Big jumps seen in tax prep fees: Survey

The average fee nationwide to prepare a non-itemized 1040 and a state return jumped almost 26 percent in the last two years, according to a recent survey.

That represents a rise of $45, according to the “Tax Prep Pricing Guide 2020” from industry software company Canopy.

Responses showed that the average cost to prepare an itemized 1040 and a state return rose almost 11 percent (a $29 increase) from 2018. The average nationwide price for doing a 1040 with the Schedule C reportedly rose $40, or about 11 percent, from 2019 to 2020.

The average national fees for common tax prep forms reported this year were $302 for an itemized 1040 and state return, $221 for a non-itemized 1040 and state return, and $400 for a 1040 with a Schedule C.

Flat-fee billing has also become much more popular (81 percent of respondents) than hourly billing.

North Dakota averaged the lowest fees for preparing an itemized 1040 with a state return at $158; Hawaii was the highest at $483. The cheapest state for a non-itemized 1040 and a state return was Delaware at $125; the most expensive was Washington at $373.

Reported national averages for tax prep fees for businesses included $755 for an 1120, $721 for an 1120-S, and $682 for a 1065, Canopy said.

The percentage jumps in this survey seem significant given that in recent years preparers and other organizations’ surveys have found that prep fees tend to increase about 5 percent a year, with higher increases coming in the wake of tax law changes or the retooling of forms.