How about adding tax prep to your business?

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Aug 24, 2008 9:30 pm

For those who are self employed.  Has anyone thought of supplementing their income by preparing tax returns?  You can get experience working 1-2 seasons at a tax prep firm and then tacking on the EA to your resume.

Aug 24, 2008 9:58 pm
Frank Abagnale:

Why don't you sell your clients some shoes to supplement your income as well?

 
Tax prep and financial planning go hand-in-hand.  It's a great way to get crossover clients.
Aug 24, 2008 10:03 pm

I think what Frank is saying is that if you're building your business the right way, tax-prep is a waste of time.

Aug 24, 2008 10:05 pm
Rodee:
Frank Abagnale:

Why don't you sell your clients some shoes to supplement your income as well?

 
Tax prep and financial planning go hand-in-hand.  It's a great way to get crossover clients.
 
Go down that road.  Let us know how it works for you.  I think you're quite capable to work part time as an advisor while taking care of their tax issues.
 
There is a reason why most firms do not allow their advisors to give tax advice. 
Aug 24, 2008 10:58 pm
Rodee:

For those who are self employed.  Has anyone thought of supplementing their income by preparing tax returns?  You can get experience working 1-2 seasons at a tax prep firm and then tacking on the EA to your resume.

 
I do a few returns and wish I didn't have them (I refer all new tax/accounting requests to an affiliated CPA group).  You may like the idea when you're fairly new and/or small, but I'd be surprised if you like the idea when your investment book reaches critical mass.
Aug 24, 2008 11:25 pm

Frank,

 
Is this you:  http://affiniongroupmedia.com/index.php/affinion/displayspokesBio/frank_w_abagnale_ab_big_nail/
 
OR
 
is this you:  http://en.wikipedia.org/wiki/FrankAbagnale
Aug 25, 2008 8:10 am

Folks, it's yet another in a growing list of incarnations of Bobby.  Frank is the former scan artist-turned security guru, and inspiration for the movie, Catch Me If You Can. 

Aug 25, 2008 8:48 am
When I went indy 2 years ago I started to do income taxes for a few clients. Last tax season I did a few more clients and about 15 none clients. One of the none clients inherited 800k from her father the year before and  transferred her accounts to me. Another none client referred me to a friend with a 520k rollover. I believe that I have a closer and better relationship with my tax/investments clients. I can't wait to see what next tax season brings in because I am going to take out a tax return ad in my local paper.
Aug 25, 2008 11:55 am
Morphius:

Folks, it's yet another in a growing list of incarnations of Bobby.  Frank is the former scan artist-turned security guru, and inspiration for the movie, Catch Me If You Can. 

 
You are SO wrong.  I am not, nor have I ever been anything like Bobby Hull.
 
However, only time will tell, so I'll let you have whatever opinion you want of me.
 
Let's just say that I'm a regular poster who decided to change his own identity here for his own protection.
 
And no, I'm not "Joe" either.
Aug 25, 2008 12:14 pm

I'll give Frank the benefit that he's not Bobby.  Bobby doesn't try to hide his identity.


Pussman, the question isn't how much you made from tax prep.  Rather, how much would you have made if you spent the tax prep time propspecting instead.


I think that doing tax prep for one year might be a valuable experience if one picks up useable knowledge.

Aug 25, 2008 4:56 pm

Well, anon...apparently the admins disagreed...I see "Frank" is now a troll.  My guess is they are getting a bit more sophisticated and starting to match IP addresses.

 
On tax prep, I'll stick to my guns that on balance, you will spend too much time doing low-margin work to make up for the occasional golden nugget you'll find.  In my case, I refer to CPAs that I share office space with, so I get a steady stream of cross referrals, which I prefer to preparing tax returns.
 
I'm convinced that my practice would be more profitable and satisfying if I didn't even do my own return.
Aug 25, 2008 5:41 pm

Yep, definitely looks like I'm wrong. 

 
I'm with you on the tax return stuff.  I'm coming from it more from the angle that the knowledge that a new person can gather from doing this for a short period of time can help their practice into the future.
Aug 25, 2008 6:23 pm

Who are Bobby and Frank?

Aug 27, 2008 7:41 pm

I have added a modest amount of tax work.  I have an experienced tax associate who handles most of the work.  I meet with the higher networth clients and handle those relationships and leave most the rest to the associate.  Been doing it just one year, but it has worked out nicely for me.

Aug 27, 2008 10:17 pm

I provide complementary tax prep to clients who meet a minimum asset threshold. It's an important value added, and helps sell my business. I've uncovered millions of dollars from doing the tax prep work.

 
Stok
Aug 27, 2008 11:30 pm
stokwiz:

I provide complementary tax prep to clients who meet a minimum asset threshold. It's an important value added, and helps sell my business. I've uncovered millions of dollars from doing the tax prep work.

 
Stok
 
Stok, you're obviously intelligent and I assume, pretty successful, so I pay attention when you post.  I do make a practice of asking prospects/new clients to bring their tax return with them so we can do some basic financial planning, but I see actual tax prep as not very productive time for me.  Offering it to high-end clients is an interesting thing to consider, but given the potential complexity of HNW returns and the added heartburn of increased audit potential, I still think I'll pass for now.  I'm curious as to how long you've been doing that and what, if any, problems you've encountered as a result.
 
Thanks for an interesting angle.
Aug 28, 2008 12:38 pm

I do a similar thing, if clients have 500k or more in a fee based account I give them free tax work (within reason of course).  People dig it. 

Sep 2, 2008 6:46 pm

As a CPA that doesn't currently practice but is interested in starting a business as a FA/RR, what do you think about starting out as a tax prep business with the goal of converting tax clients to investment clients?  I've posted this elsewhere, but it seems applicable to this thread so I thought I would see if anyone would like to weigh in.

 
I know time is an issue but as the business grows my goal would be to transition the prep and transactional work to an employee(s) so that I could focus on higher level planning and brigning in clients.
 
Where can a newbie like me get training and support on the FA side of things?  Will Raymond James, LPL, or anyone else like that be willing to work with me?
 
Thanks for the input.
Sep 2, 2008 10:31 pm
CoachXD:

As a CPA that doesn't currently practice but is interested in starting a business as a FA/RR, what do you think about starting out as a tax prep business with the goal of converting tax clients to investment clients?  I've posted this elsewhere, but it seems applicable to this thread so I thought I would see if anyone would like to weigh in.

 
I know time is an issue but as the business grows my goal would be to transition the prep and transactional work to an employee(s) so that I could focus on higher level planning and brigning in clients.
 
Where can a newbie like me get training and support on the FA side of things?  Will Raymond James, LPL, or anyone else like that be willing to work with me?
 
Thanks for the input.
 
First of all, you're going to have a tough time convincing top independent firms such as Raymond James and LPL to take a flier on you without a track record.  Expect these firms to take a pass.  Somewhere, Old Lady referenced HD Vest and I'll second that motion.  While perhaps not at the top among indy firms, HDV specializes in helping CPAs add investments to their tax practices and would be an ideal fit for you starting out.  Once you are established, you could always seek out Ray Jay or LPL and migrate your client base.  A big plus for HDV is lack of pressure and low production minimums (I'm not even sure they have production minimums, although the cost of E&O insurance will effectively set the minimum for you).  My recollection from my limited due diligence recalls that there was sufficient product offerings for a startup practice.  The biggest knock I recall is that their payout for general securities (stocks/bonds) was very poor...something like 10%, I believe.  Payout on mutual funds was something like 70%.  Frankly, when you're starting out, you should probably focus on funds and VA's and stay away from individual stock-picking anyway.  You can always do the occasional courtesy trade for that client who just has to own 100 shares of Wal-Mart.  Just understand that your compensation for this part of the business will be minimal.
 
On running a tax and investment practice simultaneously, you'll find two distinct schools of thought.  My opinion is that it's very difficult to do both well and thus, I am gradually phasing out my tax and accounting practice in favor of focusing on what has become my bread and butter.  Today, I was on the phone for almost an hour with the IRS correcting two bad 941 return notices.  While the IRS employee acknowledged that we had completed both forms 100% correct and promised to fix the notices, I spent a frustrating hour that will net me perhaps $100, while that client will pay me for correcting IRS incompetence, gaining nothing of monetary value for themselves.  This is not the kind of rewarding and high-comp work I want to do.
 
On the other hand, some advisors here have spoken of using tax preparation as a value-added service for larger clients to strengthen the relationship.  Others have spoken of finding significant assets while doing tax prep work.  I won't argue the merits laid out by those advisors, and I won't tell you that it doesn't work for them.  I'll simply tell you that my experience is that on balance, I spend more than I get back doing tax work.  For the 250-300 hours I spent doing tax work, I've made the same money on the investment side and accomplished more positive things for a client in 10% of the time.  That's all I need to know to know that while tax and accounting work may be a good springboard into the world of investment management, it's nothing I want to do on a permanent basis.  I suppose I could hire an employee to handle the tax and accounting portion of the practice, but I simply am not interested in acting as a liability backstop for a small accounting practice when I can instead focus on building the investment side of the practice.  For what it's worth, that's my take.  I wish you well in chasing the dream.
Sep 3, 2008 12:15 am

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Thanks Indyone!  Your post and the other advice I have received on this topic is making sense to me as much as I may have tried to resist it at first.  I honestly don't want to spend too much time preparing tax returns-that's why I got out of public accounting several years ago.  I also remember those calls to the IRS and the description of your phone call was enough to bring back some of those frustrating memories.

 
I guess I just saw tax prep as my door knocking or cold calling (my way to pay my dues).  So if I decide not to spend my time building a business that I will eventually abandoned, how do I get my foot in the door?  Go to EJ or AG Edwards (I guess they're Wachovia now)? I have to be honest, one of the things I want out of this gig is my own office with a door that I can close on occassion, which makes the EJ model appealing.  I know it sounds funny, but after living in a cube for the last 6-7 years in fairly large corporate environments I'm ready for a different kind of working environment.