Despite life's uncertainty, some things remain constant - like the need to file a tax return. 

In the lead-up to tax season, you may be asking yourself: should I file my own tax returns with the help of tax software, or should I hire someone like a tax preparer to do it for me? Your decision will likely be heavily influenced by cost.

So, how much does it cost to have a professional do your taxes? Read on to learn more. 

How much does it cost to file your taxes?

In short, it depends. Tax professionals charge a wide range of prices, so the cost of filing your taxes will vary. In general, tax form preparation costs about $220 on average. This fee covers a standard 1040 and state return with no itemized deductions. 

Despite the national average serving as a good starting point, many factors determine the actual cost. A tax professional's services may cost between $200 and $600, depending on your tax situation, where you live, and how they charge for their services.

If you're looking for the lowest price, you should consult various tax preparation firms to get a feel for their price ranges. Although they might not be able to provide you with an exact quote right away, they can give you either an average or range of prices depending on your tax situation.

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How Do Tax Preparers Set Their Prices?

You should always ask how a tax preparer is going to charge you when you meet with them for the first time. This will help you avoid surprises down the line.

Most tax preparers follow one of these three pricing methods:

1. Tax forms and schedules are charged at a fixed price

Tax preparers may charge a flat fee per form or schedule. Here's an overview of the average filing fees for common forms: 

  • $323 for a Form 1040 with a Schedule A and state return
  • $220 for a Form 1040 (non-itemized) and state return
  • $192 for Schedule C (business)
  • $118 for Schedule D (gains and losses)
  • $145 for Schedule E (rental)
  • $200 for Schedule F (farm)

2. You are charged a minimum fee plus additional charges if your taxes are complicated

There are some tax preparers who charge a flat fee, but if your taxes take longer than planned, they'll need to charge you more to compensate for their time.

You should ask your tax preparer upfront if there are any additional fees beyond their initial quote. 

3. They charge an hourly rate

Ask your tax preparer in advance how much they will charge and how long they will spend on your taxes if they charge by the hour.

Normally, a tax professional will charge between $100 and $200 per hour, depending on what kind of tax forms you need to file. The sooner your taxes are done, the less you will have to pay at the end.

What Variables Affect Tax Preparation Cost?

Preparation of tax returns doesn't come with a standard fee. Most tax preparers charge a flat fee for each return, but some charge an hourly rate.

The cost of this service is affected by a number of variables.

Type of return

The type of return you file determines the cost of preparation. In 2020, the National Society of Accountants reported that the average fee for preparing Form 1040 with Schedule A to itemize deductions, plus a state income tax return, was $323; the average fee for Form 1040 with the standard deduction was $220.

Fees increase as you add schedules to your return. Schedule C fees, for example, averaged $192 for sole proprietors and independent contractors. Schedule D for reporting capital gains and losses required an additional fee of $118. A fee of $145 was added to Schedule E to report rental income and losses. Individuals who filed returns requiring Schedules A, C, D, and E paid an average of $778. In 2020, many preparers increased their fees.

Your location

There is considerable variation in the costs of tax preparation across the country. Fees are lowest in the Southeast, while they are highest in New England and on the West Coast.

Expertise of the preparer

The price of getting your taxes done is also greatly affected by the credentials of the preparer you work with, as well as their experience. For example, certified public accountants (CPAs) usually charge more than enrolled agents or tax advisors.

What Does the Cost of Tax Preparation Include?

You should find out what is included in the fee before hiring a professional. Is there a fee for electronic filing, telephone calls, and office visits?

There are firms that charge an extra fee for audit protection, such as H&R Block and Turbotax. Essentially, you're prepaying for the costs you might incur if the IRS scrutinizes your tax return.

Find out what's included in your initial fee if your return is audited, and what happens if the preparer made the mistakes without your fault. 

How to Save Money on Tax Preparation 

Regardless of how you file your taxes, there are ways to save money.

1. Get your paperwork together

Organize your expenses, income, receipts, statements, etc. Place receipts into folders and label them throughout the year. Add the numbers together when it’s time to file so that the preparer can fill in the appropriate blanks.

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2. Do your research

Make sure you're getting a fair deal by getting quotes from several reputable providers.

3. Don’t pay for more than you need

Chain preparation firms may prepare simple returns for free or at least at a discounted rate. If you only need to file 1040 without itemizing or any other schedules, then you probably do not need a very expensive tax preparer.

4. Ask about discounts and promotions

The Association of Tax Professionals reports that 86% of preparers offer free consultations for prospective clients or the following discounts:

  • family or dependents of a client
  • students
  • senior citizens
  • new clients
  • returning customers
  • filing before a specific date
  • charities or non-profits

What Are The Advantages of Hiring a Tax Professional?

Tax preparation companies offer a wide range of other services besides tax preparation, including accounting, record-keeping, tax consultation, and auditing. A specialist accountant is also available if, for example, you own a small business or live abroad. Despite the fact that some professionals are generalists, it is always important to hire someone with a level of experience.

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Accounting professionals can help set up an accounting system to accurately and conveniently assess profitability, monitor prices and expenses, control budgets, and forecast future speculation trends. Additionally, accountants can provide tax-related advice to their clients, such as tax compliance and regulations.

Further, accountants can produce accurate audit reports, financial statements, and other accounting documents that are required by governments and lending institutions.

Hiring an accountant can open the door to a beneficial relationship with a financial consultant. They will become familiar with your family's or business's financial records and goals. Any time of the year, they can provide valuable advice and suggestions and answer critical questions.

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