1120S Pricing Help

[Crank]

After 30+ years of doing taxes Im a CPA I have completed my first 1120s. Ive strictly only worked on 1040s up until now and I have no idea what to charge for an 1120s and the corresponding State return.

Background info. Business is a year round ice cream shop with 2 sharholders. They have 2 locations and revenue of about $175,000. Assets are about $200,000.

One of the shareholders has been a long time client of mine but went to a different CPA last year to file the inital 1120S when I declined. The shareholders did not have good experience with this CPA and convinced me to take the return this year. Cant say I disagree as the CPA did a sloppy job with almost no interaction with the clients and didnt file until October 2011 with some penatlies and interest. He also made significant mistakes on their 1040s missing $10,000 in capital loss carryforwards, among others, requiring amendments.

This other CPA charged them $1500 for the 1120s and the two shareholders 1040's including States and locals.

Im good with pricing the 1040s but Im at a loss for pricing the 1120s that would be fair to both me and the client.

I would appreciate any comments on what others charge or how to arrive at reasonable price.

Thank you!

[ILLMAS]

If they were not having a problem paying $1500, charge them the same or just a little less $1450 or $1400. Clients love having to pay less. Early this year a person came with a 1040 with 9 properties and asked me how much do you charge because HR charged him a lot the prior year, I told him my fees start at $1000, he said HR charged him $800 and his previous preparer would charge him $200, I said great return to the person that charged you $200, but he died.

[rfassett]

I know you tried to relay some of the info but the real issue is how much work was involved. Some Corps (and I do about 90 - 80 of which are S's) are literally just drop thier numbers onto the return (and of course review for pertinent elections et al,) and I will charge $750 to $1,000 (my state requires two separate returns - so for each S-Corp, I do three returns). Others I have to do all of the accounting before I can even think about putting together a return and those run to as much as $5,000. If the $1,500 included the two shareholder returns, back out what you would charge for the 1040's and you will have an idea what the other guy charged for the corp. That might be what is reasonable in your area. I would love to get more for the corporate returns, but living in Podunk USA does not permit it. By the way, I did one just yesterday, took me an hour and a half and I charged the $750 - and the client is happy to pay it. It is not what you do when it comes to corp returns, it is what you know. Charge accordingly.

[GeneInAlabama]

I try to figure what I need on an hourly basis and then I try to estimate how much time I will have to spend on a particular return and charge accordingly. I base all my work on the same hourly rate of $100.00 per hour. I tried once to charge strictly on an hourly rate but it didn't work out. Too many interruptions.

[Lion EA]

You are comfortable with your 1040 pricing. You can compute your hourly fee. You know how many hours you spent on the 1120S. Work out your fee for the 1120S based on your hours. Don't be alarmed if it's more than their CPA charged. After all, they weren't happy with him. Sometimes I try to come in a little less, but your clients weren't happy; I would charge a little more. Probably a lot more for two stores, good revenues, lots of assets, etc. Don't cheat yourself.

[imjulier]

I charge a flat hourly rate of $75/hour so I don't have to worry if I am under/over-charging. For small s-corps I charge $520 for payroll throughout the year. For the return, it generally works out to be about $400-600 which includes adjustments to QB and tax return prep. If no QB, its the same because then I have to go balance whatever they have provided.

[Crank]

Thanks for the replies.

They were not very happy with the $1500 the other guy charged. The return wasnt all that difficult as they provided most of the numbers on a spread sheet. There were some new assets this year and also some from the initial year (last year). I put in about 4 hours on it and some of that was researching and learning about 1120S filings. The state also requires two filings. No payroll involved.

I was originally landing at about $400 for the 1120s with each 1040 at about $300 for a total of $1000 which is 33% less than the other CPA.

I didnt realize that people charged so much for 1120s prep. I dont want to charge them entirely for my having to learn about 1120s filing but some of it should be allocated to them.

This is a difficult decision as the client is a personal friend.

[Randall]

You may not want to charge the $1500. But don't go too low. Even the easy ones can take some time. There's the state return and the local returns. If their two locations are in different local taxing districts (common in my area), then there's the allocation of the two locals. A lot of these local returns are not in ATX. These can be time consuming. Don't make my mistake and go too low. Tell them you turned them down the first year and they chose to operate as an S Corp so this is all part of it.

Then there's keeping track of basis, reasonable W2 compensation vs. shareholder distributions. All these things add up in a lot of time that's really not seen by the client.

[JohnH]

I think the $1,500 for the S-corp and both shareholders returns was too low. One of my biggest mistakes many years ago was charging too little for S-corp returns. I've long since corrected that error and my minimum is now $1.200 plus $100 per shareholder. That's just for preparation of the return and associated schedules - if there's write-up work involved, 941's, etc, then that's all extra. Preparation of personal returns is also extra - you can have two shareholders who have vastly different personal tax situations and it's best no to confuse that with the corporation. It's a separate entity - the only commonality is the pass-through of corporate income and other items. (I suppose a case could even be made for unequal distributions if the shareholders returns are vastly different but their fees are included in the S-corp fee, but that's probably a stretch. However, I'd hate to see an auditor holding up my invoice as evidence that the election had been terminated). There are a few situations where I may discount it a bit if the work is really, really simple, but even the heaviest discount won't drop below $900 base price for the 1120S, and that's a rarity.

S-corp returns are deceptive in their simplicity. Sometimes it really is just a matter of dropping a few numbers onto the appropriate lines intially, but as Randall just pointed out, there are many other things to consider prior to, during, and after the preparation of the return. Not only do you have to consider these things, but you have to explain them to the client (over and over in most cases), and you have to track several of them as long as the corp exists.

So I'm saying you should stay on the high side. If you want to discount down from the base fee for special reasons, then do that on the backside - after all the work is done. But keep that base fee in their faces so they won't be shocked if next year or the year after you have to say "no discount this year, and here is why...."

This is your first year with them after initially refusing - what you do at this point will be the base line for everything you charge from here on out. Be sure it's in your favor.