As the new tax season rolls by, you must start your tax preparation services how much you must charge your incoming clients. However, pricing your services can be tricky, especially if you have yet to gain experience.
When you conduct market research, you’ll see that the cost of preparing any tax return can vary among professionals, where several tax preparers charge hourly. Others operate from a conventional schedule of charges. On the other hand, some professionals may only charge depending on the traffic.
We put together seven crucial steps to help you price tax preparation.
1. Understand the IRS Laws
The Internal Revenue Service, or the IRS, is a U.S. government agency operating under the Department of the Treasury. This agency is responsible for collecting taxes and enforcing tax laws.
The first step to help you price your tax preparation services is understanding and complying with IRS laws to avoid legal trouble. It’s also best to stay updated with the latest changes to ensure proper tax returns.
On the other hand, basing your services on your client’s tax refund amount is an illegal and poor way to operate a business.
2. Understand the National Average
Like other law-abiding professionals, you must also know the national average pricing to understand your average price range. You can get a baseline of your pricing whenever tax professional associations, such as the National Association of Tax Professionals, conduct yearly surveys.
3. Analyze Your Competition
Successful tax preparers must understand their competition to stay ahead like other businesses. It also helps you see what your competitors are doing right and wrong so you can adjust your strategies accordingly. Likewise, carefully analyzing your competitors enables you to create competitive price ranges.
You can analyze your competitors’ strategies by requesting quotes or asking your loved ones to do this.
4. Decide How Much You’ll Charge
After understanding the relevant laws and analyzing your competition, you must now decide how much you’ll charge your clients. You’d want your clients to compensate you for your time and expertise while keeping reasonable prices.
Factors such as the national average pricing, price elasticity, and how much your competition charges can help you decide how much to charge. You must also consider your knowledge, experience, and overhead costs.
5. Consider Your Knowledge and Experience
Besides the external factors, your knowledge and experience will also determine how much you’ll charge for your tax preparation services.
If you’re a newbie and want to gain market share, we recommend charging lower prices to attract clients. However, it’s also essential not to undercut yourself too much because potential clients may look at significantly lower fees.
You can charge more for your services if you’ve been preparing taxes for years and have established adequate knowledge and credentials.
6. Consider Your Overhead Costs
Overhead costs are your business’s ongoing expenses not directly associated with developing a product or service. These expenses are crucial for budgeting and determining how much you’ll charge your products or services to generate profit.
Before determining your fees, you must consider office space, employees, and tax software.
7. Have an Elastic Price
It may be worth considering your price elasticity before charging higher or lower fees. For instance, if your employees work from home but eventually you want them to work in a physical office, your payments must be enough to cover your future expenses.
Setting a Fair Price
Pricing your tax preparation services can be tricky for most tax preparers, especially for newbies. By complying with relevant laws and carefully considering the surrounding factors, you can set reasonable prices that match your experience and knowledge.
Keystone Tax Solutions offers professional tax preparation software to help businesses efficiently manage their files. Get your free demo today!
