How Much Do Tax Preparation Services Cost? The Fees Explained

Tax Preparation Services

Tax season is right around the corner. So, if you haven’t already, it’s time you started scoping out tax preparation services.

The question you might have, however, is: how much do tax preparation services cost? In truth, they can vary based on a variety of factors. So, to give you a better idea as to what you’re up against, we’re going to discuss these factors and more below.

Ready? Let’s go!

Average Tax Preparation Services Cost

We’ll start by discussing the averages. On average, tax accountants charge around $300 for tax returns that are itemized and $190 for tax returns that aren’t itemized.

There are a number of fees and figures that can add up to these numbers. These include the following.

Base Fee

Every tax form comes with a base fee. You would multiply this fee by the number of forms you’re filing. So, if you’re filing, say, a Schedule C form, you’ll have to pay more than you would if you were just filing a 1040 form.

Change Fee

If you’ve been to a tax preparer before, you should already have your tax information on file. If this information is generally the same as the year before, there will be no additional fee added to it. However, if your tax situation has changed, you will be charged extra for the changes that need to be made.

Hourly Fee

Most tax accountants charge an hourly fee as well. So, if your taxes take 3 hours to prepare instead of 2, you’ll end up having to pay more money.

Factors That Affect Tax Preparation Fees

There are a number of factors that can affect tax preparation fees. Some of the biggest of these factors include the following.

Whether Or Not You Itemize

The factor that most affects the cost of tax preparation fees is whether or not you itemize. This means writing off specific purchases as opposed to taking the standard deduction. Itemizing creates a great deal of additional work for the tax preparer and therefore commands a higher cost overall.

Note, different accountants have different fees for itemizing. So, you’ll have to call ahead to get an estimate of the services you require.

Your Geographical Area

The area in which you live will affect the cost of tax preparation services as well. If you live in a low-cost-of-living area (like in a rural area of Iowa, for instance), you’ll likely pay relatively little for tax preparation services. If you live in a high-cost-of-living area (such as New York City), you’ll likely pay a great deal for tax preparation services.

This stands to reason, as tax preparers need to be able to afford the cost-of-living of the area in which they live.

The Reputation of the Preparer

Even in the same geographical area, different tax preparers charge different rates. Generally speaking, the rates they charge are based on the reputations they’ve made for themselves.

As such, an established tax preparer with 20 years in the field is likely to charge more than a new tax preparer who is in his or her first or second tax season.

You can save money by opting for the latter. Note, though, that a new tax preparer may not be as knowledgeable as one who has been in the business for decades.

Are There Any Alternatives to Professional Tax Preparation Services?

Now, maybe you don’t have the money to spend hundreds of dollars on tax services? What should you do in that case? Are there alternatives available?

The answer is yes. Those alternatives include the following.

Tax Preparation Software

Popular these days are tax preparation software. These are programs into which you plug the numbers on your tax documents. These programs guide you through the process, doing calculations for you and helping you make important decisions.

Tax preparation software is popular due primarily to its price. In fact, there is even free tax preparation software out there (like Tax-Free USA, for example). Turbo Tax is the most popular option and is also free for those who make little income.

If you find the need to buy such software, you’ll have to pay no more than $100. This can be big savings when compared to professional preparation services.

Note, however, that tax preparation software is at its best when dealing with straightforward tax returns, for instance, if you’re a standard W2 employee. If you’re self-employed or were unemployed for part of the year if there is itemization involved on your tax return, you would be better suited by a professional.

IRS Free File

If your tax situation is simple and straightforward, and if you make under $70,000, you can likely benefit from IRS Free File. This is a service provided by the IRS in which they appropriately file your taxes for you.

Make note, however, that this is only for federal taxes. You’ll have to prepare your state taxes separately.

IRS Volunteer Income Tax Assistance Program

If yours is considered to be low income, you could make use of the IRS Volunteer Income Tax Assistance Program. This is a program consisting of thousands of different organizations, all of which are ready to help low-income individuals as well as the handicapped, the elderly, and groups such as Native Americans.

Income limits can vary based on location. So, find a program near you and give it a call. You just might be able to have your taxes prepared for free.

On the Search for Other Tax-Related Info?

Now that you have a feel for tax preparation services cost, you might be looking for other tax-related info. If so, you’re in the right place. Our website has all types of tax information for you to peruse.

Become a tax expert by checking out some of our other articles now!