Dear firm owner,
November is the one month you can change a price calmly. The season is behind you and the engagement letters have not gone out. You still remember which returns took twice the hours you billed. By January that memory will be a vague sense that “some of them ran over.” This letter is about turning the memory into new fees before it fades, and keeping the clients while you do it.
The wind and the sun
There is an Aesop fable about the North Wind and the Sun, who argued over which of them was stronger. They agreed to test it on a traveler. The Wind blew as hard as it could, and the traveler only pulled his coat tighter. Then the Sun shone gently, and the traveler took the coat off himself.
A fee increase works the same way. A new number on the January invoice, with no warning and no reason, is the wind. The client grips the relationship tighter, or starts asking friends for the name of their preparer. The same increase, explained in November and tied to work the client can see, is the sun. Many clients take the coat off themselves.
Start with the return, not the client
The usual way to find underpriced work is a realization report by client. It points you at the wrong thing. A good client with one hard return looks like a bad client, and we wrote about that trap in the third option.
Look at returns instead. For each one, set last season’s hours beside last season’s fee. Then ask a narrower question: what changed in this return since the fee was quoted?
The answers tend to repeat. The client joined a partnership and now has Schedule K-1s, the statements of each partner’s share of income. A K-1 brings basis work the old fee never imagined. The client started working remotely and now files in two or three states. The client moved abroad and now needs Form 2555 (the foreign earned income exclusion) or Form 1116 (the foreign tax credit). They also need an FBAR, the report of foreign bank accounts. The client bought a rental, or received stock compensation, or sold a business.
None of those returns is a bad client. Each is a return that grew while its price stayed still.
Reprice the work you can name
Clients accept a fee they can explain to themselves. “Our fees are going up 8 percent” invites a debate about inflation. “Your return now includes three K-1s and a second state” does not. It describes something the client did.
So build the new fee from the parts of the return, not from the old fee plus a percentage. Many firms already price this way for new clients: a base return, then a component for each additional state, each K-1, each foreign form. Apply the same structure to existing clients whose returns have grown. The fee then moves when the return moves, and you do not have to have this conversation every year.
There is a second reason to price by component. It shows you which parts of the return carry the margin, and which ones you have been doing at cost.
Say it before the engagement letter, not in it
Timing does most of the work here. An engagement letter that arrives with a new fee feels like a notice. A short call or note in November, followed by an engagement letter that confirms what you already discussed, feels like service.
Keep the message short. Something like this, adapted to your voice:
Your return has changed over the last two years. It now includes income from two partnerships and a second state, which add schedules we did not prepare before. Our fee for 2026 reflects that work. It will be [new fee], and here is what it covers. If anything about your situation changes again, we will tell you before we start, not after.
That paragraph names the change, gives the number, lists what it buys, and makes a promise about the future. It does not apologize. You are not asking permission to be paid for work you are doing.
Some clients will push back. Listen to them. A client who says “I did not know my return had become that complicated” is often the client you keep. A client who says “my neighbor pays half that” may be telling you something useful about whether you want the return at all. (That is a different decision, and we will come back to it before the month is out.)
Know your own cost first
Every repricing rests on one number you may not have: what the return costs you to prepare. For returns your firm prepares itself, that number is hours times a loaded staff rate, and it moves every season with who is available. That is hard to price against.
For returns you send to an outside desk, the cost can be fixed in advance. If you know in November what a K-1 return or a foreign-income return will cost you next season, you can set the client’s fee with the margin already in view. The client sees one fee, on your letterhead. You see the spread, before the return starts.
The reverse also helps. Once you know your cost on a type of return, you can tell which old fees were never going to work, however efficient your team became.
What to do this month
Pull ten returns that ran over last season. For each, write down what changed and what the work is now worth. Draft the paragraph above for the three clients you most want to keep. Make those calls before December fills up.
It is a small job, and it is the one most likely to change next season’s margin. It has to happen while you still remember why those returns ran over.
With regards,
The TaxSQR team
Pricing the returns you send out
TaxSQR’s Desk prepares the returns small firms find hardest to price: foreign income, K-1s, multiple states and entity returns. Every return is reviewed by two enrolled agents and handed back for your firm to sign and file in your own tax software. Our founders have prepared US returns since 2003, with 5,300+ tax returns filed in the last 4 seasons.
Flat per-return partner pricing makes the margin visible before you set the client fee. Ask us for the partner rate card: steve@mobilitysqr.com