Off-Season Client Audit for Tax Preparers

It is the second half of May. The desk is still not clean. A folder of extension notes is sitting near the printer. There is one client you meant to call on April 10, and the sticky note is still looking at you.

Most small tax offices spend this window recovering, chasing loose ends, and promising to think strategically after summer. By then, the memory fades. The client who ate six hours for a $185 fee starts to feel less painful. The messy Schedule C with the grocery bag of receipts gets scheduled again. The EITC file that made you nervous becomes "we will handle it better next year."

That is how a practice drifts.

The highest-paid hour of the off-season is a client audit. Not a pricing audit, although you should run that too. This one answers a narrower question: who belongs in next season's book?

The number that makes the decision clearer

Open a spreadsheet with four columns: client, fee collected, hours spent, effective hourly.

Do not over-engineer the hours. Count intake, document chase, preparation, review, pickup, e-file, IRS notice follow-up, and every "quick question" that was not quick. Your estimate is good enough for the first pass.

Then divide fee by hours.

This number changes the conversation. A $2,400 business client can look impressive until you remember the file took 28 hours and landed at $86 per hour. A $235 retiree with clean documents and one quick review call may land above $250 per hour. The client you feel loyal to may be the client subsidized by everyone else.

Pick a floor. For many solo or two-person offices, $150 effective hourly is a useful first line. Your floor may be higher, especially if you are credentialed, carrying staff, or doing more complex advisory work. The exact number matters less than writing it down before you sort the list.

Three lists by July 1

Once the spreadsheet is sorted, build three lists.

The Fire list is not about emotion. It is for clients below the floor who also create operational drag or compliance risk: late documents, abusive behavior, chronic nonpayment, refusal to use the portal, or due-diligence facts that never come in clean. If a client makes a clean EITC, CTC, AOTC, or HOH file nearly impossible, run the exposure through the preparer penalty calculator. Risk priced in thousands should not be hidden behind a low fee.

The Raise list is your middle. These clients fit the office, pay on time, and produce clean files, but the fee is stale. They do not need to leave. They need a written increase communicated before the next season.

The Deepen list is your best work. Organized clients, clean communication, growing complexity, and high trust. These are the clients who should hear from you before September with a planning offer, entity review, quarterly meeting, or workflow upgrade.

If every active client lands in exactly one list, you have a usable plan.

How to close an engagement without drama

The word "fire" is shorthand. The real move is a professional engagement close.

Send the letter in May or June. Do not wait until January. Keep it short. Make it about fit and capacity, not blame. Offer a transition path.

The structure is simple: your office reviewed capacity, you will not be accepting the engagement next season, you want to give the client time to find a better fit, and you will transfer prior-year records with written authorization.

Do not list every frustration. Do not argue about the fee. Do not say "maybe" if the decision is made. A clean letter in June is kinder than an awkward no in February.

The front-door filter

The Fire list shows you who should not have entered the book. Use it to rewrite intake.

A useful new-client filter has five rules.

• Minimum fee stated before the consult.
• Document-readiness check before an appointment is accepted.
• Due-diligence pre-screen for EITC, CTC, AOTC, and HOH.
• Portal and e-signature expectation stated plainly.
• Prior-preparer question: why are you switching?

That last question is worth more than it looks. "They retired" is different from "they would not sign something I wanted." The prospect often tells you the future problem in the first call.

Pair the audit with your tool stack

Margin has two sides. The client spreadsheet tells you what comes in. A tool stack audit tells you what leaves every month.

Run them together. If a client sits below your effective-hourly floor and requires extra software, extra manual reminders, or extra document cleanup, the real hourly is lower than your first number.

By July 1, you should have three named lists, one engagement-close letter, one fee-increase communication draft, and one intake filter your staff can use without asking you every time.

That is not busywork. It is the difference between choosing next season's book and inheriting last season's problems.