- quote -

huh? how does fica only amount to 2%? and if they are
employees (not contractors) what about all the other payroll
taxes and withholdings?

peter

=============================================
Moderator Comment: He means ~2% of the $4,000
=============================================

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- quote -

I keep it real simple. My three preparers bill from a basic
fee schedule with some discretion as to the final charge.

They turn in their billings once a week. If they turn in
$4000, they immediately get a check for $1120 (28%). My
FICA cost = about 2%. My total costs = 30%.

No fringe benefits. No unemployment compensation/health
ins/CPE. Only a year-end party.

All get laid off April 16. My top preparer made over 16K.
Not bad for a seasonal job.

Jim Hayden EA - South Haven (in the summer) Mich

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dbmonkey[at]elvis.com (Dave Buck) wrote:

- quote -

I'm not sure "generous enough" is the phrase I'd use--unless
you were being sarcastic.

--
D.F. Manno
dommanno[at]netscape.net
"They that can give up essential liberty to obtain a little
temporary safety deserve neither liberty nor safety."
(Benjamin Franklin)

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- quote -

Sorry about this, but I just can't help but dig into this
some more - If you don't mind, I'd like to get some
additional information and clarification on how you pay.

How do you determine their billings? Do you use an hourly
fee or a fee schedule? Do your preparers have any input
into what the fees are and how the fee structure is
determined?

What about write ups and write downs on accounts? Do they
participate in these?

Do you provide any other items like fringe benefits (health
insurance, vacation, sick leave, etc.) or CPEs? If so, is
this considered part of the 30% or is the 30% straight
dollars your preparers receive?

How do you factor in your review time when calculating the
billings for their percentage.

The reason I bring this is up is that many years ago in one
of my very first public accounting jobs I was offered either
a straight hourly rate or a percentage of billings. I
wanted the percentage of billings because I knew that I was
efficient - read that FAST with a very, very low incident of
errors. As I discussed the PoB method with my prospective
employer a few things became very apparent to me:

1 - on an hourly schedule I got penalized because I was fast
and efficient. The more returns I cranked out the less I
made;

2 - however, on a fee schedule basis there was no
compensation for fees that were considered but turned out to
not be needed - like back in the days when the AMT didn't
spank everyone we know and when we used the Schedule B to
list all the interest and dividends even though it wasn't
required for the return and if I got hung up on an issue
that took longer than normal there was nothing extra in it
for me;

3 - I was expected to eat any write downs that had to happen
but under no circumstances would I be allowed to participate
in any write up of the bills; NOTE - This was a BIG issue
for me! I either wanted to participate in both or neither.

4 - only MY time/fee would be counted in the calculation for
my earnings. So in theory, a partner could write down my
time if he thought I took too long, then write up the bill
because the client would accept the fee and I was left on
the short end; ANOTHER BIG ISSUE!

5 - on the PoB schedule the Percentage was to be considered
my total compensation package and out of that came my health
insurance, vacation time, sick time, and an allotment for
CPEs. I would get a weekly "draw" against my earnings and
there would be a holdback for insurance, vacation, sick
leave and CPEs. At the end of the year my "account" would
be reconciled and I was supposed to either get a check for
any accrued monies that I had not used or write them a check
for any shortage.

6 - on the hourly schedule I would get a check each week
based on my timesheet (which we had to keep anyway either
for internal use or for billing purposes) and the company
would cover all of my extras - vacation, sick leave, CPEs,
etc.

In fairness to the that group I don't think they had any
intention of being unfair at all, they didn't come off that
way to me. There were people on staff who worked under both
methods (some were hourly and some were on PoB) and one that
I can remember who actually used both at the same time (as I
recall he was hourly for business entity work - 1120, 1120S,
1065 - and PoB for 1040 work) and a few who changed their
method of compensation - you could do that once on your
anniversary date.

FWIW - I never did go to work for these guys. I actually
got a better hourly offer from a competitor! This was more
than 20 years ago so I'm curious if it is being handled
differently now.

Gene E. Utterback, EA

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lostintheether[at]hotmail.com (Brian) wrote:
- quote -

I wish! Anyway, the amount of money I make is relevant:

A = Amount of money I can make at the firm asking me to
sign papers.
B = Expected cost of hiring a lawyer to read papers.
C = Expected cost (foregone future employment, etc.) of
signing the papers.

Ordering these from largest to smallest, my decisions
would be:

A> B> C or B> A> C: Sign the papers and take the job.
A> C> B or C> A> B: See a lawyer first, and sign if he/she approves.
B> C> A or C> B> A: Forget the job and the lawyer. Go home.

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- quote -

Their billings.

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dbmonkey[at]elvis.com (Dave Buck) wrote:
- quote -

But the $2,000 has nothing to do with this. The contract
seeks to hamper your ability to pursue employment, which may
have a value of many hundreds of thousands of dollars.
Problem with employment related contracts is that the local
laws may change what they seem to mean even in plain
English. At the very least they may undercut certain
provisions.

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jhaydenea[at]aol.com (JHaydenEA) wrote:

- quote -

Just curious, what do you mean by generate? Business that
they personally bring in the door, or their billing?

--
To reply to me directly, remove the XXX characters from my
email address.

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Dick Adams wrote:

- quote -

Agreed.

This was California, so the non-compete was illegal, even
then -- but anti-raiding provisions, such as the one you
mention, would probably still hold up.

But, I think it was 5 years for someone you met at Block
(THAT would probably hold up), 2-4 years for someone whose
return was prepared by you at Block [including your own
return (prepared for free at Block) or those of close
relatives prepared at a discoun], and 1-2 years for ANY
returns prepared within a 50 mile radius of where you
worked. (They noted that "where you worked" might mean
anywhere that the particular office you worked at had a
satellite branch, so it could be MORE than 50 miles.)

In decreasing order of probable validity.

Oh, and there was an anti-moonlighting clause, including
preparing returns without charge.

But I'm not a lawyer, and I DIDN'T sign the agreement or
keep a copy, so my recollection could be wrong.

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Dick Adams <rdadams[at]smart.net> wrote:

- quote -

This seems awfully impractical. I only made $2,000 from the
job. How much would I have to pay an attorney to read all
the stuff they made me sign? I did read it myself. I'm not a
lawyer, but I'm not illiterate either.

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- quote -

I pay my preparers 30% of the fees they generate.
Works out to $35 - $55/hr.

Also give them a big party at the end.

Jim Hayden EA - in chilly Michigan

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"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:
- quote -

Rule #1 is NEVER sign your name to anything that is not
truthful or to anything contract without having an
attorney read it first.

Non-competition agreements are rigorously enforceable with
regards to soliciting consumer clients away whom you have
served from a former employer within a two period.

There is no work around on the solicitation. Don't do it.

The work around if clients come to you is have clients
write a letter to the employer stating that they contacted
you to prepare their return and you said they must inform
your former employer that this is their inititive and their
choice. Even then you could have a problem, but it will be
minimal.

Dick

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"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:
- quote -

They must have. I've read that non-compete agreements are
either illegal or unenforceable in most states; perhaps the
change was due to this.

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Vic Dura <vpdura[at]XXXhiwaay.net> wrote:
- quote -

Block is generous enough to pay the employer's half of the
payroll tax. I wouldn't be shocked if that changed in the
future, though.

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Frank S. Duke, Jr. <dukefs[at]one.net> wrote:

- quote -

Your financial results are pretty consistent with what I've
heard from other SEASONAL preparers. I can think of a couple
people who claim to net about $20,000. But that is probably
the "tops" unless you have other bookkeeping, accounting or
consulting work during the rest of the year.

MTW

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Dave Buck wrote:

- quote -

In many ways, it's going to be the same as the way someone
who *is* a CPA or EA would open up shop. What those
designations help with is the marketing side of the
equation--explaining to a potential client why he/she should
believe you actually know something about tax matters.

I think most successful practitioners depend primarily on
client referrals, which creates a kind of "chicken/egg"
problem (you obviously have to have at least one client in
order to get a referral from a client <grin> ). The big
issue is to get the word out both about your availability
and your skills, and work on contacts who will feel
comfortable suggesting you to their acquaintances.

You also need a clear idea about the type of practice you
plan to have. The tax law is one huge area, and no one can
handle all tax matters. You need to take a critical look at
your skill level (which types of returns are you qualified
to handle) and the target market you would expect to serve.

I would caution you not to attempt to play the "Wal-Mart"
game (I'll get into the business by low ball pricing) unless
you plan to start a high volume operation. The lower the
price per return, the less time you will be able to spend on
each one and the more returns you will need to do to achieve
the same level of profitability. As well, it should be
clear that in that market, having "cheap" staff to leverage
will be very useful.

Too often I see people try and start up a service business
who want to both offer highly personalized service *AND*
offer low pricing. In most cases, at the end of the day
they'd have been better compensated flipping hamburgers at
McDonalds for minimum wage <grin> .

For a small practice, I think you have to accept that
someone will always be willing to work for less than you--so
you need some reason for people to use you besides being the
least expensive alternative.

That doesn't mean you have to work the "high end" market
only--but you need to think beyond mere pricing. The one
thing that research tends to show time and time again among
CPAs is that the reason a tax client leaves a CPA is far
more likely to be "I don't believe Joe cared about me" than
"I think Joe charges too much."

--
Ed Zollars, CPA
Phoenix, Arizona

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"David Ebbole" <debbole[at]earthlink.net> wrote:

- quote -

It goes up by less than one percentage point each year. In
your first year, they pay you 20% of 89% of your volume (why
they don't just say 17.8% of your volume, which is simpler
and mathematically equivalent, I have no idea). In your
second year, they pay you 21% of 89% of your volume, which
equals 18.69% of your volume. Not a huge jump.

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- quote -

Because $10/hr W2 nets only about $9.25/hr on Sch-C.

--
To reply to me directly, remove the XXX characters from my
email address.

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Dave Buck wrote:

- quote -

It DID say that when I considered it. Also the requirement
that you do your own taxes at HRB, and not do anyone else's
taxes for pay or for free (with an exception for VITA, I
believe), although your immediately family gets free or
discounted fees at HRB, means that you could not do taxes
for your immediately family for 2 years following your
employment.

However, they may have changed the non-compete.

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- quote -

They knew we opened up. They had the office receptionist,
who we thought was a friend, call people and if they said
that their taxes were done, she buddied up to them and asked
them who did it. They got 3 clients that came to us. And
we could have won, PA is a right to work state, but the
legal fees were getting out of hand.

Helen, EA in PA
Member of The Tax Gang
Director, National Assoication of Enrolled Agents
Immediate Past President, PA Society of Enrolled Agents

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