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.
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.