In looking back at
my 40+ years in the business, if I were to start all over again I think I would
limit my practice to 1040s. Period. No 1065s.
No 1120s. No 1041s. Just 1040s.
I would probably have
to, as I have done, also provide year-round bookkeeping and accounting services
for additional income. But I would not
accept any clients that collected and remitted state and local sales tax, or
any other kind of tax, and I would limit my involvement to keeping the books
and preparing payroll and payroll tax returns and reports, but I would not
prepare the corporate income tax returns.
If possible I
think I would also try to avoid bookkeeping, accounting, and payroll.
Why? To limit my need to keep up-to-date to 1040
issues only, and to limit my exposure to agita and liability for FUs.
My ideal practice –
for me personally – would be preparing 1040s from February to April, and writing,
relaxing, and “wandering” for the rest of the year. Hopefully the writing would provide
additional income so there would be no need to take up bookkeeping, accounting,
and payroll. Other tax preparers could
substitute teaching CPE for writing, or do both. As for me, I am not a confident or experienced public speaker - so I would limit my activity to writing, which I enjoy and am good at.
Actually I enjoy
bookkeeping and payroll, and always have.
But I do acknowledge the potential for agita and liability.
Today I do not
accept any more new 1040 clients, and do not accept any non-1040 clients. But I do have some existing business clients
that I really cannot “drop” due to long-time, and often personal,
relationships. So I still do prepare
quarterly sales tax returns and 1120s. I
have been able to lose preparation of multiple 1120s for a business client due
to a merger. I will continue to do the
year-round bookkeeping and payroll for a couple of more years, but have handed
off the 1120 preparation.
When I say limit
my practice to 1040s I mean just that.
One of the problems of business clients is that they come to me to
prepare various non-tax related government forms, reports, and questionnaires –
like business census forms and municipal rental real estate reports. These forms all usually have a financial
aspect – and I do not object to providing specific financial information
available to me – but they also involve other information about which I have no
personal knowledge and no interest to learn about.
This happens with
1040 clients, too. I am often given
census forms, student loan applications, property tax reimbursement
applications, loan applications, utility discount applications, and the list
goes on. However I specifically state to
clients in writing that I do not, and will not, prepare these forms, reports
and applications. The most I can do, I
tell clients, is provide specific financial information from the completed tax
return needed to answer specific questions.
Here is what I tell my clients (in writing) -
"I prepare income tax
returns. I do not prepare mortgage or loan applications, census forms, college
financial aid applications, prescription drug or utility discount program
applications, Property Tax Reimbursement applications, or any other such forms. Please do not ask me to fill out these forms!
I have no special experience, knowledge or expertise with any of
these forms - I do not know any more about them than you do. The most I can do is provide you with any
needed income information from your tax return."
All these non-tax
forms, for both business and individual clients, are truly a PITA. I have no knowledge or expertise in preparing
these forms and applications. And I do
not want any knowledge or expertise in preparing these forms and
applications. In the past when I have given
in and filled out such forms I have merely read the instructions and followed
them as best I could – the same as the client could do himself/herself. But most of all – I just do not want to be
bothered with these forms.
There are
preparers out there who do solicit such forms, especially college financial aid
applications, as a post-tax season sideline source of income, and do acquire
knowledge and expertise in these forms.
That is fine. It is just not for
me.
So preparers who
are just starting out in “the business” – maybe you want to think about
limiting your business to 1040 preparation.
What do my fellow
experienced tax pros think?
PS – thanks for
allowing me to “ramble”.
RDF
This is gorgeous!
ReplyDeleteI operate like you suggest by focusing on 1040s -- although I'll also tackle some business returns. I don't involve myself in non-tax financial forms. I'm a little different than young people just starting out because I'm comfortable with the income from a solo operation while also providing writing services, tax training, and practice consultation.
ReplyDeleteHowever, someone with a tax business can only grow in prosperity by adding services and staff. Maybe bookkeeping services are a good fit (not payroll, too low margin) but it depends upon the competency of the individual and the availability of capable labor. Certainly preparation of business returns is a suitable opportunity.
In fact, the competition for 1040s alone is fierce. Many individuals are qualified candidates for do-it-yourself on TurboTax (although not as many as think they are) or the H&R Block system for getting a low price and having the tax prep fee easily deducted from the refund on an e-filed return (although people with complex tax situations need preparers with more experience). This is a marketing issue, but it does entail consideration of the tax entrepreneur's time allocation in growing a business. I find young practitioners benefit more by adding business tax return preparation than battling for misinformed do-it-yourself 1040 clients.