The cost to hire a professional tax preparer is a good value, according to the National Society of Accountants (NSA). The NSA biennial survey of nearly 8,000 tax preparers showed the average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return is only $229. Rates for non-itemized returns are also low the average cost to prepare a Form 1040 and state return without itemized deductions is only $129.
“The tax code becomes more complex every year especially this year with so many new tax credits and other rules as the federal government attempts to provide some taxpayers with relief during the economic downturn,” says NSA President Robert L. Cross, PA, ABA, ATA. “With the constant changes and new provisions, it pays to have a professional tracking all the potential tax breaks for their clients, who may miss them on their own. Even one extra deduction or tax credit can more than cover the fee paid to a professional tax preparer.”
Taxpayers may also benefit by obtaining tax preparation estimates from more than one preparer from different size companies. For example, the survey found that tax preparation fees for an itemized Form 1040 with Schedule A and a state tax return averaged only $217 at one-person firms, and rose to an average of $245 for firms with three or more staff.
Firms with lower levels of gross income also charged less on average than larger companies. For example, tax preparation firms with gross annual income of $50,000 or less charge an average of $174 for an itemized Form 1040 with Schedule A and a state tax return, while a company with gross income of $400,000 or more charged an average of $305.
The survey found that the average fees for preparing other Internal Revenue Service (IRS) tax forms include:
• $212 for a Form 1040 Schedule C (profit or loss from business)
• $551 for a Form 1065 (partnership)
• $692 for a Form 1120 (corporation)
• $665 for a Form 1120S (S corporation)
• $415 for preparing a Form 1041 (fiduciary)
• $2,044 for Form 706 (estates)
• $584 for a Form 990 (tax exempt)
• $58 for a Form 940 (Federal unemployment)
All fees assume a taxpayer has gathered and organized all necessary information.
Fees also vary by region. The average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return in each U.S. census district are as follows:
New England $205
Middle Atlantic $252
South Atlantic $243
East South Central $137
West South Central $220
East North Central $193
West North Central $192
Sixty percent of accounting firms do not require payment until returns are completed and clients are satisfied. Ten percent require a percentage of the payment upfront, and 23 percent require payments during tax return processing. Ninety-one percent of accountants also offer electronic filing services for Federal and state tax returns, and accountants report that 84 percent of clients eligible for electronic filing choose this option.
Many accountants also hold one or more professional credentials that demonstrate their experience and expertise. These credentials (and the percentage of NSA survey participants holding these credentials) include:
• Enrolled Agents (federally authorized tax practitioners) 49.2%
• Accredited Tax Advisors 26.3%
• Accredited Tax Preparers 26.2%
• Certified Public Accountants 24.8%
• Accredited Business Advisor/Accountant 16.2%
• Registered/Licensed Public Accountants or Accounting Practitioner 11.8%
For more information and to use an online search directory to identify a qualified tax preparer in your area, visit www.nsacct.org and click on “Find a Professional.”