The CPA’s e-mail was blunt.
“Due to increasingly limited availability of accounting professionals and an exponentially growing number of client contacts we face ourselves needing to service, we have concluded that it would be in the best interest of both parties to discontinue our professional relationship,” read the communiqué sent to the author’s acquaintance, who had paid the Colorado accounting boutique $1,300 last year to prepare her return.
Such situations have become common and remedying them is no small matter. “It isn’t easy to find somebody who will take on individual tax preparation clients,” said Bruce Primeau, president of Summit Wealth Advocates LLC, in Prior Lake, Minn.
Primeau has been trying to locate new preparers for his accountant-jilted clients, “but three of the four CPAs I’ve been sending clients to told me they no longer want the business, and the fourth one said, ‘I don’t really want the business unless your clients pay me an exorbitant rate.’ I have spoken to several local CPA firms who are overwhelmed and understaffed. They’ve had to give considerable salary increases in the last few years to keep staff and they’ve refocused those folks on projects with higher profitability, like audits and corporate tax returns,” Primeau said.
“Some CPA firms offer financial services and if you’re not a financial services client, they don’t want to do your tax return,” added Glenn Schwier, a partner at Nisivoccia LLP, an accounting firm in Mt. Arlington, N.J.
It's a problem that's expected to continue, as the accounting industry faces what has been described as a serious shortage of young professionals to replace those leaving the field.
Conditions vary across geographic markets, of course. Still, for clients seeking a new tax preparer, or who need one for the first time, advisors can add value by framing the issue.
Help Wanted
Is a paid preparer really necessary?
Clients with the simplest returns could benefit from the free assistance doled by the AARP Foundation’s Tax-Aide Program, which could be preferable to the client handling their taxes themselves, said Jeremy Keil at Keil Financial Partners in New Berlin, Wis. “I see a lot of mistakes when you self-prepare. AARP Tax-Aide looks at hundreds of returns and they are aware of things that often get missed.”
For clients with slightly more involved tax returns, recommending one of the national chains should not be off the table. The cost could be reasonable.
When a taxpayer’s situation demands greater expertise, Primeau contacts accountants his clients are happy with. He asks prospective preparers about their practice’s focus, whether they’re accepting new individual-tax clients, and perhaps most importantly, their typical fee. “If they tell me their average return is $1,000, they may not be a good fit for a client with a return that should probably be in the $400 to $600 range,” Primeau said.
Set clients’ expectations for working with a new preparer.
“The accountant may recommend an extension in order to have extra time to understand the client’s tax situation. That should be beneficial,” said Matt Saneholtz, president of Tobias Financial Advisors in Plantation, Fla. Explain to clients who are unaccustomed to filing an extension that doing so delays filing the return for six months, but full payment of 2023’s tax liability is due April 15 (April 17 for Massachusetts taxpayers and Mainers) to avoid penalties and interest.
“Tell clients that just like any other service, be prepared to do some shopping to evaluate your alternatives prior to making a decision. Because we’re now at the beginning of the filing season, jump on getting quotes from tax services right away,” Saneholtz said.
Advisors sit well-positioned to inform clients whether the amount they’ve been paying, or would pay a new preparer, is reasonable. When Keil sees a fee that’s too high, “I give recommendations for other tax preparers.”
No matter where the client turns for tax prep, review the return post-preparation. Is the taxable income close to what you expected it to be?
If the client converted a traditional individual retirement account to a Roth, check Form 8606, Part II, to verify accurate reporting. The Form 1099-R the client received from the IRA custodian won’t indicate that the distribution from the traditional account was converted. Therefore, if the accountant doesn’t know about the Roth conversion, it may not be properly reported on the client’s tax return.
Make sure your studious planning doesn’t go for naught.