Tax preparers charge an average of $246 to prepare an itemized Form 1040 with a Schedule A and a state tax return, according to a survey by the National Society of Accountants.
John Ams
If a professional tax preparer can catch even one more deduction or credit that a taxpayer may have missed, that can pay for the tax prep fee, the NSA noted.
“I think most people would say this is worth the money,” NSA executive vice president John Ams said in a statement. “Especially when you think about how long it will take you to do the return. Just reading the instructions can take hours, let alone filling it out. Let a professional take the hassle out of it.”
Rates for non-itemized returns are also low, with the average cost to prepare a Form 1040 and state return without itemized deductions is only $143.
The cost of tax prep may even go lower now that a federal judge has invalidated the Internal Revenue Service’s tax preparer regulation program. U.S. District Court Judge James E. Boasberg enjoined the IRS from enforcing its requirements for testing and continuing education of Registered Tax Return Preparers (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers). Many tax preparers were forced to pass along the costs of complying with the new requirements to their clients. The IRS has suspended the program, but is appealing the decision (see IRS to Appeal Ruling Barring Licensing of Tax Preparers).
The NSA collected the tax prep fee information through a biennial survey of tax preparers. The tax and accounting firms surveyed are largely owners, principals and partners of local “Main Street” companies who have an average of more than 26 years of experience. Most of them hold credentials such as Enrolled Agent, CPA, Accredited Tax Preparer, Accredited Tax Advisor and others.
The survey also identified the average fees for preparing specific IRS tax forms, including:
• $205 for a Form 1040 Schedule C (business)
• $556 for a Form 1065 (partnership)
• $759 for a Form 1120 (corporation)
• $717 for a Form 1120S (S corporation)
• $468 for a Form 1041 (fiduciary)
• $628 for a Form 990 (tax exempt)
• $59 for a Form 940 (Federal unemployment)
• $134 for Schedule D (gains and losses)
• $155 for Schedule E (rental)
• $185 for Schedule F (farm)
However, the fees varied by region, firm size, population and economic strength of an area. The average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return in each U.S. census district are as follows:
• New England (CT, ME, MA, NH, RI, VT) - $237
• Middle Atlantic (NJ, NY, PA) - $258
• South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) - $253
• East South Central (AL, KY, MS, TN) - $279
• West South Central (AR, LA, OK, TX) - $226
• East North Central (IL, IN, MI, OH, WI) - $225
• West North Central (IA, KS, MN, MO, NE, ND, SD) - $196
• Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) - $233
• Pacific (AK, CA, HI, OR, WA) - $288
Nearly 90 percent of accounting firms offer prospective clients a free consultation, the NSA noted, and those can be worth well over $100 based on the hourly fees of most tax preparers.
Sixty percent of accounting firms do not require payment until returns are completed and clients are satisfied, the survey found. Others may require a portion of the fee upfront or payments throughout the tax return process.
All fees assume a taxpayer has gathered and organized all the necessary information beforehand. Taxpayers should make sure they provide information on time to avoid additional fees, the NSA noted. Some preparers will charge an average fee of $41 to file an extension, an average fee of $73 to expedite a return, and an average fee of $80 if information is not provided by 15 days in advance of a filing deadline.
The NSA offers an online search directory to help taxpayers identify qualified tax preparers in their area by visiting www.nsacct.org and clicking on “Find a Professional.” Taxpayers can also call (800) 966-6679.
15 Comments
I thought this was a useful list. I am in the MD/DC area (I also serve Baltimore). However, after reading some of your comments as well as AG (who is also from my area) I feel like I need to do some more research. I am just starting out and this is only my second tax season solo! I have to say though I intend no disrespect that I have only seen prices as low as $75-50 via Craig's List. I used to work at a tax prep franchise (only 1 season) their fees average in the $300s. They have no shame and could care less!I've seen EIC clients get "ganked" and they just take it out of their return like they won't miss it. They adjust preparation fees for no one and will give you some "Send a friend" for cash incentives as consolation, file the return and send you on your way!
Posted by: TaylorTaxAndBooks@hotmail.com | February 18, 2013 11:27 PM
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@wjeretidwell - at the fairtax.org website, it's proponents post the following:
"The FairTax is a national sales tax that treats every person equally and allows American businesses to thrive, while generating the same tax revenue as the current four-million-word-plus word tax code. Under the FairTax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to the prebate. The FairTax rate after necessities is 23% and equal to the lowest current income tax bracket (15%) combined with employee payroll taxes (7.65%), both of which will be eliminated."
Now I invite you to read a posting at http://www.factcheck.org/taxes/unspinning_the_fairtax.html . Written in 2007, I still think it's an excellent argument against the FairTax theory and exposing it to be in reality a rate of 30% and up. And according to this, the middle class would be hit the hardest. So much for lollipops and rainbows for everyone.
Do not assume CPAs or anyone else reading the IRS' code and regulations enjoys following the many twists and tangles of the laws that congress has passed in a few pages and handed down to the treasury department to be inserted and implemented into the current code and regs. A lot of time it requires reading mulitple resources to get to the intent of the code or reg, diagrams and decision trees on scratch paper, and checking with someone else to see if they come up with the same supportable position. And an analysis like that tends to get requested 1/2 day before the taxpayer has his appointment to go in and sign his name on the line of a whacked out deal he drew up for himself without letting his attorney or CPA know there was even a deal in the works.
Most of Congress is made up of business men and women, not accountants (although we got some CPAs voted in this time--YAY!)and therefore what they propose and pass sometimes has the practical application of handing out toilet paper to elephants so they wouldn't make so much of a mess. Every tax professional I know shakes their head at the inadequacy and ignorance of some things that have been passed that in theory may have sounded good but in every day real life are downright ridiculous or impossible. This is another reason why the tax profession has lobbyists--trying to impress on congress to think before they do something. This is why we have to have tax lawyers to get some tax situations decided by a court.
No doubt a change to the tax system may indeed be a necessity at some point. But for now this is what we've got, someone has to go to school to understand it and report according to it. When/if change comes, no doubt it will take a long time to implement the change--it certainly won't happen overnight. Think of all the computer systems and programs that would have to be changed, much less company policies of every type of entity. Personnel will need to be retrained, the consumer has to be educated, etc. Professionals will still be needed during the implementation and afterwards. No system can self-manage itself--human intelligence is still going to be required to monitor it and test accuracy. You think our government is going to be so kind as to trust all Americans to handle ANY system and follow the rules? No there will ALWAYs be crooks out there.
Actually the biggest point I wanted to makes is, between you and Mhammer 491, enough of the name calling on the professionals (to quote you, "someone making a great living as the blood suckers on a sick economic system")! I don't think I want to leave it to you to interpret the code and regs and prepare MY return. Your attitude toward our country and toward our "Marxist" tax system makes me wonder if you're even an American, and, if you are, maybe the CIA and FBI should be watching you--you sound scary to me.
Posted by: oktaxcpa | January 28, 2013 3:05 PM
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The fee schedule for filling out useless forms is a prima facia case for dumping the citizen based Marxist Income Tax. The tax industry affects about 100 million U.S. citizens. They are either in the IRS, Tax accounting, tax legal system or family friends or relatives of someone making a great living as the blood suckers on a sick economic system. The federal Government could collect the same income from The FairTax and 30 million people could get real productive work. HR25 to start, should be passed and the repeal of the 16nth amendment that voided the will of our founders, who opposed, in our constitution, a tax on income, establishing a national Sales Tax on all new goods and services. Second we must repeal all Federal Tax Laws. Third we must disband the IRS and all their Jack Booted enforcement Police. Fourth we should watch prosperity happen like never in your lifetime. Get your full paycheck, plus a monthly prebate of taxes you would pay next month on essentials. The poor are the major beneficiaries, getting about a 37% raise in income. Stop the accountant drain, stop the tax evasion of those who get their incomes in cash, stop the extortion the politicians get to stop the FairTax. TAKE BACK AMERICA AND PAY YOUR FAIR SHARE BY DECIDING WHEN TO BE TAXED BY WHAT YOU WANT TO BUY. (Spending is out of control, and unfortunately the airTax doesn't correct that)
Posted by: wjeretidwell | January 26, 2013 11:27 AM
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Mhammer491... If you are going to continue to bash everyone and blame Obama, I thought you might want to educate yourself a bit (although I it appears you abhor the possibility of educating yourself). The preparer regulation idea began in 2002 with the recommendation from Nina Olsen of the Taxpayer Advocate Service during her report to congress. 2006 the Government Accountability Office (GAO) began visiting preparers to see the results of test returns. In 2008 GAO looked at states that required registration and testing of their preparers. 2009 IRS Commissioner Douglas Shulman started the ball rolling with a comprehensive review of issues surrounding regulation of paid preparers. This initiative has been by the IRS Commissioner and the Tax Payer Advocate service, and reported to congress throughout the years. This is not a partisan issue as many would like to believe. Now go read pub 17 if you can...
Posted by: Unknown | January 26, 2013 9:40 AM
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@thecryer - AMEN
@mhammer491 - your opinion of CPAs is exactly that - an opinion. But not reality. As a CPA, I resent "the hell out of" (to stoop to your level) your comment. You have no clue what I and the other CPAs, the unlicensed tax professionals, and our "clerks" do in ethical CPA firms, especially the one I work at, how we establish fees and bill clients, nor our expenses. You have no idea how many HOURS I spend actually researching issues, preparing, reviewing returns, meeting and talking with my clients, studying and researching for presentations, attending or testing for self-study CPE, etc. So don't BS everyone that all we "do is sign returns" and "gouge the hell out of the American people." And oh yeah I've done a Sch F--and I worked in Houston. And I've done consolidated returns with international subsidiaries in an office in a town where the population was about 20,000. You can't sum us up and sterotype us into one comfy cozy definition that suits your mood of the day. Oh, you can if you want to, but you'd look like an idiot. Instead of resenting those of us who have earned our license, why don't you go back to doing what you do best and continue perfecting what you do for your clients?
There ARE CPA's that give tremendous care to what they are doing, and follow all ethics of their state board of accountancy and the AICPA and conform to Circular 230. And you know what, yes, there are arrogant ones that think the three letters give them entitlement to sign anything--with or without proper training. Same goes for tax attorneys, EAs and YES unlicensed tax return preparers--you've got the ethical, competent ones and you've got the slimey, incompetent ones. I have had to fix mistakes from all of the above. A "mistake" doesn't make one incompetent--a repeated, consistent pattern of making mistakes is probably your clue--NOT what title or hat that they do or do not wear.
Heck yeah, this industry needs to be regulated. I don't want a jokester sitting in prison filing a fraudulent return. I don't want ANYONE that doesn't hold themselves to the ethical and legal standards that I'm required to do to prepare a return.
Why is it so many (but not all) non-licensed preparers resent and are so hateful toward CPAs as a group? I ask that with all ignorance. When they point their finger at us, they need to look at the three pointing back at themselves. They need to ask if they're jealous they didn't have the funds to take all the college courses they needed or to pay for the CPA exam? Could they not pass the exam? Maybe they didn't even want to try--and if so, why not??? Had they passed it once but failed to renew their license or lost their license because they failed to otherwise comply with their state board?
On the CPA side, you CPAs that look down on the non-licensed preparers and resent and are hateful toward them--you need to look at how you're pointing, too. They may not be in a position to afford what we had to find the money for. If a preparer is consistently taking many hours of CPE, legitimately following ethical standards, giving advice backed by sound researched law, and filing accurate returns, accept them as your fellow soldier in the battle to get returns filed on time.
Someone's going to ask would I want a nurse doing my brain surgery. That depends. I've definitely had services of a nurse I trusted more than the doctor. And vice versa.
Posted by: oktaxcpa | January 25, 2013 5:47 PM
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The comments on this story really point out the differences between preparers who are subject to circular 230 and those who are not.
Posted by: thecryer@cryercpa.net | January 25, 2013 3:05 PM
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I've been preparing taxes for 47 years - not a CPA, but have an accounting degree. You have GOT to be kidding that preparers are that greedy that they would charge outrageous fees like that! I can't in all good conscience charge more than $50-75 for a 1040 with a Sch.A and B!! I mean, how long does it take, people?? 30 minutes max? Puleeze. And H&R Blockheads or Jackson-Puke-it are unreal with their fees. I've caught them in too many errors to count. Stop being so arrogant and greedy out there! You are not gods.
Posted by: Snick | January 25, 2013 2:08 PM
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What? Tax Prep Fees Average $246!!! Tell me where I can get that deal!
That doesn't cover the cost of filing just ONE form, the Foreign tax credit form 1116, or the FEIE form 2555, or the form 3520 for your mutual funds, or the FATCA form 8938, or the duplicative FBAR form.
Each of those forms alone, prepared by a "competent" International tax expert probably cost more than the average you state. Simple tax filing for a middle class person abroad is way way beyond what an average homelander is required to do.
This extra cost is due to the stupid fact that Americans abroad are subject Citizenship taxation unlike any other citizen of any other country who practice residency based taxation. The US system comes with complexity on steroids just to prove that you may not owe much. The failures to file the informational forms are Draconian, and with the 'Final FATCA Fatwa' now issued, you better be compliant or get out of dodge like Nina Turner just did.
Everything about trying to remain compliant with the US tax code from abroad are many many times that cost of that average homelander you speak of. Have you NOT been reading the National Tax Advocate Reports to Congress the past few years, do did you miss that section?
Posted by: Just Me | January 25, 2013 1:10 PM
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Why is all the concentration on individual preparers? The irs already has the power to throw anyone out of the profession if an individual file misleading and fradulent returns. Everyone is free to file his or her own taxes, are those individuals who file their own taxes have to take a test? No. Like one of the individual preparer said in his comment, we individual preparers are way more competent and careful, because we take pride in what we do and want our clients to be comfortable and come back to us. Most of us are not in this business to get rich like the big companies. We do not have lobbies, so we do not get away with mistakes after mistakes.
The irs has a questionare that every paid tax preparer must answered before it can issue a ptin. The irs also have forum that attracts thousands of individuals preparers every year, and even companies that are satisfied by the irs also offered such forums. I think the irs should come up with a plan that will allow people that attend these forums take a review test or quiz at the end of the forum.
Posted by: dumcat | January 25, 2013 12:09 PM
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You are speaking about a national average. Unfortunately, tax preparation and consulting is very much a regional business. In large cities like Los Angeles, New York, San Francisco, and Chicago, the average is higher. I could not cover basic costs of software and rent with an invoice for $246. My minimum billings are $550 and up and I am one of the least expensive preparers in the West side of Los Angeles with many charging upwards of $1,000. Even H&R Block charges more than $246 for simple returns. This kind of news reporting without provisos is misleading to the general public.
Add in rental, sole proprietorships and ex-pat issues and they fees are much higher. While I am sure there are areas in which tax preparation is less expensive and for many clients their needs are simple, but blanket statements are just not telling the whole story.
Posted by: M. Debra R | January 25, 2013 11:42 AM
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As I have noted before, those people who are upset because the Federal Judge overturned the apple cart of the IRS under the direction of Obama, are the ones who are price gouging the hell out of the American People! They can afford to hire the clerks, and assistants who actually prepare the majority of the tax returns that they file, and all they do is sign the forms.
$400 for an average tax return is ridiculous especially in a rural setting where I live. This is why the CPA's, the EA's, and the Tax Attorneys want the tax preparer business regulated so that they continue to have control over the market. And all they will do is to hire additional office staff at something over the minimum wage to handle the workload.
Posted by: Mhammer491 | January 25, 2013 11:35 AM
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I never find these price scales very useful. Our firm (10 people) is between Washington, DC and Baltimore, MD and if we prepared the type of returns listed above for $246 we would be undercutting the local H&R Block, and the retiree doing returns for his neighbors. Basic returns around here start at $400 and go up from there. Glad this information is useful to some.
Posted by: AGS | January 25, 2013 9:25 AM
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Roger, I am a CPA practicing in Canada, my business dealing almost exclusively with American expats in Canada. The prices above seem fairly reasonable for what they are. In Canada, our prices are a bit higher as we have multiple other forms to fill out. However, if you are a simple expat, I have done returns in the 200-300 range and I have seen returns go for more than $1000. It all will depend on what the client needs. The major problem with Americans abroad are all the rules regarding day to day life. If someone owns a corporation in their country of residence, form 5471, a partner in a law firm, form 8865, an education savings plan or retirement plan, form 3520 & 3520A per account and God help anyone who actually owns a mutual fund or other PFIC - form 8621. My company website ustaxesincanada.com has an FAQ page, one of the questions dealing with how to be sure your expat tax preparer knows what he/she is doing. Follow my indicators to a quality tax preparer abroad and you should be fine. One thing to consider though, especially for Canadians is that US based accountants often don't know how to deal with an American who lives abroad. Unfortunately, for the Americans abroad, these services will not be cheap although in my case, I try and be reasonable with my clients. Unfortunately, citizenship based taxation with a tax code like the US has, penalizes Americans for living abroad and nobody in congress will ever care as they don't get to vote.
Posted by: nfarkas | January 25, 2013 8:26 AM
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Actually there are several preparers, me being one, in Mexico. I know of at least 7. While I have not analyzed the pricing information in the article, on the surface it seems close to my prices.
I do not know if we are allowed to provide contact data here, but I have a add in the local English language weekly in San Miguel de Allende, Mexico
Herb Wilson
Posted by: hwilson99 | January 25, 2013 8:04 AM
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Great information, but where are the numbers and costs for preparing and filing US tax returns for the 7 million US citizens who live and work abroad? They are subject to exactly the same filing requirements as those living in the US, but must also submit a myrad of additional schedules and forms not listed above. And they are subject to US tax on income which is tax free to residents of the US such as employer contributions to foreign Social Security, their own and employer contributions to deferred payment pension plans, etc and they must submit Forms 1116, 2555,and others, plus FATCA reports on their financial accounts abroad and FBAR reports on both their own and the bank accounts of employers, charaties, etc. they don't own but over which they have signature authority.
And where and how can US citizens abroad find competetent accounting firms to provide this service? The number of US citizens and foreigners with US resident green cards exceeds the cumulative total number of taxpayers in several our states. There are about 1 million overseas Americans in Canada and another 1.5 million in Mexico, plus another 4-5 million in other countries.
Posted by: RogerC | January 25, 2013 7:39 AM
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