How Much Does It Cost to Get Your Taxes Done?
You can’t run from them. You can’t hide from them. But you can get someone else to do them.
Yep, we’re talking about taxes.
For those of us who would like to spend our weekends at the park with the kids or, honestly, anywhere else but at a desk with tax forms and schedules, finding a tax advisor may be our only hope this tax season.
How much does it cost to have a professional do your taxes? Let’s take a closer look and find out.
How Much Does It Cost to Get Your Taxes Done?
The average cost for a basic tax form preparation is about $176.1 That fee covers a standard 1040 and state return with no itemized deductions.
But don’t run off with that number just yet. While the national average is a good starting place, a lot of things determine the actual cost.
Here are four questions you should ask yourself as you decide how much to spend on your tax filing:
1. How qualified do you want your professional to be?
The average Joe tax preparer will charge less than a high-quality advisor with loads of experience. But when it comes to the IRS and your money, the stakes can be high, depending on your specific situation.
Now, don’t get us wrong. We want you to save money just as much as you do. But when hiring experts—like tax pros, doctors and mechanics—we’re all for spending more cash to get the job done right. Paying an extra $100-300 on the front end may be worth it in the long run if the expert is thorough, accurate and ends up saving you a ton. Remember, we’re talking about estimates here, so adjust your professional expectations accordingly.
2. How organized are your taxes?
Show up at a pro’s office with crumpled receipts spilling from your pockets and manila folders packed with unorganized records and you’ll definitely pay a high fee. Here’s our rule of thumb: The more organized you are, the less work a tax pro has to do. And that means a lower cost in the end.
3. Where do you live?
The fees for hiring a tax professional differ across the country. For instance, you can expect to pay more than average on the Pacific Coast and less in the good ol’ South.2 Here are the average tax preparation fees for an itemized 1040 with a Schedule A and state return in each region:
- New England (CT, ME, MA, NH, RI, VT): $333
- Middle Atlantic (NJ, NY, PA): $290
- South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV): $268
- East South Central (AL, KY, MS, TN): $210
- West South Central (AR, LA, OK, TX): $271
- East North Central (IL, IN, MI, OH, WI): $249
- West North Central (IA, KS, MN, MO, NE, ND, SD): $214
- Mountain (AZ, CO, ID, MT, NV, NM, UT, WY): $263
- Pacific (AK, CA, HI, OR, WA): $329
You’ll notice all these averages are higher than the $176 mentioned above, but that’s because many people who use a tax pro have more complicated situations than the standard 1040 can cover. Either way, expect a slight fluctuation in cost based on the quality of the pro, the region and your specific needs.
How Do Tax Advisors Set Their Prices?
When you sit down with a tax advisor for the first time, be sure to ask how they’re going to charge you. It shouldn’t be a secret and you don’t want surprises! A tax advisor will usually follow one of these five methods:
1. They charge a set fee for each tax form or schedule.
No ifs, ands or buts about it! They have one flat fee per form or schedule. If you’re wondering what the average costs for filing common forms are, here’s the breakdown:
- $273 for a Form 1040 with a Schedule A and state return
- $176 for a Form 1040 (non-itemized) and state return
- $184 for a Form 1040 Schedule C (business)
- $124 for Schedule D (gains and losses)
- $135 for Schedule E (rental)
- $180 for Schedule F (farm)
2. They charge a fee that matches what you paid the year before.
If you work with the same tax advisor each year, you’ll often get a matching rate. That means your advisor will charge you what they charged the year before and maybe more if your tax situation has become more complex.
3. They charge a minimum fee plus more if your taxes are complicated.
Some advisors charge a flat fee, but if you make them think too hard, they’ll have to charge you more to compensate for their time. Definitely ask up front if your advisor has extra fees beyond the flat rate.
4. They charge a value-based fee—a price based on feeling.
Some tax advisors will say, Your taxes feel like they’ll cost $350. You can see how value-based fees can easily lead to disputes. Then again, advisors do this day in and day out and they’re used to quoting rates that match the elbow grease they’ll need to put into the job.
5. They charge an hourly rate.
If your tax advisor charges by the hour, make sure you find out how much they charge and how much time they expect to spend on your taxes. An advisor’s hourly wage can be steep—sometimes $400 an hour. But if they can get your taxes done in less time, you won’t get stuck with a high bill at the end.
Pricing Methods Used by Tax Preparers
You can ask up front how the firm determines its prices if you’re comparing tax professionals or accountants. Ask for an estimate of what their services might cost you, although you probably won’t get an answer—at least not a firm, definitive one—until you’ve met with the professional and they have a firm grasp of your tax issues.
Some accountants offer free consultations, so you might get an answer at the end of this initial meeting.
Otherwise, the firm would have to base its number on your personal summary of your situation, and this might or might not provide an accurate picture of your tax situation. After all, you probably wouldn’t be seeking a professional’s services if you were exceptionally savvy about tax matters.
Some of the methods used by tax professionals to set prices include:
- A set fee for each tax form or schedule
- A fee based on last year’s fee plus an additional fee for any changes in a client’s tax situation
- A minimum tax return fee, plus an additional fee based on the complexity of the client’s situation
- A value-based fee based on the subjective value of the tax preparation service
- An hourly rate for time spent preparing the tax return and accompanying forms and schedules
- A set fee for each item of data entry
Steps to Take Before You Prepare Your Taxes
Choose a Preparer
If you don’t have a tax preparer yet, a good way to find one is to ask friends and advisors (such as an attorney you know) for referrals. Be sure that the person you choose has a Preparer Tax Identification Number (PTIN) showing that they are authorized to prepare federal income tax returns.2
You should also inquire about fees, which are likely to depend on the complexity of your return. Avoid using a firm that intends to take a percentage of your refund. The IRS website has tips for choosing a preparer and a link to the IRS directory of preparers, which you can search according to their credentials and location.
Schedule an Appointment
The sooner you meet with your preparer, the sooner you should be able to complete your return (even if you decide to file for an extension, as discussed later). If you anticipate a refund, you’ll get that sooner, too. If you wait too long to schedule an appointment with a tax preparer, it might not happen before April 15, and you could miss out on opportunities to lower your tax bill, such as making deductible contributions to an IRA or a health savings account.3 4 Note: for 2020, the deadlines for making these contributions and for filing taxes is July 15.5
Gather Your Documents
By the end of January, you should have received all the various tax documents that you need from your employer or employers, as well as from banks, brokerage firms, and others with whom you do business. For each form, check that the information matches your own records.
What Happens If A Tax Preparer Makes A Mistake?
When the mistake doesn’t impact tax returns and/or refunds, you may still report the tax preparer under the following circumstances.
- Improper use of the Preparer Tax Identification Number (PTIN) on a tax return
- Not providing clients with a copy of their tax return when asked to do so
- Failing to sign tax returns they prepare and file
- Holding the client’s records until the preparation fee is paid
- Using off-the-shelf free tax software for preparing client returns
- Claiming to be a certified accountant, an attorney, an enrolled agent, enrolled retirement plan agent or enrolled actuary