[sacpa]

I have been offered a full time tax preparer position at a small CPA firm. This position will extend after tax season & year around. I have been given two options:

1. Hourly pay or

2. 20% of what I make for the firm

I will be given a W2 for both options. Health insurance will be offered after 90 days. For hourly pay, there will be overtime offered for work on Saturdays. For the previous 3 tax seasons at other CPA firms, I was offered an hourly pay & a W2. I am not able to decide between the two.

Your thoughts? TIA for all your input.

Btw, the firm is less than 10 minutes from my home – a huge plus. The CPA is an ex IRS auditor who is a walking encyclopedia. The firm provides services like tax preparation, bookkeeping & other services. So there is lot of scope for me to learn a lot.

FAR - < than 75, 10/2013, 2/2015
BEC - < than 75, 10/2013
AUD - < than 75, 8/2015, 1/2016

~ Winners fail until they succeed. Losers quit when they fail. - Robert Kiyosaki
~ I survived because the fire inside burned brighter than the fire around me.
~ Something will grow from all you are going through. And it will be YOU.
~ Right now you may not be where you intend to be, but it's where you need to be in order to get where you want to go.

[jm962011]

is the 20% what you physically bring into the office? Say we are friends and you offer to do my taxes for $250. You'd get 20% of that.

are you going to get 20% in this situation? the owner's nephew comes in to get his federal and state returns done and he is charged $250. the owner asks you to do the return?

If you're not going to get the 20% in the second situation, I would recommend going hourly, unless you have a ton of family and friends coming in.

[EuroAddict]

Need more detail about that 20%.

– Is it on the work you perform? (I'm guessing no).
– Leads me to think it is on the biz you bring in. Which, let's face it, won't be much as a new guy.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[sacpa]

Thanks for your responses, jm962011 & EuroAddict.

The 20% is of what I make for the firm. I am not sure about whether it is 20% of what business I bring in. I am assuming it is not about what business I bring in, as EuroAddict pointed out it is not much or nothing, anyway.

FAR - < than 75, 10/2013, 2/2015
BEC - < than 75, 10/2013
AUD - < than 75, 8/2015, 1/2016

~ Winners fail until they succeed. Losers quit when they fail. - Robert Kiyosaki
~ I survived because the fire inside burned brighter than the fire around me.
~ Something will grow from all you are going through. And it will be YOU.
~ Right now you may not be where you intend to be, but it's where you need to be in order to get where you want to go.

[Anonymous]

take 20% of all the billable work you do for all clients. i'd negotiate up to 25% explaining away @ 25% me 25% overhead 50% you- the partnership

but bottom line is you gotta find out. cuz i doubt theyd give you 20% off the top- thats ridiculous. need more info.

[sacpa]

eesti, thanks for your response. I'll try to get more details. This is a small CPA firm & I don't think I would have luck asking for 25%. I am assuming the income will be split with 20% for me & 80% (overhead & partnership).

EuroAddict, I have experience working in CPA firms as tax preparer for 3 tax seasons. It's just that I won't be bringing my friends/acquaintances to this business.

Though small, this CPA firm is an established one with 15+ years of service & has lot of clients, returning & new.

FAR - < than 75, 10/2013, 2/2015
BEC - < than 75, 10/2013
AUD - < than 75, 8/2015, 1/2016

~ Winners fail until they succeed. Losers quit when they fail. - Robert Kiyosaki
~ I survived because the fire inside burned brighter than the fire around me.
~ Something will grow from all you are going through. And it will be YOU.
~ Right now you may not be where you intend to be, but it's where you need to be in order to get where you want to go.

[EuroAddict]

“The 20% is of what I make for the firm.”

Lot of grey area. I would want a ton of detail about this.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[cacheacs]

As has been said, there is too much in the unknown. I'll throw out a hypothetical situation though. I'll assume that the 20% means that you will receive 20% of your billable time. So 52 weeks of 40 hours average (I know it will be more during certain times, but there will also be unbillable hours) is 2,080 hours a year. I'll also assume the billing rate is $120 an hour. Your total amount of billable time during the year would be $249,600 of which you would receive 20% or $49,920. You'd need to see how much you would need to be paid hourly to hit or exceed that amount. Ignoring overtime, $49,920 divided by 2,080 hours a year would mean that your hourly rate would need to be $24 to yield you around the same amount.

There are many variables and assumptions that I made that I know do not fit in your circumstances; however, I just thought I'd show you how I would evaluate it if I knew more of the facts about each situation.

[CPA2BEE]

If what your saying is you make 20% of what you bill out for the firm, depending on firm size and your billable rate, that could be the way to go. Although it could go either way, depending on your hourly pay rate vs your billable rate for the firm.

If you get paid OT with your hourly rate, then determine what 20% of your billable rate is and if it is less than your hourly rate (including time-and-a-half) then I'd go with the hourly rate. But if you don't get paid OT on the hourly rate, then the 20% deal can kind of give you some incentive for working extra hours (i.e billing out more time, more money in your pocket).

Thats if this is all based on your billable time, if not, then idk lol

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[sacpa]

EuroAddict, cacheacs, CPA2BEE, thanks for your input.

cacheacs, that was nicely put analyzing the scenario. Just yesterday, I went online to see what 25/hr looks like when converted to annual salary to get an idea.

CPA2BEE, overtime will be provided only on Saturdays. I am assuming that there will be overtime only during tax season. Maybe some in fall. This is a full time, year round position. I will include the overtime into consideration & do the analysis that cacheacs did to arrive at an estimated income.

Though the CPA is knowledgeable & experienced, his communication skills are not upto the level. I was somehow given the impression that I was hired. But it looks like the firm is still interviewing candidates. So I cannot ask for more details at this point. I have applied for other jobs & not depending on this one.

In case I am offered the job, what other details should I ask for in order to decide between these 2 options? Is it a good idea to ask what my billable rate would be?

FAR - < than 75, 10/2013, 2/2015
BEC - < than 75, 10/2013
AUD - < than 75, 8/2015, 1/2016

~ Winners fail until they succeed. Losers quit when they fail. - Robert Kiyosaki
~ I survived because the fire inside burned brighter than the fire around me.
~ Something will grow from all you are going through. And it will be YOU.
~ Right now you may not be where you intend to be, but it's where you need to be in order to get where you want to go.

[Yaz88]

I doubt that you will be getting 20% of any work you do regardless whether you bring it or not… they might as well make you a partner in the small cpa firm.. You have to investigate the 20% very deeply

[CPA2BEE]

Yeah, if you get paid for the OT then that could make the hourly pay more appealing. The 20% deal sounds sketchy. Cacheacs calculation assumes that 100% of the hours you would work in a year are billable, that is never the case in smaller firms. I work for a small-mid sized firm and if you are billable 75-80% of the time you work that is considered stellar. I can think of only a few days during peak tax season where I was actually 100% billable. So with that, the $24/hr could actually be more like $19-20/hr.

From what we know about it, I think the 20% deal leaves too much room for manipulation. You could bust your ass and bill out time like crazy, but what happens if the partner decides you took too long on some projects and decides to eat 30% of the time you billed out? Then your left with how many hours of unpaid work. Especially if you are at staff level, the partners are going to monitor how much time you are billing out on certain projects for certain clients and keep it contained. Given that, 20% of what you bill out could already be much more determined than you might think.

Just my 2cents

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[Anonymous]

Here's the hesitations I would have with the 20%:

– If you get help on your work, what portion of the work counts as your income that you brought in? You do a $500 return, have to ask a partner about a complicated part of it; does he now get 25% of the fee credited to him cause the complicated part was 25% of the skill required for the return?
– Will you be expected to do work that's not directly billable or billable at a lower rate? When I worked in a small firm (granted, it was super super small), we did tax work a few months out of the year that would've been great at the 20% deal, but the rest of the year we did bookkeeping, organizing for next year, etc. If you end up with a decent paycheck 3 months a year, and then 9 months of barely any billable work and mostly doing random stuff to fill your time that's only billable at a $10/hr equivalent, then you'll be hurting 9 months of the year.

That being said…I can see the attraction of the profit sharing. If it was a higher percentage, I'd go for it. But at 20%, I'm guessing you'd come out ahead with hourly.

Oh, and this is ignoring the legal complications. If you're an employee that's paid hourly, they're required to pay you overtime, not just on Saturdays. If you're paid commission (which is what they're probably considering the 20% plan), I'm pretty sure they're required to pay you at least a minimum hourly pay including overtime for hours worked, so that in a week with no billable hours but 50 hours worked, you'd at least get minimum wage overtime pay. I'm not an expert on payroll law, so may have the particulars wrong, but I'm pretty sure both their offerings aren't in compliance with DOL regulations.

[Anonymous]

If you are brand new , you should not do the 20% option unless you are a serious go getter and have some money socked away. THEN, do you have to sign a non compete agreement on all the clients you bring in ? The second complication is that your realization will be very low as you learn how to do this.

This deal would work great for someone who is highly motivated to get new business, and has some good contacts, and can starve for a year or two and depend on wife's steady income. But then, you get all that new business and only get 20% ?

[sacpa]

Thanks everyone! All your suggestions/opinions are giving me a big picture.

Lilla, regarding overtime what I meant was that during weekdays I will be working the regular 8 hours & will have to work on Saturdays for which the overtime is given. You make a good point of the need to have consistent earnings throughout the year.

Even before I posted here, the 20% idea did not sound right to me because like you all said, lots of unknown things. I am not comfortable with the whole profit sharing idea, since I have not done that before. There are possibilities that I will be taken for a ride. As far as hourly pay is concerned, at least I know that I am paid for the hours (including overtime) I worked.

6silvermoonbeams, ya, doing all that work for a mere 20% does not sound right.

Right now we are financially ok with just my husband's salary with not even adding my seasonal tax job. What I am looking for is an opportunity where I can get more experience especially preparing corporate returns & meet a diverse set of clients. Also, if I can gain some experience in bookkeeping, preparing & reviewing financial statements, that would be great. I still need about 350 hours in a CPA firm to fulfil CA license requirements. But that is not a big issue as it looks like I can transfer my score to another state where there are no strict requirements like working under a CPA's supervision & hours signed by the CPA. In that case, I can work in any firm. But the thing is, I want to pass all the sections first & there is no time to explore that option & procedures now. So for now, I will just work in a CPA firm.

FAR - < than 75, 10/2013, 2/2015
BEC - < than 75, 10/2013
AUD - < than 75, 8/2015, 1/2016

~ Winners fail until they succeed. Losers quit when they fail. - Robert Kiyosaki
~ I survived because the fire inside burned brighter than the fire around me.
~ Something will grow from all you are going through. And it will be YOU.
~ Right now you may not be where you intend to be, but it's where you need to be in order to get where you want to go.

[Jdn9201]

Sacpa, congrats on the job offer. I will admit I only scanned through the replies, but the decision is easy for me – take the hourly rate. I'm assuming the rate is respectable. There's just too many questions about the 20%. I might would ask if you could convert to the profit sharing later. I would be wary of the profit sharing or a commission-based pay rate because it's not as dependable as a salaried pay or hourly pay. It's pretty sweet they are paying you overtime, because that is rare in this line of work.

BEC - 88 8/29/15
REG - 82 11/14/15
AUD - 83 1/8/16
FAR - 80 2/29/16

[Author]

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