How Much Tax Preparation Costs on Average

Tax preparation costs vary depending on individual financial situations and the method chosen for filing. Understanding these expenses is important for managing financial obligations.

Key Factors Determining Cost

The cost of tax preparation services depends on the complexity of the tax return. A simple return, involving only W-2 income and standard deductions, incurs lower fees than returns with more complex financial details. For example, returns including self-employment income (Schedule C) or rental property income (Schedule E) require additional time and expertise. Reporting capital gains and losses (Schedule D) or foreign income also adds complexity.

The number of forms and schedules directly correlates with the overall cost. Each additional form, such as those for itemized deductions (Schedule A), business income, or investment activities, increases the preparer’s time. Including state tax returns alongside the federal return also increases the fee, often ranging from an additional $50 to $150 per state return.

Geographical location plays a role in pricing, with preparers in urban areas generally charging more. The credentials and experience level of the preparer also influence fees. Certified Public Accountants (CPAs) and Enrolled Agents (EAs) often command higher rates due to their training and specialized knowledge. A tax attorney generally has the highest fees, often reserved for complex legal tax matters.

Typical Costs Across Preparation Options

Tax preparation costs vary based on the chosen method, from do-it-yourself (DIY) software to professional assistance. For DIY tax software, basic versions for simple returns are inexpensive, while deluxe or premium versions for complex situations like investments or self-employment cost more. The cost of tax software can increase if additional services, such as audit defense or state tax filing, are added.

Professional tax preparers, including national chains, local independent preparers, CPAs, and Enrolled Agents, charge fees based on return complexity. A basic Form 1040 with standard deductions and a state return might cost around $220. Returns requiring itemized deductions (Schedule A) and a state return average around $323.

For self-employed individuals filing Schedule C, the average additional fee can be around $192, bringing the total for a 1040 with Schedule C to approximately $515. Returns involving rental income (Schedule E) may add around $145 to the cost.

CPAs and Enrolled Agents often charge higher fees, with individual tax returns prepared by a CPA firm ranging from $750 to $1,250, and business tax returns from $1,000 to $2,000. Hourly rates for tax professionals can range from $100 to $200.

Scope of Services Included in Fees

Fees for tax preparation typically encompass several core services. For both tax software and professional preparers, the standard fee includes the preparation of the federal tax return and electronic filing. One state tax return is often included, though additional state returns usually incur extra charges.

Professional tax services commonly include basic consultation, where preparers answer questions related to the prepared return. Some professional services may also offer a certain level of audit support, such as assistance in responding to inquiries from the IRS. However, extensive audit representation, complex tax planning, or detailed financial consulting are usually considered additional services and are billed separately. Self-employed individuals and business owners may deduct the portion of tax preparation fees directly related to their business filings, such as Schedule C, E, or F.