Can I Afford a Tax Preparer? CPA Costs and Fees

How Much Does a CPA Cost for Tax Preparation?

What is this article about?

Hello, welcome to Bottomline Tax! Today we’ll talk about Certified Public Accountants (CPAs), more specifically about the cost of hiring a CPA to prepare and file your taxes. One of the reasons people are not sure about hiring a professional to handle their taxes is the cost of their services. Are all CPAs expensive to hire? Is the cost actually worth it? We’ll answer this in a minute and also explore the following topics:

If you are looking for information on how much a CPA charges for tax preparation, this article will help you understand the factors that affect the price and how to find a reputable and affordable CPA. Let’s get started!

II. What is a Tax Accountant?

A tax accountant is a professional who specializes in preparing and filing tax returns for individuals, businesses, and organizations. Tax accountants have extensive knowledge of tax laws, regulations, and deductions, and they can help their clients optimize their tax situation and comply with their tax obligations.

What services do tax accountants offer?

Tax accountants offer a variety of services related to tax preparation and planning, such as:

• Preparing and filing federal, state, and local tax returns
• Calculating and paying estimated taxes
• Claiming tax credits and deductions
• Advising on tax strategies and implications of financial decisions
• Reviewing previous tax returns and correcting errors
• Representing clients in case of audits, disputes, or appeals with the IRS or other tax authorities
• Keeping up to date with tax law changes and updates

What factors influence the cost of hiring a tax accountant?

The cost of hiring a tax accountant depends on several factors, such as:

• The complexity of your tax situation and the forms you need to file
• The qualifications, experience, and credentials of the accountant
• The location and demand of the accountant
• The type and frequency of the services you require
• The fee structure and payment method of the accountant

According to the National Society of Accountants (NSA)‘s “2020-2021 Income and Fees of Accountants and Tax Preparers in Public Practice” study , the average cost for a certified public accountant (CPA) to prepare and file a Form 1040 with itemized deductions and a state tax return was $323. However, this cost can vary significantly depending on the factors mentioned above. For example, if you are self-employed and need to file a Schedule C, the average cost increases to $457. On the other hand, if you only need to file a simple Form 1040 with no itemized deductions, the average cost drops to $220.

For information about average CPA fees for your specific state and type of return, we have a handy tool right here.

Some accountants charge by the hour, while others charge a flat fee or a percentage of your refund. Some may also charge extra for additional services or consultations. Therefore, it is important to compare different accountants and ask for a detailed quote before hiring one.

III. Average Cost of Hiring a Tax Accountant

What is the average cost of hiring a tax accountant?

The average cost of hiring a tax accountant depends on several factors, such as your location, the complexity of your tax situation, the type of services you need, and the credentials and experience of the accountant. According to the National Society of Accountants (NSA), the average fee for a tax professional to complete and submit a Form 1040 and a state tax return in 2023 was $323, if you had itemized deductions. However, this fee could vary significantly depending on your circumstances. For example, if you were self-employed and needed to file a Schedule C, the average fee increased to $457. On the other hand, if you had no itemized deductions, the average fee was $220. For information about average CPA fees for your specific state and type of return, we have a handy tool right below.

Average CPA Fees Tool, Per Type of Tax Return

Use this tool to get the average CPA fees in your state, for the type of return that you want to file:

How are the costs broken down (hourly rates, flat fees, etc.)?

The costs of hiring a tax accountant can be broken down into different payment and fee structures, depending on how the accountant charges for their services. Some common ways that accountants charge are:

• Hourly rates: Some accountants charge by the hour, based on the time they spend working on your tax return. The hourly rate may depend on the accountant’s qualifications, experience, and reputation. According to the Bureau of Labor Statistics (BLS), the average hourly rate for accountants in 2023 was $37, but this could range from $20 to $100 or more, depending on the accountant and the service. Use our handy tool below to get an average hourly rate for the most common CPA services.
• Flat fees: Some accountants charge a flat fee for a specific service or package of services, regardless of how long it takes them to complete it. This may provide more certainty and transparency for both parties, as you know upfront how much you will pay and what you will get. However, flat fees may not reflect the actual value or complexity of the service, and they may not include additional charges or revisions. For example, according to Thervo, some accountants charge a flat fee of $100 to $500 for tax preparation, depending on their qualifications and your needs.
• Value-based fees: Some accountants charge based on the value they provide to you or your business, rather than the time they spend or the service they deliver. This may align their incentives with your goals and outcomes, and reward them for their expertise and efficiency. However, value-based fees may be harder to estimate and negotiate, and they may not reflect the actual cost or effort of the service. For example, an accountant may charge a percentage of your tax savings or refund as a value-based fee.

Average CPA Hourly Fees Tool

Use this tool to get the average CPA hourly fees in your state, for the type of service that you need:

What additional charges should I be aware of?

In addition to the basic fees for tax preparation and filing, you may also incur some additional charges when hiring a tax accountant. These may include:

• Consultation fees: Some accountants charge an initial consultation fee to assess your tax situation and provide an estimate of their services. This fee may be waived or credited if you decide to hire them for your tax return.
• Rush fees: Some accountants charge extra fees if you need your tax return done in a hurry or close to the deadline. This may reflect the higher demand and urgency of their services at that time.
• Revision fees: Some accountants charge additional fees if you need to make changes or corrections to your tax return after they have completed it. This may depend on whether the revision is due to their error or yours.
• Audit support fees: Some accountants charge extra fees if you need them to represent you or assist you in case of an IRS audit or inquiry. This may depend on the scope and complexity of the audit.

To avoid any surprises or disputes over fees, it is advisable to ask your accountant for a written agreement that outlines their services, fees, and terms before hiring them.

IV. Cost vs. Benefit Analysis

What are the potential savings and benefits of hiring a tax accountant?

Hiring a tax accountant can save you money and time, as well as provide you with valuable financial advice and peace of mind. Here are some of the benefits of hiring a professional to handle your taxes:

• Accuracy: A tax accountant can ensure that your tax returns are accurate and complete, avoiding costly errors and penalties. They can also help you avoid an audit by the IRS, or represent you in case of one.
• Deductions: A tax accountant can help you find and claim all the deductions and credits that you are eligible for, reducing your taxable income and increasing your refund. They can also advise you on how to optimize your tax situation for the future.
• Time: A tax accountant can save you time by preparing and filing your taxes for you, freeing you from the hassle and stress of doing it yourself. According to the IRS, the average time spent on preparing a tax return is 12 hours, but it can be much more if your situation is complex.
• Advice: A tax accountant can provide you with financial guidance and planning, helping you achieve your personal and business goals. They can also keep you updated on the latest tax laws and regulations, and how they affect you.

What are the risks of not hiring a professional?

If you decide to do your taxes yourself, or use a low-cost online service, you may face some risks and disadvantages, such as:

• Mistakes: You may make errors or miss important information on your tax returns, resulting in penalties, interest, or audits by the IRS. You may also miss out on deductions and credits that could lower your tax bill.
• Cost: You may think that doing your taxes yourself is cheaper than hiring a professional, but it may not be true in the long run. You may end up paying more in taxes than you should, or spending more on software, books, or courses to learn how to do it correctly.
• Time: You may spend a lot of time and energy on doing your taxes, especially if your situation is complicated or you have multiple sources of income. You may also have to deal with the IRS yourself if you have any questions or issues.
• Advice: You may not have access to expert advice or guidance on how to improve your financial situation or plan for the future. You may also miss out on opportunities to save money or grow your wealth through tax strategies.

To sum up, hiring a tax accountant can be a worthwhile investment that can save you money, time, and stress, as well as provide you with valuable financial insights and support.

How to Choose a Tax Accountant

Choosing a tax accountant is an important decision for your business. A tax accountant can help you with various services, such as preparing and filing your business taxes, generating financial statements, offering financial advice, and more. But how do you find a reputable and affordable tax accountant that meets your needs? Here are some tips to help you choose a tax accountant.

What should I look for in a tax accountant?

When looking for a tax accountant, you should consider the following factors:

– Qualifications and experience: You should look for a tax accountant who has the appropriate qualifications and experience to handle your business’s accounting needs. For example, you may want to hire a certified public accountant (CPA) who has passed a rigorous exam and met certain educational and experience requirements. CPAs can provide services that other accountants cannot, such as audits, reviews, and certain tax services. CPAs also have to adhere to a code of ethics and maintain their skills through continuing education. Alternatively, you may want to hire an enrolled agent (EA) who is authorized by the IRS to represent taxpayers in tax matters. EAs have to pass a three-part exam and complete continuing education courses on tax laws and regulations.

– Services and fees: You should look for a tax accountant who offers the services that you need at a reasonable price. You should ask the tax accountant what services they provide, how they charge for them, and what additional fees they may charge. For example, some tax accountants may charge by the hour, by the form, or by the service. Some may charge extra for bookkeeping, payroll, or consulting services. You should compare the fees of different tax accountants and get a written estimate before hiring one.

– Reputation and references: You should look for a tax accountant who has a good reputation and positive reviews from previous clients. You should check the tax accountant’s website, social media pages, online directories, or review sites to see what others have said about their work. You should also ask the tax accountant for references from clients who have similar businesses or accounting needs as yours. You should contact these references and ask them about their experience with the tax accountant, such as their quality of work, timeliness, communication, and professionalism.

What questions should I ask potential accountants?

When interviewing potential tax accountants, you should ask them questions that will help you assess their suitability for your business. Some of the questions you may want to ask are:

– What are your qualifications and credentials? How long have you been practicing as a tax accountant?
– What kind of clients do you work with? Do you have experience with businesses in my industry or size?
– What services do you offer? How do you charge for them? Do you provide any  warranties?
– How do you communicate with your clients? How often do you update them on their accounting status? How do you handle questions or concerns?
– How do you keep up with the latest tax laws and regulations? Do you use any software or tools to assist you with your work?
– How do you protect your clients’ data and privacy? Do you have any security measures or policies in place?
– How do you handle audits or disputes with the IRS or other authorities? Do you have any experience in representing clients in these situations?

Do you have any tips for finding a reputable and affordable tax accountant?

Finding a reputable and affordable tax accountant can be challenging, but not impossible. Here are some tips to help you find one:

• Start your search early: Don’t wait until the last minute to look for a tax accountant. Start your search at least a few months before the tax season or deadline. This will give you enough time to research, compare, and interview different tax accountants and choose the best one for your business.
• Ask for referrals: One of the best ways to find a good tax accountant is to ask for referrals from your friends, family, colleagues, or other business owners who have used their services. They can give you honest feedback and recommendations based on their personal experience.
• Use online resources: Another way to find a good tax accountant is to use online resources, such as websites, directories, or review sites that list or rate tax accountants in your area. For example, you can use H&R Block’s website to find a CPA or EA near you.
• Check their credentials: Before hiring a tax accountant, make sure to check their credentials and verify their license and certification. You can use sites like the IRS Directory of Federal Tax Return Preparers to check if the tax accountant is authorized to practice and has a valid license and certification.
• Interview them: Finally, before hiring a tax accountant, make sure to interview them and ask them relevant questions that will help you evaluate their skills, experience, personality, and fit for your business. You should also review their portfolio or samples of their work and ask for references from previous clients.

Conclusion

In this article, we have discussed the cost of hiring a CPA for your tax preparation needs. We have seen that the average cost of tax preparation in 2023 is $220 for a basic federal and state return, but it can vary depending on your location, the complexity of your tax situation, and the expertise of the preparer. We have also learned that hiring a CPA can offer many benefits, such as saving you time and money, reducing your tax liability, avoiding errors and penalties, and providing you with professional advice and guidance.

However, hiring a CPA is not a decision to be taken lightly. You should do your research and compare different options before choosing a CPA that suits your needs and budget. You should also look for a CPA that has the appropriate credentials, experience, and reputation, and that you can trust and communicate well with.

Here are some key points to remember when hiring a CPA for your tax preparation:

• CPA charges vary depending on the type of service, the location, and the complexity of the tax return.
• CPA services include preparing and filing your tax return, reviewing your financial records, advising you on tax planning strategies, representing you before the IRS, and more.
• How much does an accountant cost depends on whether you choose a CPA, an enrolled agent, a tax attorney, or another type of preparer.
• How much does a CPA cost depends on their hourly rate or flat fee, which can range from $50 to $400 or more per hour or from $100 to $1,000 or more per return.
• CPA cost can be offset by the potential savings and benefits that they can provide, such as reducing your tax bill, maximizing your deductions and credits, avoiding mistakes and audits, and giving you peace of mind.
• How much do accountants cost can also be influenced by the quality of your records and documents. If you are organized and have all the necessary information ready, you can save time and money on your tax preparation.
• CPA tax accountant is a professional who specializes in preparing and filing taxes for individuals and businesses. They have extensive knowledge of the tax laws and regulations, and they can help you comply with them and optimize your tax situation.
• How much is an accountant worth to you depends on how much value they can add to your financial situation. If you have a simple tax return that you can easily do yourself online or with software, you may not need to hire an accountant. But if you have a complex or unusual tax situation that requires expert assistance, hiring an accountant may be a wise investment.
• Average cost of tax preparation in 2023 is $220 for a basic federal and state return, but it can vary widely depending on various factors.

We hope this article has helped you understand the cost of hiring a CPA for your tax preparation needs. Thanks for reading!