Message Font: Serif | Sans-Serif
No. of Recommendations: 4
I'm disappointed in a charge recently billed by my CPA. He charged $225 to write a letter to the IRS.

We received a letter notifying us that our 2001 return was being examined. The item in question was charitable contributions. I determined from the IRS material that the IRS had input the contributions on the wrong line (17: carryover contributions instead of lines 15 and 16). I took my charitable contribution receipts to the CPA and told him the IRS had input values on the wrong line. (He didn't have to sleuth out the problem.)

Anyway, the charge for writing the letter and attaching copies of receipts seems excessive to me. But, I also am reluctant to grump about the bill.

Whether $225 is excessive or not depends on a lot of factors. Is your CPA a sole practitioner, or a partner in a big "N" (how many are left) firm? My guess is that you were charged for approximately one hour of his time. This amount of "time" doesn't seem excessive to me...he has to retrieve your file, review the IRS notice and the information you provided, write the letter, review and sign it, etc. It's your call whether your CPA's hourly rate is too expensive for your needs.

I also question his billing for tax preparation each year. Range $600-$1000. I've not questioned the yearly tax prep bill, but I've been tempted. I swear it seems based on our fluctuating yearly income. That's not right, is it? The tax work involved is the same year to year.

Again, rates vary significantly from preparer to preparer. I can assure you that the change in rates is not a function of your changing income, but changes in time requirements, forms/schedules required, etc. Each year the tax laws change. Even if your income pattern is unchanged, some years the forms get easier, some years more difficult. Sometimes you don't see the changes on the forms themselves. For example, up until a few years ago, you had to include Schedule B if your interest or dividend income exceeded $400. Then the threshold was raised to $1600. Your CPA still had to collect and review the same documentation, but your tax return might have one less schedule attached, shortening the final review step. Then last year, the concept of qualifying dividends was introduced. Now there is new information to review.

You also mention self-employment income. If your CPA is reviewing your Schedule C supporting documentation, or closing your business's year-end books, you can expect variations from year to year.

Is $225 too much for a letter which states that basically the IRS input the data on the wrong line? And how does one grump about a bill without appearing "cheap"?

As stated above, it might be too much or it might not. You can question your CPA's fees at any time. You are purchasing a service. You are always free to take your business elsewhere and your CPA knows that. Perhaps he will adjust them, perhaps not.


ps I had a 2nd letter from the IRS regarding 2003 taxes. The self employment schedule was not included with the return! It's not in my copy of the return either. Although I also took the 2nd IRS letter in for the CPA to handle (at the same time), I have no ackowlegement from the CPA that the 2nd matter was corrected. I'll call him about that this morning.

If this turns out to be a preparer error, I would expect that he would make all necessary corrections free of charge. If the IRS assesses penalty (unlikely) and interest (likely) on any deficiency, I would expect the CPA to cover the penalty. You might even be able to get him to pick up the interest though most CPAs won't (after all you had use of the money for the period in question).

The 2003 return also had a "worksheet" for Keogh included which had never been included before. It reflects a contribution "override" (red flag?). I didn't call him about it at the time (thought about it), but sent the return in as provided. I'm now thinking that someone in the office fouled up when generating the 2003 return. i.e., no self-employment schedule and a worksheet never included before. Don't know what else might be wrong with it. (The Keogh contribution override is legit because of an age-based Keogh. Just don't want to provide more info to IRS than is required.)

Very possible, see above. An "override" flag is the program's way of alerting the CPA that there is something on the return which differs from what the program logic expects. Sometimes these reflect true errors, oftentimes they reflect conscious decisions by the preparer to take a position (or enter data) in a different fashion. In your specific case, I am willing to bet that your CPA never input your birthdate into the personal information section of the program. Since he knows you're over age 50 he forced the program to accept the higher maximum contribution.

Also, within in the last few years I had another IRS letter for underpayment of taxes. I determined that that was again IRS error. They dropped an exemption, input the wrong # of exemptions.

In each of the above cases:

1. contribution on wrong line by IRS
2. lack of self-employment schedule by CPA
3. dropped exemption by IRS

Would it be foolish for me to write the letter myself to the IRS??? Is that just asking for trouble? They are rather straightforward items.

Many people write to the IRS on their own behalf. In general, there is no greater "risk" in doing so. However, it is possible to say too much and get yourself into trouble. Your CPA knows how to deal with the IRS efficiently and can remove the stress from you.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.