Average Tax Prep Fees

[Yardley CPA]

Interesting article...

What do you pay for professional tax preparation and filing help?

What do you pay your tax preparer to complete and file your tax return?

The national average to prepare an itemized Form 1040 with a Schedule A and a state tax return is $246.

$246

That's what the National Society of Accountants (NSA) discovered in a recent survey. It's also the latest featured By the Numbers figure.

If you have a simple tax situation, $246 probably sounds like a lot more than you want to spend to get your taxes done. That's cool. You have lots of tax preparation and filing options, so find the one that works best for you.

But, says the NSA, if a professional tax preparer can catch even one more deduction or credit that you may have missed, the savings could cover the tax pro's fee.

"I think most people would say this is worth the money, especially when you think about how long it will take you to do the return," said NSA Executive Vice President John Ams in a statement announcing the organization's biennial survey of tax preparers.

The NSA collected the tax prep fee data primarily from owners, principals and partners of "Main Street" companies with an average of more than 26 years of experience.

Other forms, rates: If you have simpler filing needs, you'll save, on average, around $100, according to the NSA survey.

The average cost to prepare a Form 1040 and state return without itemized deductions is $143.

As for other forms, the NSA found the following fees:

• $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 (capital gains and losses)
• $155 for Schedule E (rental income)
• $185 for Schedule F (farm income)

Regional cost differences: And as with the price of all professional services, fees tend to vary by region, firm size, population, and economic strength of an area.

The NSA broke out the average tax preparation fee for an itemized Form 1040 with a Schedule A and a state tax return in each U.S. census district:

• New England: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont = $237
• Middle Atlantic: New Jersey, New York and Pennsylvania = $258
• South Atlantic: Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia = $253
• East South Central: Alabama, Kentucky, Mississippi and Tennessee = $279
• West South Central: Arkansas, Louisiana, Oklahoma and Texas = $226
• East North Central: Illinois, Indiana, Michigan, Ohio and Wisconsin = $225
• West North Central: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota = $196
• Mountain: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming = $233
• Pacific: Alaska, California, Hawaii, Oregon and Washington = $288

The NSA also notes that nearly 90 percent of accounting firms offer prospective clients a free consultation. Such meetings, says the accounting organization, can be worth well over $100 based on the hourly fees of most tax preparers.

Do you use a tax professional? Do the NSA numbers match up with your payment experience?

How about you, tax preparers? Are your fees in line with the NSA findings?

[Guest Taxed]

>>> How about you, tax preparers? Are your fees in line with the NSA findings?

No!

>>> New England: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont = $237

May be CPA firms in the Boston area can get away with charging $237 for a 1040 with Sch A. BUT not in my rural neck of the woods of MA.

>>> East South Central: Alabama, Kentucky, Mississippi and Tennessee = $279

Why are these state higher than the average? Their per capita income is lower than most other states?

It would be nice to see the raw data.

[Catherine]

Those surveys are all based on totally bogus suppositions. If you look at my "normal" billing rates for 1040-A-MA it would be $205. But who has a 1040 and Sch A without a Sch B? Or a D? Who can buy a house without sufficient resources to have other accounts? What about non-schedule complications to the 1040 like educator expenses or student loans with worksheets to determine how much is allowed?

Plus, it makes no mention of all the other factors that go into pricing. If, for example, that 1040-A-MA return came in early, with every bit of info needed, I would probably discount the price - possibly as much as $50. If, on the other hand, I had to send a half-dozen emails asking for the 3Q property tax, or had to hound them for the closing statements to calculate the refi points amortization, I might hit them with a "accounting time" fee on top of the $205 -- which could easily hit $100 (depending on how much of a PITA they were to deal with).

Here's one for you -- picked up a family for 2012, brother to an existing client. He was charged $1075 for 2011. I would have charged $385 for the very same return. And every single client who has come to me from (insert name of favorite big box tax store) has found me to be substantially less expensive even though I think I charge very fairly if a bit skewed towards my benefit.

So I believe the "averages" they report in the article to be low -- or at the very least unable to be compared to real life situations. Nonsense, all of it. If you think your prices are fair to you, you're fine. If your clients think you're too high, they'll leave. That's fine, too -- it's called feedback. A free market runs on it -- what an un-coerced buyer is willing to pay an un-coerced seller for something they need that the seller is willing to sell. Milton Friedman talked about it a lot and there are plenty of videos on YouTube of him doing so.

[Guest Taxed]

>> If you look at my "normal" billing rates for 1040-A-MA it would be $205.

In my neck of the woods you are looking at $130 to $150 from small tax prep shops and around $180 to $200 at chain tax prep shops and small CPA shops.

[Jack from Ohio]

Catherine "gets" it. Taxed has yet to.

[TaxCPANY]

Except for your citing myopic monetarist Milton Friedman instead of awesome all-seeing Adam Smith, Catherine, I so totally agree with you.

Those surveys are all based on totally bogus suppositions. If you look at my "normal" billing rates for 1040-A-MA it would be $205. But who has a 1040 and Sch A without a Sch B? Or a D? Who can buy a house without sufficient resources to have other accounts? What about non-schedule complications to the 1040 like educator expenses or student loans with worksheets to determine how much is allowed?

Plus, it makes no mention of all the other factors that go into pricing. If, for example, that 1040-A-MA return came in early, with every bit of info needed, I would probably discount the price - possibly as much as $50. If, on the other hand, I had to send a half-dozen emails asking for the 3Q property tax, or had to hound them for the closing statements to calculate the refi points amortization, I might hit them with a "accounting time" fee on top of the $205 -- which could easily hit $100 (depending on how much of a PITA they were to deal with).

Here's one for you -- picked up a family for 2012, brother to an existing client. He was charged $1075 for 2011. I would have charged $385 for the very same return. And every single client who has come to me from (insert name of favorite big box tax store) has found me to be substantially less expensive even though I think I charge very fairly if a bit skewed towards my benefit.

So I believe the "averages" they report in the article to be low -- or at the very least unable to be compared to real life situations. Nonsense, all of it. If you think your prices are fair to you, you're fine. If your clients think you're too high, they'll leave. That's fine, too -- it's called feedback. A free market runs on it -- what an un-coerced buyer is willing to pay an un-coerced seller for something they need that the seller is willing to sell. Milton Friedman talked about it a lot and there are plenty of videos on YouTube of him doing so.

[JohnH]

Averages tell you something, but they don't tell you everything. For example, if I place one hand in the freezer and the other hand in a hot oven , then on average I should be feeling about right.

Or, as my former pastor used to reply when some would ask him what the "average" honorarium is for a wedding, funeral, etc -> "Well, the average is about $150, but hardly anybody ever gives the average."

[MsTabbyKats]

My fees are lower, but I work out of my home, without any overhead.

Everything is based on that specific client....so, someone with an A with no expenses other than state tax & charity won't pay much more than the standard deduction. Someone with a long list of every paperclip purchased pays me more.

As far as this free consultation....not with me.

I give an estimate based on what the client says they have....and then I add "as long as there are no surprises".

I believe next year I'm going to raise fees for new clients. I get a lot of referrals because of my "low fees" (the low fees started because my clients, for the most part, didn't have a lot of money)....but these new clients can afford more.

[Guest Taxed]

Catherine "gets" it. Taxed has yet to.

A free market runs on it -- what an un-coerced buyer is willing to pay an un-coerced seller for something they need that the seller is willing to sell.

I understand that too! You charge what the market will bear.

[Catherine]

Except for your citing myopic monetarist Milton Friedman instead of awesome all-seeing Adam Smith, Catherine, I so totally agree with you.

I figured Uncle Milty was enough of a stretch for some. And Adam Smith's work is taken out of context too much; you need to read his "Theory of Moral Sentiments" before "The Wealth of Nations" can be properly understood.

(And yes, I know that "Uncle Milty" referred to Milton Berle. I was being facetious.)

[Catherine]

A free market runs on it -- what an un-coerced buyer is willing to pay an un-coerced seller for something they need that the seller is willing to sell.

I understand that too! You charge what the market will bear.

That's not *quite* it. You charge what the time and effort is worth to you; where you feel fairly compensated for your trouble. If the market sees that as low, they will flock to you (as MsTabbyKat is finding) and you will then raise your prices. OTOH, if you lose clients, you will either lower your prices to entice new clients (and keep old ones), or decide to sell the business/close shop/retire/turn to hand-knotting hammocks to sale on Etsy.

What a truly free market (which we have NOT had in this country or much of the rest of the world, for decades at the very least) will quickly establish is WHERE that level is, at this particular time, in this particular location. "A smelly mess in the barnyard is valuable fertilizer in the south 40." (RA Heinlein).

Then one may decide (a) to purchase the good or service offered, ( b ) to offer that good or service oneself, ( c) or to refrain from either purchase or offer and do something else with one's time, effort, and money.

There will always be someone who sees opportunity in moving items from the barnyard to the fields, and finds an investment (kerchief, clothespin) that makes the effort worth their while.

[Lee B]

I was talking to the co-owner of a modest sized independent copy machine/printer dealership several months ago,

he was charged $625 for a 1040 with Schedule A, one Schedule E Rental and one 1120 S K-1 by a mid sized local CPA firm.

My fee for the same return would have $ 375.

[kcjenkins]

Actually, you really can't say what is 'fair fee' until you have done a return for the client, in my experience. You are looking at the finished product, but we all know that while two returns may LOOK identical, but often the work that went into them was quite different. One client may be well organized, give you his stuff early and complete, and be both polite and respectful of your advice, and pay promptly. The other is generally disorganized, late getting his data to you, you have to contact him three times to get everything you need, he ignores your advice then gripes when, as a result, things don't work out right. And once he finally gets you the last thing needed, he expects you to finish it the next day, then wants to pay you when.....[gets refund, next payday, in installments, or other].

SHOULD THEY BOTH BE CHARGED THE SAME? THE RETURNS LOOK ALMOST IDENTICAL, AFTER ALL.

[Guest Taxed]

>>> You are looking at the finished product, but we all know that while two returns may LOOK identical, but often the work that went into them was quite different.

You are correct. When we charge by the form alone that seems to get overlooked. I think a combination of by the form and time charge for return preparation may be a better method.

[Jack from Ohio]

Someone made this statement a long time ago on this site while discussing fees...

"If I double my rates, loose 50% of my clients, I earn the same amount of money doing half as much work."

There is a VERY SOLID business principal in that statement.

I have SERIOUSLY considered this course of action. The ones that would stay, appreciate my professionalism.

[MsTabbyKats]

Someone made this statement a long time ago on this site while discussing fees...

"If I double my rates, loose 50% of my clients, I earn the same amount of money doing half as much work."

There is a VERY SOLID business principal in that statement.

I have SERIOUSLY considered this course of action. The ones that would stay, appreciate my professionalism.

Not to mention that you'll need less supplies, use less time making calls and have less "after the season" follow-up.

This is the advice my husband keeps giving me..........it's called "working smart"!

[kcjenkins]

And if you are smart, instead of doubling the fees, just raise them 25 %, odds are high you will lose less than 10%. Or better yet, raise them individually, more for the PITA clients. That way, you either get rid of a lot of pain, or you get paid enough to not mind the pain.

[Guest Taxed]

I don't know about you guys but most of my 1040 clients are either related or affiliated to another client because I get 100% of my clients through referrals. I have many clients that I am doing 3 generations.

So when I look at the PITA factor and raise fees to alleviate that problem, I have to be very concerned about unintended consequences.

The most common PITA issue that I find is unorganized clients who will bring me a grocery bag or shobox filled with receipts. One option I offer is to have that organized for tax prep work by my part time assistant. She will charge anywhere from $10 to $15 per hour (1 hr min.) Quite a few of my clients will choose that option. And it helps her out as extra income.

[Gail in Virginia]

If we as preparers don't value our own work enough to charge a sufficient fee our clients won't value it either. I have never wanted to be the cheapest - I want to be the best.

[SaraEA]

"But who has a 1040 and Sch A without a Sch B? Or a D? Who can buy a house without sufficient resources to have other accounts? " Catherine, am I the only one who has lots of clients who make well into the six figures and the only interest they have is from their mortgage escrow? I always wonder how they can spend it all, but they sure do. And KC says he has clients who are "both polite and respectful of your advice, and pay promptly." I have a few clients who take over $100k from their retirement plans every year, have 10% withheld and NO state tax. How about the self-employeds for whom you calculate and print out estimates every year and they never send them in? My advice goes unheeded year after year so they end up paying interest and penalties. I want more of Catherine and KC's type clients!

What is missing from this discussion is those clients you have had for years, raising their fees a bit from time to time. It suddenly hits you that by now they are paying way less than what you charge for similar returns. What do you do? Some of them come in with their check already made out--are they being clever or just trusting?

As for clients who don't pay promptly? I feel strongly that we should not release or efile a return unless payment is in hand. The problem is there are always exceptions (those who always pay when their refund arrives, businesses where the invoice has to go through the accounts payable dept, etc.). The exceptions become the norm, and we end up chasing people for payment for months. (Some pay when they come in next season and we tell them no dice, but then they do the same thing that year. When will we ever learn?) This year we have decided to fire a number of clients. Those who don't pay relatively promptly are going on the list. This is relatively tricky because if they owe you money when you fire them, you'll never see it. There are others whose income and expense records are not believable, who you have to nag for info, are downright nasty when you nag, piecemeal their info, you know the types I mean. How do we respectfully fire them without making it sound like we are downsizing our business or that we hate them and never want to see them again? Maybe someone wants to start a new topic on this issue.

[Catherine]

And if you are smart, instead of doubling the fees, just raise them 25 %, odds are high you will lose less than 10%. Or better yet, raise them individually, more for the PITA clients. That way, you either get rid of a lot of pain, or you get paid enough to not mind the pain.

A few years ago I sent my usual tax season letter out in early January. Most folks got a line "fees going up, you should expect to see an increase of 3-5%." Some half dozen PITA clients got the same letter but the figure was 30%. All but one of those folks left (here's your hat, what's your hurry, and don't stumble on the way out). Should have done it *years* earlier.

[Catherine]

<snip>

As for clients who don't pay promptly? I feel strongly that we should not release or efile a return unless payment is in hand. The problem is there are always exceptions (those who always pay when their refund arrives, businesses where the invoice has to go through the accounts payable dept, etc.). The exceptions become the norm, and we end up chasing people for payment for months. (Some pay when they come in next season and we tell them no dice, but then they do the same thing that year. When will we ever learn?) This year we have decided to fire a number of clients. Those who don't pay relatively promptly are going on the list. This is relatively tricky because if they owe you money when you fire them, you'll never see it. There are others whose income and expense records are not believable, who you have to nag for info, are downright nasty when you nag, piecemeal their info, you know the types I mean. How do we respectfully fire them without making it sound like we are downsizing our business or that we hate them and never want to see them again? Maybe someone wants to start a new topic on this issue.

My tax season letter always includes a disclaimer that NO new work can begin until prior year balances are paid in full. Yes, there are folks who pay late (same ones every year) but -- at least my clients -- always pay.

What I generally do is charge a hefty fee for my forms and schedules -- then give the client a "discount" if they're nice, pay quickly, have all the info or respond quickly, don't drive me nuts... whatever. Those whom I need to pester get a much smaller discount -- if any. Built in PITA pricing. I never charge someone "what they paid last year" although I do look at last year's bill, last year's notes, last year's time lag to payment, etc. when figuring this year's price break.

I send out statements to those who owe -- most will pay up promptly then, usually with an apology for forgetting. The few that don't get the point with the "no new work" line. I have had to fire people; I usually try to wait until after their bill is paid (AND cleared!) - but have on occasion figured it was better to write off the money owed than to be stuck with an albatross.

But you're right; it's a tough line to draw and to hold.

[Guest Taxed]

>>> Maybe someone wants to start a new topic on this issue.

I agree a separate topic on Billing and billing practices may be enlightening. I am enjoying this topic and learning from others.

[Yardley CPA]

I also have a handful of clients who tend to pay well past an “acceptable” time. Some end up paying the previous year’s balance when they receive their invoice for the current years prep. I don’t make it a habit of allowing this, but sometimes it just happens. That’s going to change and I am also going to follow the advice that has been mentioned in a few of the responses above. I like Catherine’s approach. "No new work can begin until prior year balances are paid off."

I’m curious, as a tax preparer; would I be allowed to file a 1099-C to a client who does not pay? For example, if I prepared a client’s 2012 return and after repeated attempts to obtain payment (sending second and third notice invoices) could I file a 1099-C before the end of 2013 for that client? I believe I know the answer is that, as a tax preparer, I am not authorized to file a 1099-C. I recognize there are certain requirements to who can actually file them, but thought I would throw that out there. It certainly would be nice to have the option.

[JohnH]

I think you answered your own question. The instructions for the 1099-C as pretty clear insofar as who is supposed to file it. Personally, I'd never file a 1099-C for a non-paying client even if that were an option available to me, but I realize others have different views on this matter.

Who Must File

File Form 1099-C if you are:

1. A financial institution described in section 581 or 591(a) (such as a

domestic bank, trust company, building and loan or savings and loan association).

2. A credit union.

3. Any of the following, its successor, or subunit of one of the following:

a. Federal Deposit Insurance Corporation,

b. Resolution Trust Corporation,

c. National Credit Union Administration,

d. Any other federal executive agency, including government corporations,

e. Any military department,

f. U.S. Postal Service, or

g. Postal Rate Commission.

4. A corporation that is a subsidiary of a financial institution or credit

union, but only if, because of your affiliation, you are subject to

supervision and examination by a federal or state regulatory agency.

5. A Federal Government agency including:

a. A department,

b. An agency,

c. A court or court administrative office, or

d. An instrumentality in the judicial or legislative branch of the government.

6. Any organization whose significant trade or business is the

lending of money, such as a finance company or credit card company

(whether or not affiliated with a financial institution). The lending of

money is a significant trade or business if money is lent on a regular and

continuing basis.