How much does tax preparation cost?
How much does tax preparation cost?
$100 – $400 average tax preparation cost
Tax preparation cost
Tax preparation costs $100 to $400 on average. Tax preparers charge $50 to $200 per hour or a flat fee. The cost of tax preparation depends on your location, the type of tax expert you hire, the complexity of your return, and whether your income tax files are organized.
| Services | Average cost per form |
|---|---|
| Form 1040 (not itemized) | $100 – $300 |
| Form 1040 with Schedule A (itemized) | $200 – $400 |
| Form 1040-SR (seniors 65 and over) | $100 – $250 |
| Schedule B (Interest and dividends) attachment | $25 – $50 |
| Schedule C (Self-employed/business) attachment | $100 – $250 |
| Schedule D (Capital gains / losses) attachment | $50 – $125 |
| Schedule E (Rental income) attachment | $100 – $150 |
| Form 1099-MISC (Freelance income, royalties, and tips) | $25 – $50 |
| Form 1099-INT (Interest income from banks and credit unions) | $25 – $50 |
| Form 1099-DIV (Dividend income from stocks and mutual funds) | $25 – $50 |
Average cost of tax preparation
The average cost of tax preparation is $220 to prepare a basic 1040 form and state return with standard deductions. Preparers typically charge more if your return requires schedule attachment forms for itemized deductions, interest and dividends, rental income, or capital gains cost. Tax preparation for self-employed taxpayers is more complex and costly.
| National Average Cost | $220 |
| Minimum Cost | $25 |
| Maximum Cost | $800 |
| Average Range | $100 to $400 |
Tax preparation cost factors
More than half of American taxpayers use professional help to prepare and file their electronic tax returns. While the average cost for tax prep ranges from $100 to $500, several factors impact the final cost, including your location, the complexity and neatness of your return, and the preparer's qualifications.
Location
The fees for tax preparation differ across the country. Some states have no state income tax, so filing in those states is cheaper. Taxpayers who earn income from several states will pay more to file. Tax preparation typically costs more in metropolitan areas and less in rural areas.
Complexity
Since most tax professionals charge by the hour, the simpler your return, the less you will pay. If you're a salaried employee taking the standard deduction, a basic 1040 form can cost $100 to $300. If you're self-employed or earn income from rental real estate, your costs will be much higher than average.
Organization
Most tax preparation firms charge an extra $150 to $200 to prepare disorganized or incomplete tax files. The added fees compensate them for the extra time spent organizing or requesting clarifications. Also, firms often charge higher fees if you submit your tax return paperwork later than requested.
Preparer qualifications
Hiring a professional to prepare your taxes costs $100 to $500, depending on who you hire. Tax preparers with higher qualifications charge more, but they may find more deductions and reduce your final tax bill. CPAs, EAs, and tax attorneys can also represent you before the IRS on any matter, if needed.
| Preparer type | Average cost | Qualifications |
|---|---|---|
| Tax preparer | $100 – $300 |
|
| Certified public accountant (CPA) | $150 – $300 |
|
| Enrolled agent (EA) | $200 – $400 |
|
| Tax attorney | $300 – $500+ |
|
| PTIN holder | $100 – $300 |
|
Check a preparer’s credentials, including whether they have a valid PTIN for this filing season, through the IRS Directory of Federal Tax Return Preparers.
Billing methods
Tax professionals bill their clients in different ways, including:
Hourly rate – Most tax professionals bill this way, charging $50 to $200 per hour, with the total cost of the service based on the number of hours worked.
Flat fee – This method involves charging a set fee for a specific service, such as preparing a tax return or providing ongoing tax planning advice. If your taxes are more complex, extra fees apply to compensate for their time.
Retainer – This method involves paying a set fee up front for the tax professional to provide services as needed throughout the year.
Blended rate – This method is a combination of hourly and flat fees. The tax professional charges an hourly rate for certain tasks, and a flat fee for other tasks.
Matching rate – If you work with the same tax advisor every year, you may be charged a matching rate. This means they charge you what they charged the year before. If your tax situation has become more complex, you will be charged a higher rate.
Additional charges
Tax preparers have a regular fee schedule for their services which includes added fees for many common supplemental services, including:
File extensions – Filing an extension costs $25 to $100.
Tax prep retainers – Preparers charge an advance payment of $250 to $1,000 to retain their tax-related services for a set period of time.
Audit retainers – An IRS audit retainer ranges from $1,000 to $10,000 and is paid in advance by businesses wanting to secure the services of a tax advisor or accountant in the event of an IRS audit.
How to save money on tax preparation
Follow these steps to save money on your tax preparation costs:
Start gathering your documents early. This will help the preparer get started quickly and avoid charges for filing extensions.
Keep track of your income and expenses throughout the year. This will make it easier to prepare your return and avoid forgetting any deductions or credits.
Shop around for quotes from different preparers. Compare prices, services, and qualifications to find the best deal.
Consider using a tax preparation software program. These programs can be a great way to save money, but they may not be as comprehensive as having your taxes prepared by a professional.
Free tax return services
The IRS Free File program offers basic tax return preparation services to qualified individuals through their VITA and TCE programs.
The Volunteer Income Tax Assistance (VITA) program offers free tax help for people making $60,000 or less, persons with disabilities, and limited English-speaking taxpayers.
The Tax Counseling for the Elderly (TCE) program provides free tax assistance for people 60+ years of age. The program specializes in questions about pensions and retirement-related issues for seniors.
Other free or low-cost tax service options include:
A free DIY tax option is to use paper forms available at the library or post office or fillable forms at IRS.gov.
Taxpayers can file for free with Credit Karma as long as they are willing to give the company use of their private data for marketing.
Full-service tax prep with Liberty, Jackson Hewitt, or H&R Block is a low-cost option but their employees are seasonal and have limited training.
DIY tax software
Do-it-yourself (DIY) tax software is a great way to save on tax preparation. These software programs cost $0 to $250, with the highest rates for premium services. The software allows you to prepare and file your taxes from home. Most programs offer a 100% accuracy guarantee with live chat and phone support.
| Software | Average price | Details |
|---|---|---|
| Turbo Tax | Free to $249.99 |
|
| H&R Block | Free to $99.99 |
|
| TaxAct | Free to $79.95 |
|
| TaxSlayer | Free to $64.95 |
|
| FreeTaxUSA | Free |
|
Many online tax software providers advertise FREE preparation services for taxpayers with simple returns but beware that some providers charge a fee to file, and some also charge a hefty fee to file a state return.
Tax preparation FAQs
What is a tax preparer?
A tax preparer is someone who prepares, calculates, and files tax returns for individuals and businesses. They help clients navigate the complex federal and state tax codes and avoid penalties while maximizing their deductions and credits.
How much do tax preparers charge?
Tax preparers charge $50 to $200 per hour, on average, depending on their location and qualifications. Many preparers have set fees for services. Based on experience, they can quickly assess a return and accurately estimate the time it will take and then charge a flat fee for preparing that return.
Are tax preparation fees deductible?
Tax preparation fees are no longer deductible on personal taxes in the United States, due to the Tax Cuts and Jobs Act of 2017. However, self-employed taxpayers and business owners can still deduct their tax preparation fees as a business expense.
What is a preparer tax identification number?
A Preparer Tax Identification Number (PTIN) is a 9-digit number issued by the IRS. Anyone who is paid to prepare and file taxes must have a PTIN. The number is renewed annually and must be included on all federal tax returns filed by a paid preparer.
What should I bring to my tax preparer?
Staying organized is one of the best ways to save money on a tax preparer. When you visit your tax preparer, be sure to bring the following:
Proof of identity – Identification must be a government-issued ID, driver's license, or passport.
Social Security cards – Include social security cards for you, your spouse, and any dependents.
W-2 forms – Bring all annual income statements from your employer(s).
1099 forms – Bring proof of income from other sources, such as self-employment or investments.
Other income and expense documents:
Mortgage statements
Property tax bills
Medical bills
Charitable contributions
Retirement contributions
State and local tax returns
Bank account details – Bank account information is required for direct deposit refunds.
Copy of your previous tax return – This helps your preparer identify changes in income or deductions since last year.
How to find the best tax preparers near you
Hiring a skilled tax preparer can reduce your stress and tax burden. Follow these recommendations to find the most qualified tax preparer near you:
Search online for tax preparers on the IRS website, the National Association of Enrolled Agents (NAEA), and the American Institute of Certified Public Accountants (AICPA).
Verify they hold a PTIN for this filing season on the IRS Directory of Federal Tax Return Preparers website.
Inquire about their availability, qualifications, experience, services, and fees.
Read their online reviews on Thervo and Google.
Questions to ask tax preparation services
Ask these important questions to help you choose the tax preparation service that best fits your needs:
What training and credentials do you carry?
How many years of tax prep experience do you have?
Can you represent me in front of the IRS if I am audited?
What kinds of tax returns can you prepare?
Do you file my taxes electronically?
How soon will I get my refund through direct deposit?
What should I bring to the appointment?
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