How much to charge for hourly tax work? Update

[jwright]

I wrote out a whole post with background but deleted it because I really just want to ask one question.



I have an offer to work 20 hours a week from a fellow CPA doing tax prep on high end complex returns during tax season. He's a sole practitioner that just needs some extra help. I'm technically retired and don't need the money. He asked me to tell him "how much I would like to be paid". I would be a W-2 employee but no benefits.



I assume he would bill my time somewhere between $150-$200/hour to his clients.



I'm leaning toward $65/hour but I wonder if $50/hour would be more palatable.



Any advice?

[mccallister84]

I have no idea how much CPAs get paid but if your gut says $65 ask for $65. He can come back and say no.

ETA: honestly I’d probably ask for $70 to leave room for negotiation.

[Deleted]

I would ask him his bill rates and then charge 50% of that. That way there is room for negotiation. Even if you don't need the money, you should be fairly compensated.

[AdaraMarie]

I think if you want $65 ask for that. With no benefits or office costs for you and approximately a 3x multiplier he would still be making money.
Are you afraid he would pull the offer rather than negotiate if he thinks it's too high?

[jwright]

Nov 18, 2021 11:03:47 GMT -5 AdaraMarie said:

I think if you want $65 ask for that. With no benefits or office costs for you and approximately a 3x multiplier he would still be making money.
Are you afraid he would pull the offer rather than negotiate if he thinks it's too high?

No, he'd counter if it's too high, I just don't want to look out of touch for a casual part time gig. 

[jwright]

Nov 18, 2021 11:01:31 GMT -5 @lemonlover said:

I would ask him his bill rates and then charge 50% of that. That way there is room for negotiation. Even if you don't need the money, you should be fairly compensated.

It's mostly flat fee and/or value billing so I don't know if he'd give me a true charge rate.  I said $150-$200 because that's the typical staff rate in our area.  

[niq]

jwright Can I ask what counts as a "high end complex return"? Is that, like, "I have taxable investments in a brokerage account and pay household employees as W2 employees"? Donald Trump's taxes? Somewhere in between?

[jwright]

Nov 18, 2021 11:38:28 GMT -5 niq said:

jwright Can I ask what counts as a "high end complex return"? Is that, like, "I have taxable investments in a brokerage account and pay household employees as W2 employees"? Donald Trump's taxes? Somewhere in between?

Sure! A lot of the prep would be business returns, but I'll answer for individuals.  Your example, I'd say is a 3 or 4 out of 10. 

  
Most of these individuals will have at least a few of the following:

- Multiple brokerage accounts, not just interest, dividends and capital gains, but foreign investments, foreign tax credits, tax exempt income (which may include state differences or AMT differences), straddles or contracts (Sec 1256), margin interest.  
- My lease favorite investment to report is publicly traded partnerships or master limited partnerships. Most of these are the oil and gas industry and combine K-1 inputs with brokerage 1099 inputs.
- Multiple passthrough entities - K-1s from businesses in which they are a member or shareholder.  Are the passive or active? Do they have basis sufficient to take losses? Can you use losses from prior years?  Can you combine activities to take advantage of losses? QBI deduction?  Do you want to aggregate QBI activities? 
- Business owners - if they don't have a separate business return, we are preparing a Schedule C within the individual tax return.  That involves reporting revenue (when is it recognized?) and expenses (what is deductible and when?), depreciation issues, for small owners they likely have a vehicle with mix of business/personal.  You have QBI considerations on the Sch C.  Hopefully, they've kept reasonably good books throughout the year (this particular CPA tells me he doesn't take on high maintenance clients that don't use a bookkeeper).
- Rental owners - same issues as business, but you have passive/active considerations, grouping possibilities, depreciation
- Tax Credits - either from the individual or a flowthorugh entity, last year the new Employee Retention Credit was a huge one
- Large Transaction - sale of business property, sale or transfer of partnership interest, sale of rental property, 1031 exchange, opportunity zone investment
- Multi-state activity - businesses with activity in mulitple states, real estate in different states, split time during the year.  A lot of the business K-1s will have numerous state attachments. Each state has different methodology on conforming to federal tax law, some might be the same, but many have different treatment than federal so the state return is a whole new preparation. 

[sometimesrunner]

I would jump at the opportunity to hire a skilled CPA who only wanted to work part time. $65 is a bargain.

[dr.girlfriend]

I was going to ask -- is there any professional network or people in the area you could call on to get a sense of market rate? My husband found out he was WAY undercharging when he first went freelance.  He got on a call with a bunch of people he knew through conferences, etc., to have a frank discussion about rates and pretty much doubled his hourly asking price.

[dcn]

I’m a cpa, my first reaction was and I’d ask for $100 an hour for 1099 work. Since you’d be w-2 I’d probably ask for $75. I think $50 is too low.

[jwright]

Thanks everyone!

I was working off of 1/3 of billing rate model, but without overhead I think I can ask for closer to 1/2 of billing rate. I am getting a few other perks, like the ability to prepare all of my personal returns for free (which is about 12 at this point) and the use of his admin for that. I normally charge $175/hour (or try to get to a good flat rate) when I prepare returns under my own PTIN and LLC as preparer (which is low), but that is such a pain in the butt that I'd be glad to work as a W-2.

I'm not positive I will accept (I'd rather work 10 hours a week because you know there's always going to be an hours expectation creep).

[ellipses84]

I do a different type of professional service and consulting. I was going to say $70 minimum. That’s my minimum for w-2 and if I’m consulting, $100 is the minimum, depending on perks / overhead / guaranteed hours / PITA factor. Usually it’s more and I’d lean closer to 1/2 of billing rate rather than 1/3rd. 1/3rd is a good number for a firm to use for full time employees they are paying lots of overhead for, including taxes, medical insurance, paid time off, office space, electric bill, equipment, etc.

[formerlyak]

If it helps, I do nonprofit consulting for small, local nonprofits as a side gig and charge anywhere between $60 and $75 per hour depending on the size of the nonprofit. I’m a 1099 contractor. In your case, I’d ask for at least $75/hour.

[jwright]

Well, I wrote out a long thoughtful email explaining why I wanted to work only 15 hours per week and why I deserved $75/hr and stressed out about it.

Then he replied in five minutes saying he agreed to all my terms. Ha! Should have asked for more.

Thanks for the advice.

[sometimesrunner]

I told you!!! LOL I'm so glad it worked out.

[ellipses84]

Congrats! I swear we are all making more $$ at work due to this board. Even though I know how to negotiate, sometimes the little push from posters here has helped give me courage.