Bedside Manner is Important for Tax Pros, Too

Late last December, I was having awful stomach pains. So bad that it hurt for my shirt to touch my stomach. I thought I had gallstones … or worse.

So I went to the local walk-in clinic and they did a battery of tests. They drew bloodwork and took x-rays.

All the tests came back fine. The doctor hurried in and said I just had “inflamed muscles” and I was quickly sent on my way with a prescription for heartburn medicine and an admonition to take it easy.

(Earlier this month, the pain came back and I went to a different doctor who diagnosed a hernia within literally the first 10 seconds of examining me.)

Anyway ….

When the nurse was drawing my blood, she went on and on and on about how she hoped it wasn’t anything to do with my pancreas, because that’s just really bad and she knows someone blah blah blah blah blah.

Yeah, lady. I know people who have had pancreatic cancer too. It’s scary. You’re diagnosed one day and oftentimes gone in months, if not weeks. That was certainly on my mind.

And this nurse didn’t help by blathering on about it.

And then the doctor, who was obviously in a hurry to move me along as quickly as possible, gave a lame “the x-ray showed inflamed muscles” diagnosis and sent me away with heartburn medicine. Six months later, I finally got a proper diagnosis from a doctor who took time to look for the right things. (The doctor also informed me that it’s not possible to see inflamed muscles from an x-ray. More proof the other guy was just trying to move me along.)

People talk about whether healthcare providers have good bedside manner. But it’s important for accountants and tax pros too.

Especially when delivering bad news.

My rules for delivering bad news:

  1. Do it by phone or in person
  2. Come to the point quickly — I will sometimes say that I have “bad news,” but I find it’s best to avoid the descriptors and just come out with it
  3. Understand that the client may not be happy
  4. If you can work in an explanation before the client says anything, do so. Otherwise, let the client respond and have their say before you proceed with an explanation
  5. Don’t try to break the tension with jokes. Even if the amount of money is relatively small, even a $200 tax bill is a big deal to most average folks, especially if they’ve never owed at tax time before.
  6. Don’t make flippant comments about the IRS or the government, even if you know that the client’s politics lean toward the Tea Party side of things. That sort of talk won’t change the client’s current situation.
  7. Explain the client’s options for paying the amount they owe
  8. Follow up with an e-mail so there’s written documentation

Each year, I have to make calls like this every now and then, and these are the rules I follow.


Baseball’s Replay System: Almost Perfect

Major League Baseball is using expanded instant replay for the first time this season. The new system allows managers to ask for a replay. The wikipedia entry on MLB instant replay explains it well:

(M)anagers will be allotted one challenge per game (two if the first challenge results in an overturned call) while the umpiring crew chief will be empowered to initiate a review in innings 7 and later. The umpires will also be allowed to review a home run call at any time, even during innings #1-6. Once a call is challenged an umpire requests a video review, fellow umpires in New York’s Replay Command Center will watch video of the play in question using the “indisputable video evidence” standard when deciding whether to overturn a call.

As with anything MLB does, the system has critics, but I like the replay system. It’s almost perfect.

The only thing I would change is the manager challenge part. That just seems hokey.

If the objective is to get the call right, then either team or any umpire should be able to ask for a replay on any play at any time, regardless of what inning it is or if a manager has “challenges” left. (I feel the same way about the use of replay in football, too.)

Baseball: When One Loss Equals Two Games

I am fascinated by seemingly random things when it comes to numbers. (Okay, I’m fascinated by a lot of random things, but numbers and statistics in particular.)

One of those things is an oddity of the baseball standings that looms large later in the season, when the number of games remaining grows smaller. And that oddity is that one loss can equal a two-game swing in the standings.


Team A has a record of 85-65. Team B has a record of 82-68. So Team B is 3 games behind. If Team B sweeps the series, it will move into a tie with Team A. But if Team B loses even 1 game in the series, it will be 2 games out at the end of the series. One loss equals a two-game swing in the standings.

I guess this isn’t so much an “oddity” as just something that sticks out to me. Normally in baseball, the goal is to “win the series.” So winning 2-of-3 is a good thing. But when you’re trailing in the standings, any losses to the team you’re chasing can create a huge setback.

Take the example above. Each team has played 150 games, which means 12 more games remain. A 3-game sweep by Team B results in a tie in the standings with 9 games left to play. But if Team B loses 1 game, Team A would still be 2 games ahead with just 9 games left. Not an impossible deficit, but a much bigger hill than being tied. All from losing 1 game.


Prior-Year Adoption Credits and Same-Sex Marriage

Scenario: Angie and Alice are in a same-sex marriage. In 2012, Alice went through the adoption process to become the parent of Angie’s child. Because of the Defense of Marriage Act, Alice properly filed her 2012 tax return as a single person … and claimed the adoption credit for adopting Angie’s child.


  1. After the repeal of DOMA, Angie and Alice’s marriage is recognized by the federal government back to the beginning of their marriage. So Alice’s adoption was a “second-parent” adoption. Second-parent adoptions are not eligible for the adoption credit. Will the IRS come after Angie and Alice on this?
  2. Alice’s 2012 tax return was such that she had an adoption credit carryforward. Can this carryforward be used on her 2013 joint return with Angie, considering that the adoption is now a second-parent adoption?
  3. What if Alice finds something that she needs to amend on her 2012 tax return? Will she need to change her 2012 filing status to “married” and pay back the adoption credit on that amended return, even if she’s amending for some other reason?

ONE: We know that the IRS will honor the filing status used on tax returns filed prior to September 61, 2013. See Revenue Ruling 2013-17. Angie properly filed her 2012 tax return as a single person, so there is no danger of the IRS challenging the adoption credit claim.

Additionally, let’s look at the wording of the Internal Revenue Code regarding the adoption credit. According to IRC Section 36C(d)(1)(C), qualified adoption expenses are expenses:

(W)hich are not expenses in connection with the adoption by an individual of a child who is the child of such individual’s spouse

The Defense of Marriage Act specifically said that the term “spouse” could only refer to couples in opposite-sex relationships. Angie properly filed her 2012 tax return based on the law of the land at the time. Angie and Alice were considered legal strangers at the time, so the adoption was not a second-parent adoption.

Which answers question two: I believe the carryforward can be used on Angie and Alice’s joint 2013 tax return.

Number three is worthy of a blog post of its own, which I’ll have on Wednesday.

A Heretic Speaks Out Against Value Billing

Value billing, as I understand it, is the concept that service providers should bill clients based on the client’s perceived value of the work completed. Across

Image courtesy of Stuart Miles /
Image courtesy of Stuart Miles /

the web, one will find plenty of articles about the wonders of value billing, sometimes even in the AICPA’s “Journal of Accountancy.”

Search “value billing” on Google and you’ll see nary a negative word about value billing. (Except in the archives of this law blog.) The few times a contrary word is written, defenders of value billing will rush in to strike down the heretic.

I’ve never been afraid of voicing my opinion on this blog, even if it’s contrary to what everyone else thinks. So here’s my opinion of value billing:

True value billing, where you bill a client based purely on the client’s “perceived value,” is BS.

Yep, I’m a value billing heretic in a world of true believers.

Areas of Agreement

I agree with proponents of value billing when they say that hourly billing is not the way to go (though I do bill by the hour sometimes).

I also agree with them that it’s important to be able to quote a firm price to the client up-front — something that’s hard to do when billing by the hour.

In my own practice, I use a “kinda-sorta” form of value billing, I guess. For tax work, I use a price menu where each form or attachment has a certain fixed price. For ongoing accounting work, I use flat-fee billing where the client pays a pre-determined, set amount each month for the services provided (but the flat fee is determined by an estimate of the ongoing time commitment.)

Determining prices is the hardest thing I do. It may be THE thing that I struggle with the most as a solo operator.

But I’m firm in my heretical conviction that true “value billing” is all wrong.

Example of Why I Think Value Billing is a Bunch of Hocus-Pocus

Let’s say I’ve got two tax clients, the Smiths and the Joneses. Both are married couples with kids. They both itemize deductions and have some daycare expenses. They come to me for tax preparation.

Value billing says I should bill each client based on how much the client “values” the work I’m doing. Meaning, the Smiths might pay $200 but the Joneses might pay $350 if I perceive that I’m providing that much more value to the Joneses.

Where does the extra $150 of value come from? How does one determine that? How did I decide it was $150 more instead of $100 more, or $50 more, or $10,000 more?

Image courtesy of iosphere /
Image courtesy of iosphere /

An article in the Journal of Accountancy says firms should appoint a “Chief Value Officer” and a “Pricing Council.”

The author opines that the “Pricing Council” should determine 3 price points: “Reservation” (where you turn a “normal profit”), “Hope For” (where you generate a “supernormal” profit”) and “Fist Pump” (where you “generate a windfall profit”).

Sure sounds to me like the service provider’s goal in “value billing” should be to jack up fees as much as possible, and hope that the client falls for the “Fist Pump” price.

Which leads me to this harsh conclusion — in order to value bill, a service provider should ask two questions:

  1. Is the client rich?
  2. Is the client naive about typical fees for the services they seek?

If the answer to these two questions is yes, then you’ve hit a home run and can jack up the fee while telling yourself that it’s okay because of the client’s “perceived value” — which is seemingly grabbed out of the sky.

So there you have it from this heretic on value pricing. I welcome commentary from any of the True Believers out there who want to save me from damnation for my failure to see the light of value billing.