLC that holds the small biz’s commercial RE including the “rental” for our small biz and another income stream from a residential rental on the same piece of land. Meanwhile, we had another LLC holding a rental in another state for 4 years for one of our college kids that got rent from 3 sources for that one. So 3 different corp returns.

And For many years, we also had 3 irrevocable trusts for each of our 3 kids - each trust got its own return. Plus, each kid had to have a return for themselves with both earned and unearned income. And a regular joint return for my spouse and I that includes W4 income, distributions, an RMD, etc, etc.

Multiple income streams from each corp, RMDs, typical investment account earnings, etc. Bought/sold/refi’ed RE probably on average one thing a year over last decade or two. Our CPA gets into our Quickbooks online for the main 2 corps and does all the tricky stuff for the general journal adjustments, etc. Answers questions anytime we call — a few times a year. For my rental LLC, I just handed him a spreadsheet with expenses and income and he did everything else. Once our kids (in their 20s)“launched”, he’s also done their returns as needed and even did a more complicated return for our eldest and her husband last year when they had some RE questions/complications/etc. He also meets with us in person in our own offices at least a couple times a year (officially quarterly, but usually we only bother twice a year.)

Our ENTIRE bundled annual CPA bill is under $4k/yr last I checked. You’re being taken to the cleaners, IMHO. That said, we live in a low income state with average cost of living. FWIW, I also personally know the CPA and know he’s doing JUST FINE (boglehead level fine) financially, so it’s not like this is a backwater quack who is working out of a shack and living on ramen.
It's important to note that you are in a low income state with average cost of living for the rates you are paying. You also seem to have had a relationship with this CPA for a number of years so you may be lucked into a lower starting rate years ago and a CPA who is nervous to increase existing client prices.

Keep in mind in many areas there is a CPA shortage which can increase prices for those now shopping for a new one.

I'm just trying to play the other side for others who may read this and think they can just find a great priced CPA like yours for this price in their specific market. It may prove to be a lot more difficult then it sounds.
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josephny
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Re: Accountant Fees

Post by josephny »

neurosphere wrote: Tue Jan 28, 2025 5:39 pm
josephny wrote: Tue Jan 28, 2025 5:09 pm
I used to enter most of them, but then Quickbooks Desktop stopped allowing paying bills from within QB, so now the accountant downloads all the transactions into QB. Categories and account assignments are already set up.

Year end reports, as well as all financial reports, are created by QB.

He has to make a bunch of GL entries, for example breaking down payment to the bank according to principal, interest and RE taxes paid, and issue 1099s, and other year-end things.

I'm the one that corrects incorrect transaction assignments.
Thanks for that. I would say that all of those activities you listed are bookkeeping duties and would not be considered straight "tax preparation". It's a separate question as to whether you're getting good value.
Thank you very much. I'm starting to understand that the accountant's acitivities (at least for the purposes of billing within the current structure) falls into only 2 categories: Bookkeeping and tax prep, and now I have a better understanding of which activities belong to which of those categories.

As far as the fees, I have been researching and talking to people and am blown away at the range of fees. No doubt, part of the reason for the wide range is that the underlying work is vastly different (other reasons, of course, is location, the experience (and market forces) of the provider.

Nonetheless, I am having a very difficult time figuring out if my fees are reasonable -- some data suggest I am vastly overpaying, and some data shows that I am underpaying.

I should add that there are no additional fees charged for questions/consultations/contacting-tax-authorities/discussions-with-retirement-plan-guy/etc.
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Raymond
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Re: Accountant Fees

Post by Raymond »

KeithSmith34 wrote: Wed Jan 29, 2025 7:26 am
ZWorkLess wrote: Tue Jan 28, 2025 4:30 pm Those rates sound batshit cray-cray to me. I’d shop for a new CPA...
It's important to note that you are in a low income state with average cost of living for the rates you are paying. You also seem to have had a relationship with this CPA for a number of years so you may be lucked into a lower starting rate years ago and a CPA who is nervous to increase existing client prices.

Keep in mind in many areas there is a CPA shortage which can increase prices for those now shopping for a new one.

I'm just trying to play the other side for others who may read this and think they can just find a great priced CPA like yours for this price in their specific market. It may prove to be a lot more difficult then it sounds.
I wonder if ZWorkLess's CPA is posting on an accounting forum...

"I have a client of many years who I'm significantly undercharging - how do I bring up the subject of either increasing my fees or discharging him from my practice, because I think I'm being taken to the cleaners?"
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neurosphere
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Re: Accountant Fees

Post by neurosphere »

josephny wrote: Wed Jan 29, 2025 7:31 am As far as the fees, I have been researching and talking to people and am blown away at the range of fees. No doubt, part of the reason for the wide range is that the underlying work is vastly different (other reasons, of course, is location, the experience (and market forces) of the provider.

Nonetheless, I am having a very difficult time figuring out if my fees are reasonable -- some data suggest I am vastly overpaying, and some data shows that I am underpaying.
Your experience is common. There is indeed a very wide range in rates. The following anecdote may help explain some of that...

I have clients with quite similar taxes whose fees vary by 3x. Because I'm VERY slow to raise rates on existing clients and because I'm busy, I essentially am not taking new clients. So if someone contacts me I tell them my new client rate is (something very high) because that what it needs to be in order for me to add additional work to my plate if I want to keep my long term clients' costs reasonable. Last year I got a last minute request for work that I really didn't want. So I quoted something outrageous. I thought I would be laughed at. They accepted. While preparing their 2023 the taxes I saw that I had charged one THIRD what their prior accountant had charged the prior year for an easier set of taxes. E.g. they had paid $7000 for one W2, two kids, one 1099-INT, one boring consolidated 1099, and a very simple Schedule C business where they did 100% of the bookkeeping. The only "hard" item was an exercise of stock options. AND there was an error in their taxes by that same preparer such that they overpaid their tax by $8000 that I pointed out to them and they got that accountant to amend for free and get a refund. They think I walk on water and wrote to me "this was the single best tax preparation experience we've ever had". But on my side, I look at their fee and continue to feel guilty because I know if they shop around they might pay half or less what I'm charging.

Summary: There is indeed a WIDE range of fees charged for similar work. So it can pay to shop around. Such as when your auto insurance goes up a lot you might decide to get new quotes and change insurers.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
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Re: Accountant Fees

Post by bsteiner »

neurosphere wrote: Wed Jan 29, 2025 9:25 am ... There is indeed a WIDE range of fees charged for similar work. ...
Like with lawyers, shortstops, quarterbacks, etc., the work may not be similar.
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Re: Accountant Fees

Post by neurosphere »

bsteiner wrote: Wed Jan 29, 2025 10:14 am
neurosphere wrote: Wed Jan 29, 2025 9:25 am ... There is indeed a WIDE range of fees charged for similar work. ...
Like with lawyers, shortstops, quarterbacks, etc., the work may not be similar.
Yes, agreed. Let me be more clear...there is a wide range of charged fees that one will find for a similar overall client complexity. One might receive very disparate quotes for the same requested job.

The type/quality of the services actually received for those fees is a separate issue. :D
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
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CAsage
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Re: Accountant Fees

Post by CAsage »

You might want to consider separating the "bookkeeping" from the CPA/tax prep, as those are different levels of skill. Especially if you are pretty much managing the cash yourself. I know someone who is a bookkeeper, some small business private clients, hourly rate much lower than CPA.
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Re: Accountant Fees

Post by mjg »

How much do you think you might save?

Do you want to risk going to someone new and have it not go well?
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josephny
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Re: Accountant Fees

Post by josephny »

Separating the bookkeeping or finding another CPA both have substantial risk. And, no, I'm not inclined to take the risk of things getting messed up, being disatisfied (in a different way than my current disatisfaction), or who knows what. And, I'm not inclined to take on the task of finding new providers.

As for the potential cost savings, who knows. What I know is the total I pay every year for tax prep and bookkeeping is undeniably a large chunk of money -- the open question is whether is a fair amount.
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Re: Accountant Fees

Post by HomeStretch »

josephny wrote: Wed Jan 29, 2025 7:31 pm … the open question is whether is a fair amount.
You will only know for sure by getting quotes from other tax firms.
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Re: Accountant Fees

Post by User98065 »

As a CPA this is an interesting thread.

Is the firm in question a sole practitioner? Generally speaking, a CPA doing bookkeeping is not the most economic solution. OTOH finding a bookkeeper is increasingly difficult.

The single easiest way to reduce tax prep fees is making sure the data provided to the accountant is well organized.
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josephny
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Re: Accountant Fees

Post by josephny »

HomeStretch wrote: Wed Jan 29, 2025 9:00 pm
josephny wrote: Wed Jan 29, 2025 7:31 pm … the open question is whether is a fair amount.
You will only know for sure by getting quotes from other tax firms.
In my experience, a quote is worth less than the paper that the email was sent via (;-)

The disaparity in understanding of the work between client and provider, except, possibly, in the case of a huge client, is such that a brief description of the work that will be provided at the quoted fee effectively creates poor communication, particularly in less-than-perfectly-trustworth providers.
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josephny
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Re: Accountant Fees

Post by josephny »

User98065 wrote: Wed Jan 29, 2025 9:31 pm As a CPA this is an interesting thread.

Is the firm in question a sole practitioner? Generally speaking, a CPA doing bookkeeping is not the most economic solution. OTOH finding a bookkeeper is increasingly difficult.

The single easiest way to reduce tax prep fees is making sure the data provided to the accountant is well organized.
It started as a sole CPA, with accounting-work support staff. Now I believe there are 3 CPA plus support.

It is the support staff (i.e., non-CPA) that does a lot of the work.

There is very little paper-based data provided to the CPA -- monthly mortgage loan statements, some year end financial institution tax reports. That is, nearly all the data is made available to him online, in as organized a fashion as the financial institution have chosen provide.
rustwood
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Re: Accountant Fees

Post by rustwood »

josephny wrote: Wed Jan 29, 2025 7:31 am I should add that there are no additional fees charged for questions/consultations/contacting-tax-authorities/discussions-with-retirement-plan-guy/etc.
Is there much of that sort of thing? Many professionals would reasonably bill at least a minimum for each question/contact unrelated to tax prep and routine bookkeeping communications. For me that, the bookkeeping you've described, being in NYC, and you seemingly being happy with the service you've received has me wondering if you might be getting fair value for your money. I also wonder how much your first year would cost with someone else as there might be a lot of time involved getting them up to speed with everything, plus getting you up to speed with their usual procedures and processes.

I don't think you've mentioned any details about the "retirement planning guy" - is someone in this firm also doing something along those lines for you without additional charges or are you just asking occasional, semi-general questions? Of course there might be AUM fees if they are managing your retirement accounts and they would cover any related questions/planning.
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josephny
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Re: Accountant Fees

Post by josephny »

rustwood wrote: Thu Jan 30, 2025 6:21 am
josephny wrote: Wed Jan 29, 2025 7:31 am I should add that there are no additional fees charged for questions/consultations/contacting-tax-authorities/discussions-with-retirement-plan-guy/etc.
Is there much of that sort of thing? Many professionals would reasonably bill at least a minimum for each question/contact unrelated to tax prep and routine bookkeeping communications. For me that, the bookkeeping you've described, being in NYC, and you seemingly being happy with the service you've received has me wondering if you might be getting fair value for your money. I also wonder how much your first year would cost with someone else as there might be a lot of time involved getting them up to speed with everything, plus getting you up to speed with their usual procedures and processes.

I don't think you've mentioned any details about the "retirement planning guy" - is someone in this firm also doing something along those lines for you without additional charges or are you just asking occasional, semi-general questions? Of course there might be AUM fees if they are managing your retirement accounts and they would cover any related questions/planning.
End of year there is a flurry of questions and discussions, but throughout the year very little, if any.

Changing providers will no doubt be costly, either in money or time or both.

Retirement planning guy was just a poor way of referring to the retirement plan guy who figures out the 401k/IRA/cash-balance/defined-benefits requirements, contributions, and filings necessary for the year. It is a completely separate firm in all ways.

Thanks to this forum, I have eliminated all AUM fees from my life (and the retirement funds are mostly in VTI).
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HueyLD
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Re: Accountant Fees

Post by HueyLD »

Nobody wants to work for free unless (s)he intends to do so for a charity.

And there is a good way to evaluate if accounting fees are reasonable. The OP can take over both bookkeeping and tax prep/planning her(him)self and see how it goes.
SubPar
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Re: Accountant Fees

Post by SubPar »

I laugh every time one of these posts go up. Always a huge range of responses. Lots of people seem to think quality professional service providers charging >$10/hour are committing highway robbery.

If you're giving your CPA sloppy (or incomplete) accounting records, expect to pay for them to clean things up. How much it should cost depends on the level of effort required to compile complete and accurate financials, and the general caliber of that firm. As a know-nothing early-twenty-something CPA, I billed out ~$100/hour for the firm I worked for. And that was quite some time ago. It would've been totally inappropriate to pay someone like me to do basic bookkeeping; there would most certainly be cheaper options.

$1,200 is close to the bare minimum a mid-size firm around me would charge for a 1065, FWIW. 100% anecdotal, but I've seen returns from cheaper sole-proprietor type firms and, uh, you often get what you pay for.
JoeNJ28
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Re: Accountant Fees

Post by JoeNJ28 »

SubPar wrote: Thu Jan 30, 2025 2:31 pm I laugh every time one of these posts go up. Always a huge range of responses. Lots of people seem to think quality professional service providers charging >$10/hour are committing highway robbery.

If you're giving your CPA sloppy (or incomplete) accounting records, expect to pay for them to clean things up. How much it should cost depends on the level of effort required to compile complete and accurate financials, and the general caliber of that firm. As a know-nothing early-twenty-something CPA, I billed out ~$100/hour for the firm I worked for. And that was quite some time ago. It would've been totally inappropriate to pay someone like me to do basic bookkeeping; there would most certainly be cheaper options.

$1,200 is close to the bare minimum a mid-size firm around me would charge for a 1065, FWIW. 100% anecdotal, but I've seen returns from cheaper sole-proprietor type firms and, uh, you often get what you pay for.
This is Bogleheads where no one should make a profit in any occupation except whatever occupation the OP is of said thread most times. These fees sound more then reasonable to me but I am a firm believer in you get what you pay for.
chassis
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Re: Accountant Fees

Post by chassis »

josephny wrote: Tue Jan 28, 2025 9:54 am
HomeStretch wrote: Tue Jan 28, 2025 8:05 am

It seems like a large portion of your annual tax fees are for bookkeeping. So it makes sense to figure out what this covers. Do you have an engagement letter from your tax professional that specifies service and cost? What services do you receive above tax return preparation? Are you able to do this yourself and eliminate the bookkeeping fee?
There is no engagement letter.

I have asked exactly what constitutes bookkeeping but cannot get an answer.
Fire him/her and move on.
Target2019
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Re: Accountant Fees

Post by Target2019 »

Accounting and bookkeeping are separate jobs. If you add up all of your bookkeeping charges I believe those are paying some fraction of the yearly cost for his bookkeeper. He's not charging you an hourly fee for that, so that the black box of his pricing regimen remains somewhat hidden.

With his lack of answers, he's telling you he's confident you can't do better.
Kinda like an 80% passive index believer and 20% free spirit.
Atretes1
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Re: Accountant Fees

Post by Atretes1 »

I pay my CPA $450 for 7 doors and my personal taxes. No LLC's. I do bookkeeping.
ZWorkLess
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Re: Accountant Fees

Post by ZWorkLess »

Raymond wrote: Wed Jan 29, 2025 7:43 am
KeithSmith34 wrote: Wed Jan 29, 2025 7:26 am
It's important to note that you are in a low income state with average cost of living for the rates you are paying. You also seem to have had a relationship with this CPA for a number of years so you may be lucked into a lower starting rate years ago and a CPA who is nervous to increase existing client prices.

Keep in mind in many areas there is a CPA shortage which can increase prices for those now shopping for a new one.

I'm just trying to play the other side for others who may read this and think they can just find a great priced CPA like yours for this price in their specific market. It may prove to be a lot more difficult then it sounds.
I wonder if ZWorkLess's CPA is posting on an accounting forum...

"I have a client of many years who I'm significantly undercharging - how do I bring up the subject of either increasing my fees or discharging him from my practice, because I think I'm being taken to the cleaners?"
:D :D Maybe? Please tell the CPA on that forum to leave his fees alone for his moocher client. :) :D

We’re not personal buddies with our CPA, but we are friendly longtime acquaintances, and indeed, we were one of his very first clients — bc we were friendly acquaintances & we wanted to do him a solid. Maybe he’s returning the favor, and I’m OK with that. We have done him whatever favors we comfortably could over the years, bc that’s what nice people do - they help others and they treat them fairly.

I do know him well enough to know he’s doing JUST FINE financially. Over the last 5-8 years, he moved from a small rental office space to a bigger one he bought and renovated, added some residential rentals to his personal investment portfolio, added a second location last year, has “moved up” in his personal housing/car/etc regularly, has added more staff and CPAs regularly, too.

Again, our area is marginally above the average cost of living in the US. And he started from scratch about a decade ago with very little start up capital. Unless we’re just the lucky moochers in a very big way, I stick to my argument that the OP’s fees were ridiculous. I advised shopping.

And, FWIW, the line of biz we are in has huge variation in fees, too. And a similar position where the client really is not able to comprehend what work is needed, how important it is, how hard it is, reasonableness of fees, etc and must rely on the ethics of the service provider to not exploit their clients’ trust. I know of plenty of practices in our field that charge the max the market can bear. I know mine that charges as much as we fairly can to support our staff and ourselves in a reasonable fashion, enough to give back to our community, and enough left over to fund our own retirement.

I don’t personally support the practice of always making maximal profit. One of the joys of being a family owned biz is that we don’t answer to stock holders, just ourselves. I’ve also experienced that being an ethical employer and ethical service provider isn’t incompatible with making a good living.

Not long ago, I told a professional service provider (to our biz) that their fees were not in our realm and she responded that she was new to the area and testing “what the market could bear.” I wished her well and scratched her off our list, no matter her future fees and no matter how desperate we were (and we were) to add another provider for her line of services. Her ethics aren’t compatible with mine, so I’m not engaging in a relationship unless I am critically desperate, and then it’d be a purely transactional relationship holding my nose, not an ongoing collaborative one. (And, yah, it comes to that sometimes, but it’s not fun.

And, fwiw, I agree that location and local market forces are important to keep in mind. Indeed, that’s why I disclosed in my original comment exactly what you noted I should disclose in your quote/response. I still advise *shopping* for better options.
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