You can structure the price mode in many ways. It’s up to you whether you want to charge the same from everyone or make a tiered price structure based on the return you’ve filed or the total time you’re spending on filing their returns.
Factors Affecting The Tax Preparation Costs
People who have never hired tax preparation services before are probably wondering, “how much does it cost to get a professional tax preparation done?” The answer is not an exact figure as the amount can vary based on many factors.
All of this comes down to the spent time while preparing tax returns. The average fee for tax preparation is based on three main factors:
- How organized is your tax preparation method?
- In which city or town do you live?
- The level of difficulty of your tax filing?
Organization
After showing up the appointment for tax preparation with the shoebox of receipts, documents, and miscellaneous statements, clients have to pay an hourly rate to the tax preparation expert to organize and add up the items. It adds up many dollars in their total cost.
Location Is Vital
The location where you’re preparing the taxes is also a vital factor. You don’t need to file income tax in some states, so it’s cheap to prepare and file taxes.
Taxpayers deriving earnings through different states would have to pay more for filing. Furthermore, it costs more to get your taxes done in larger cities. The average hourly rate, according to the National Association of Tax Professionals, in 2021 ways:
- $209 per hour for towns of up to 50,000
- $189 for towns with 10,000 to 50,000 residents
- $164 for small communities with less than 10,000 people.
Complexity Is Vital
Your total tax preparation cost can also vary based on the complexity of the tax return. Tax associates mostly charge by the hour, through the form, or by combining both. For example, the hourly rate to organize shoeboxes of receipts comes with separate charges for the tax forms.
Here you would need to lower your price than the average cost if your client is a person who draws salary while taking standard deduction without any further tax credits or schedules.
For self-employed people or people getting income from rental real estate, assets to depreciate, depleted partnerships, or foreign sources, the costs can be higher than the average tax preparation fee for the complexity.
The Average Amount For Professionals To Prepare Tax Returns
According to the survey made by the National Society of Accountants 2018 – 2019, the average fee for tax preparation in Form 1040 and the state return without any itemized deductions is $188. Itemizing deductions spike the average fee by $100 to $294.
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People with more complex financial situations should file more IRS forms. You can file other fees and also add up more. The National Society of Accountants states some average tax preparation and filing charges in the tax forms.
- $109 for the Schedule D, meant for losses and gains
- $187 for the Schedule C, meant for income from business
- $175 for the Schedule F, meant for income from farm
- $136 for the Schedule E, meant for rental income
- $65 for the Form 940, meant for federal unemployment
- $52 for the Form 1095-A, meant for the health insurance marketplace statement
- $49 for the Form 8965, meant for exemptions of health coverage
Clients who need to file an estate tax return on behalf of the deceased taxpayers pay an average fee of $1,784 to prepare the form. It is calculated based on only the estates up to $11.4 million. It seems fair for the tax professionals to charge higher for preparing such complex forms.
However, you should remember that some people in the low-income bracket also need to pay more to file tax returns to claim the federal earned income credit. It is a refundable tax credit for benefiting low to average income workers.
On average, they’ll need to pay an additional $62 for filing the Schedule EIC, helping in claiming the credit. This payment is for the average total cost of $250 for filing state and federal returns through the standard deduction and claiming credit.
How To Set Your Tax Preparation Fee?
As a tax consultant, you can set your fees. Here we mention the most common and the least common ways to set tax preparation fees. Small charge and an additional fee depending on the return’s complexity (44% use this method with the minimum average fee of $172)
Hourly tax preparation rate (7% use the method with the average hourly rate in 2019 as $138).
The average tax preparation expert fee would also vary according to the provider’s designation and credentials. For instance, when a seasonal employee makes Form 1040, the average fee was $113 for 2019, while most CPAs charged an average fee of $162. Here the CFPs hold the middle ground ($136), tax attorneys ($145), and EAs ($140).
The U.S. Treasury Department does not offer many price methods. The tax professionals can’t charge “an unconscionable fee” legally or the tax preparation fee depending on the info in the tax return – e.g., a share of the tax refund. Tax filers generally look at different estimates before they commit to any provider, so you must make a follow-up of all your prospects.
How Much Complicated TaxesCan Be?
Let’s be honest. You can probably get away after paying a closing fee to the least range when you want tax vanilla for filing. However, you’ll take more time to prepare the tax return with a more complicated tax situation. And everyone knows that time is money.
For example, let’s say that you’ve got a side business. You’ll have to itemize deductions after filing a Schedule C IRS form with the basic 1040. For such a case, you can charge an average fee of about $515.
The Right Way Of Setting Tax Preparation Charges?
When clients discuss tax preparation and filing charges with advisors, they ask about the process of charging taxes. Don’t keep it hidden, and you can charge it based on any of the following methods.
Charge An Exact Fee For Each Form
Tax preparation experts have a flat fee for each form. The fee varies based on the tax forms, including the average costs to file common forms.
Charge A Fee Matching What You Paid The Year Before
You get a matching rate after working with the same tax advisor for a year. The tax advisor charges what they used to charge the previous year and maybe more when the tax situation becomes complex.
Also, Charge A Minimum Fee And More For Complicated Taxes
As an advisor, you can charge a flat fee, but you can charge more for compensating your time input. You can also charge an extra fee beyond the flat rate. However, it is recommended for only experienced tax preparation experts.
Price Can Be Feeling Based
While a value-based fee can result in disputes, advisors do it day in and day out, and they’re used to quote rates matching elbow grease that they’re putting into the job.
Hourly Rates
You can prepare taxes while charging by the hour as a tax advisor. Ensure that you’re finding the amount charged and the time they expect to spend on taxes. Typically, the tax pro charges an hourly fee of around $100 – $200 per hour, based on the type of tax forms to file. Filing taxes in less time ensures that you and your clients won’t be stuck with high amount tax bills at the season’s end.
Conclusion
You can think of tax preparation fees as the fee of schools and colleges. Better schools and colleges have higher fees, so do better quality tax preparation services. You can surely charge more with the right quality, client-friendly services. Make sure to provide out of the crowd performance in the market. While paying around $220, clients can expect an average tax preparation service that can or cannot have all the tax deductions.
However, you get a reliable tax advisor caring about the situation with a little more fee. It helps you know tax changes and ensures more refunds. HRMB Associates LLC is the prime destination to have your taxes monitored, prepared, and filed by tax preparation experts at a reasonable fee. Our back-end team of tax experts and attorneys ensure that you’re not behind your taxes and receive the best monetary and tax exemption benefits for your taxes.
