Thursday, April 18, 2024

How Much To Charge For Tax Preparation

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To Itemize Or Not To Itemize

How Much to Charge for Income Tax Preparation Services

You might not have to torture yourself over the decision between itemizing and claiming the standard deduction. The Tax Cuts and Jobs Act effectively doubled the standard deduction for all filing statuses when it went into effect in 2018.

As of 2021, you’d need more than $25,100 in itemized deductions to make itemizing worthwhile if you’re married and you file a joint tax return . You’d be taxed on $5,100 more in income if you itemized and have only $20,000 in itemized deductions. That’s not even to mention the additional tax prep fee.

The standard deductions for other filing statuses are $12,550 if you’re single or if you’re married and filing separately , and $18,800 if you qualify as head of household .

Should You Use Free Tax

The average cost of having a professional prepare a federal Form 1040 income tax return for the 2018-2019 tax season was nearly $200 for the simplest returns, according to the National Society of Accountants. And the more complex your tax situation, or the more forms you need to file, the higher the cost can run.

Lets look at how much it could cost to pay someone else to do your taxes, and what your options are if you choose to save money by going DIY.

Refund Anticipation Checks Or Refund Transfers

After the crackdown on RALs, tax preparers shifted to refund anticipation checks . With RACs, a bank affiliated with the preparer opens up a temporary account into which the customers refund will be deposited. When the refund arrives, the bank deducts preparer fees and add-on charges, issues a check or prepaid debit card to the consumer for the remaining balance, and closes the account. In some instances, customers incur additional fees to cash the check or find hidden terms and conditions with using the debit card. About 20.5 million taxpayers obtained an RAC in 2017, paying at least $500 million for such products.

RACs raise concerns because customers who use them would have received their refunds in the same amount of time without the RAC, only they would have avoided paying RAC fees if they direct deposited their refunds into their own bank accounts. For this reason, consumers who do not have bank accounts should consider opening one to speed receipt of their refunds and avoid check-cashing fees. Taxpayers with debit cards and payroll cards can also have refunds deposited into those accounts.

THE BOTTOM LINE Dont use RACs. If you have to use a paid tax preparer, try to pay the fee up front and have your refund direct deposited into your own bank account.

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Individual Tax Return Pricing

Our fees are based on the complexity of your tax return. We have a posted fee schedule readily available to the public at all of our offices. In general, we:

  • charge a fixed price for each tax form and worksheet used in the preparation of your tax return
  • may apply a per-item charge for certain items, like stock sales and depreciation
  • charge $6 for each W-2, 1099-R, social security, 1099-INT and 1099-DIV income statement that you have

Situations that can impact the pricing of returns

  • If your income is over $125K and you reside inside Metro or Multnomah County, you will likely be required to file and pay Multnomah County’s Preschool for All tax , and Metro’s Housing Services tax , please see Examples B and E, below.
  • If your income is over $200K , you are typically required to pay additional taxes which require use of Form 8959 and 8960 . Please see Examples B and E, below.
  • Claiming dependents, and college or childcare expenses requires preparation of additional forms. Please see Examples, A, B and 4, below.
  • Sale of home, sale of stock, K-1 income from a partnership, S corporation, trust or estate, requires additional forms. Please see Example 6, below.
  • If you have over $10,000 in foreign financial accounts, you are required to report these accounts. Please refer to Example 12, below.
  • If you have income from another state, please refer to Example 10, below.

Estimating the cost of preparing your tax return

Where Do You Live

How Much Tax Preparation Would Cost You by CPA Accounting ...

The fees for hiring a tax professional differ across the country. For instance, you can expect to pay more than average on the Pacific Coast and less in the good ol South.2

Here are the average tax preparation fees for an itemized 1040 with a Schedule A and state return in each region:

  • New England : $285
  • Middle Atlantic : $303
  • South Atlantic : $339
  • East South Central : $217
  • West South Central : $313
  • East North Central : $273
  • West North Central : $267
  • Mountain : $310
  • Pacific : $4323

Youll notice all these averages are higher than the $220 mentioned above, but thats because many people who use a tax pro have more complicated situations than the standard 1040 can cover. Either way, expect a slight fluctuation in cost based on the quality of the pro, the region and your specific needs.

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You Have Other Options

You can save considerably by purchasing tax preparation software instead if your tax situation isn’t very complicated. These programs have evolved considerably over the years and are set up to ask you specific questions, then prepare your return based on your answers and the data you input.

As of Dec, 2021, prices start as low as $19.95 for the H& R Block basic tax software. You can file a simple tax return for free with TurboTax, but any returns looking to maximize deductions would require its programs starting $39. There might be an extra cost for preparing state returns, however.

You can have your return prepared and filed for free through IRS Free File if your tax situation is very simple and basic, subject to some income limits. You can’t have more than $72,000 income, and some of the participating providers’ limits are even less than this. The Free File website can guide you to what’s available.

The IRS Volunteer Income Tax Assistance Program also provides free tax preparation for low-income taxpayers, as well as for the elderly, disabled, Native Americans, rural citizens, and those for whom English is a second language. There were more than 7,350 volunteer program sites across the U.S. as of March 2021.

How Complicated Are Your Taxes

Lets be honest for a second: If you want a plain vanilla tax filing, you could probably get away with paying a fee close to the minimum range. But the more complicated your tax situation is, the more time itll take to prepare your return. And we all know time is money.

For example, lets say you have a side business. Youll want to itemize deductions and file a Schedule C IRS form in addition to your basic 1040. In that case, the average cost is around $515.4

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A Taxpayer’s Guide To Tax

About 50 percent of all tax filers pay a pro to prepare and file their tax returns. Even IRS Commissioner John Koskinen is in that boat. He has said he hires an accounting firm and pays a few thousand dollars to get his taxes done.

If youre among this group, especially if its for the first time, how do you know how much should it cost?

Most tax preparers base their charges on the complexity of your tax situation and the completeness of your information. In fact, many say theyll charge extra when a client is poorly organized and has incomplete records of their income and deductions.

Preparers can also charge in a variety of ways, such as a set fee for each form and schedule required or an hourly rate for the time spent preparing your return. That hourly rate can be based on the actual time they spend on your returns or on IRS guidelines for estimated times to complete certain forms.

Regardless of how youre charged, its always best to provide the tax pro all of your information for review and ask for a firm estimate of the cost before you agree to go forward. This is especially needed if its the first time youre working with this person.

How can you know what youre paying compared to what others are being charged?

The average fee for a Form 1040, Schedule A , a Schedule C and a state tax return is $457.

What Are Tax Preparation Fees

How much should I charge for tax preparation?

Tax preparation fees are the price that the tax accountancy professionals charge individuals, small enterprises, and LLCs for services with tax return filings. The general rule is that the more complex your tax return or higher earnings, the more your tax preparing fees increase.

Get Help With Your Taxes

Most accountants or tax preparation professionals will offer to do a free consultation before they can set a tax preparation fee schedule or charge preparation fees. When considering a reputable tax preparation firm, there is always a need to find out how these costs are calculated and determined. Ask the all-important questions – are tax preparation fees tax deductible?

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Deducting Tax Preparation Fees As A Business Expense

While tax preparation fees cant be deducted for personal taxes, they are considered an ordinary and necessary expense for business owners. This means that if you are self-employed, you can deduct your tax preparation fees under your business expenses, at least through the year 2025 if Congress does not renew the TCJA. Specifically, those eligible includes:

  • Sole proprietorships who fill out and file Schedule C for Form 1040 or 1040-R which allows you to report income or losses from businesses you operated as a sole proprietor
  • Business owners whose businesses are classified as partnerships, limited liability corporpations, or S corporations
  • Farmers who file Schedule F which reports income earned from agricultural activities
  • Individuals receiving income from rental properties, royalties, or other income reported when filing Schedule E

Independent contractors and statutory employees may also deduct tax preparation fees. This includes:

  • Food and beverage delivery drivers who are paid on commission
  • Full time travelling or local sales people who get paid solely on commission
  • Life insurance agents
  • Freelance workers, such as graphic designers.

If you arent sure if these apply to you, its important to consult with an experienced tax professional to help you avoid fines and fees.

Charging A Fee Similar To What Was Paid In The Previous Tax Year

Working with the same tax preparer year after year, and where the tax situation for has remains more or less the same may get you matching tax preparation fee rate. In their tax preparation fee schedule, any extra charges in such tax preparing rates will arise if the tax situation has changed or become complicated.

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Working With A Cpa Has A Few Other Benefits:

  • Accountants use professional software to prepare your tax return, error-free, and retain your information to expedite preparing and filing your taxes in subsequent years
  • Given their professional experience and knowledge of the tax code, CPAs often find ways to reduce your taxes
  • Typically, CPAs will pay any interest or penalties for accounting errors
  • You can ask your accountant any tax-related questions along the way and gain insight
  • With access to your financials, a CPA will likely be able to identify financial issues and provide advice

Bottom line: Hiring a CPA to prepare and file your business taxes can save you time and unnecessary stress, and can be counted as a business expense. You want to focus on your work during the year and avoid anxiety as tax season approaches. Knowing youve paid someone to handle your tax return could free up critical mental space for your day-to-day work.

You Can Expect To Pay More If You Have Any Of The Following:

NSA Survey Reveals Fee and Expense Data For Tax Accounting ...
  • Real estate taxes or home mortgage interest deductions
  • Small business expenses that may qualify for deductions
  • Rental income and expenses that may qualify for deductions
  • Investment income on stocks, bonds, or cryptocurrency

Choosing the Online Assist option adds unlimited, on-demand help from a tax professional throughout your DIY filing process. The service grants you unlimited help from an expert and allows you to screen share, or get help via chat or video. Support can be provided on any device, including a tablet or phone. This service costs anywhere from $69.99 to $194.99, plus $36.99 for a state return, not considering discounts.

If you want to use downloadable computer software, those packages are priced based on the number of income streams and credits/deductions you have, and can range from $29.95 for the basic version up to $89.95 for the Premium and Business options, plus state return and e-file fees, not considering discounts.

Finally, you can choose to have a tax expert prepare your return. On H& R Block’s website, you’ll select your location then see a range of experts available in your area. You can view available tax professionals and pick the one you’d like to work with . The starting price for this option is $69.99, plus $65 per state.

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Charging A Fee For Every Item Of Data Entry

While the charged rate for each item of data entry may be low, this method of determining tax preparation fees could end up being quite expensive if you have a large number of entries to make. Before agreeing to work with a tax professional who calculates fees based on this method, take stock of how much data entry will be involved in your return. For instance, if you have a large number of capital assets that were sold in the past year, chances are that completing your Form 8949 will require a lengthy amount of data entry. This matter could get even worse if the rate for each item of data entry is high.

How Much Does An Accountant Cost

How much does an accountant in the UK cost for small business owners and individuals? This is a question that you may be searching for if you have just started a new business for the first time.You may even be wondering what the benefits of having an accountant are or Do I need an Accountant?. We will cover those questions in another article

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Ask Questions Before Hiring A Tax Preparer

If you feel you need to hire a tax preparer, be sure to shop around. Ask about their education and experience. Insist that they explain the basis for each portion of their fee. Find out if the they are affiliated with a professional organization that provides or requires its members to pursue continuing education and holds them accountable to a code of ethics. Make sure that they are registered with the IRS, and will sign your return as required by law. If they offer a no fee advance on your refund, make sure you fully understand the terms and the price of the other services before signing up.

The Level Of Tax Document Organization


Having disorganized tax receipts and records will fetch a higher price as it means the preparer has more work to do. Well organized tax documents call for less summarization and management, therefore bringing tax preparing fees down.

Asking the question are tax preparation fees deductible? displays a level of commitment for organization and cost-consciousness.

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What To Do In The Event Of Dispute

Inevitably, clients and tax accountants might disagree over the appropriate price of tax preparation services. Treasury Department regulations protect you in fee disputes. You’re entitled to receive your original tax documents back from the accountant even if you haven’t paid the fee.

Accountants can keep any forms, schedules, and documents that they’ve preparedthey don’t have to turn these over to you without compensation.

How To Save Money On Tax Preparation Fees

However you choose to do your taxes, there are a few ways to save money.

  • Get your paperwork together
  • Do your research

    Request a few quotes from reputable providers to make sure youre getting a fair deal.

  • Dont pay for more firepower than you need

    A simple return may qualify for free preparation from VITA or at least a discounted rate from a chain preparation firm. You probably dont require a tax attorney for just a simple 1040 without itemizing or other schedules.

  • Ask about discounts and promotions

    According to the Association of Tax Professionals, 86% of preparers offer a free consultation for prospective clients and/or one of these other discounts:

    • family or friends of a tax preparer
    • family or dependents of a client
    • students
    • discount for a past service error
    • filing before a specific date
    • charities or non-profits
    • vocation or affiliation

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    Advantages Of Hiring A Tax Professional

    When you pay a professional to do your taxes, you are getting the added benefit of numerous other services, including accounting, record-keeping, tax consultation, and auditing. You can also hire an accountant who has a particular specialization, for example, if you own a small business or live abroad. Some professionals are generalists, but no matter what, it is important to hire someone with a level of experience.

    Accountants can provide assistance in building up an effective accounting system to accurately and conveniently assess profitability, monitor prices, and expenses, control budgets, and forecast future speculation trends. Accountants can also consult with their clients on tax-related problems, such as tax compliance and regulations and methods of tax reduction. Moreover, accountants can come up with accurate audit reports, financial statements, and other accounting documentation required by government regulation and lending institutions.

    At the end of the day, hiring an accountant can be the start of a fruitful relationship with a financial consultant. They will learn about your family or business’s financial records and goals, and they can give valuable advice and personal tax reduction suggestions and answers to critical questions at any time of the year.

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