What Does Tax Per Return Mean for Tax Preparation?

The “tax per return” pricing model is a common fee structure used by tax preparers. It provides a straightforward starting point for the cost of professional tax services, but understanding what the fee includes and excludes is important for budgeting. The final price is often different from the advertised base rate due to an individual’s specific financial circumstances.

Defining a “Return” in a Pricing Context

In tax preparation pricing, a “return” most often refers to a single, primary tax filing. For federal taxes, this is the Form 1040, U.S. Individual Income Tax Return. This definition holds true regardless of the filing status, meaning a single individual, a married couple filing a joint return, or a head of household are all considered to be filing one federal “return.”

State income tax filings are treated as separate and distinct returns. Each state that requires an income tax filing will constitute an additional “return,” each with its own associated preparation fee. For example, an individual who lived and worked in two different states during the year would require one federal return and two state returns, totaling three “returns” for billing purposes.

What Is Typically Included in a Base “Per Return” Fee

The advertised “per return” fee generally covers a simple or basic tax situation. This baseline price is built around the preparation of a standard Form 1040 and includes the most common types of income and deductions that do not require extensive documentation or complex calculations.

Specifically, the base fee accommodates income reported on a Form W-2 from an employer. It also often includes a limited amount of interest and dividend income, the type reported on Form 1099-INT and Form 1099-DIV. The fee structure assumes the taxpayer will be claiming the standard deduction rather than itemizing individual expenses.

Preparation for certain common tax credits is also frequently bundled into the initial “per return” cost. This can include the Child Tax Credit, which is available to taxpayers with qualifying children. The inclusion of these basic elements establishes the service level for the advertised price.

Common Factors That Increase the “Per Return” Cost

The initial “per return” price often serves as a starting point, with costs increasing based on the complexity of a taxpayer’s financial situation. Each additional form or schedule required to accurately report income, deductions, and credits adds to the workload and, consequently, the final fee.

A frequent reason for increased cost is the need to itemize deductions on Schedule A. This is necessary for taxpayers who wish to deduct expenses such as mortgage interest, state and local taxes, and significant medical expenses, especially if these deductions exceed their available standard deduction.

Reporting different types of income is another factor that escalates costs. Individuals with freelance or self-employment income must file a Schedule C, Profit or Loss from Business, which involves detailing business revenues and deducting associated expenses. Similarly, taxpayers who sold stocks, bonds, or other assets must report capital gains and losses on Schedule D. Those with income from rental properties will require a Schedule E.

Other circumstances also add to the cost. Taxpayers with financial interests in foreign countries may need to file a Report of Foreign Bank and Financial Accounts (FBAR), a separate and detailed reporting requirement that carries its own preparation fee. Disorganization or providing incomplete records can also lead to higher charges, as this increases the time the preparer must spend on the return.

Comparing “Per Return” to Other Common Tax Preparation Fees

While the “per return” model is widespread, it is not the only way tax professionals charge for their services. An alternative is hourly billing, where the fee is based on the total time the preparer spends on the return. This model is often used for highly complex situations involving significant tax planning, research, or correspondence with tax authorities.

Another common structure is a comprehensive flat fee. This approach is typically used for clients with multifaceted financial lives, such as business owners or high-net-worth individuals, who require ongoing advisory services throughout the year in addition to tax preparation. The “per return” model is most suitable for individuals with straightforward tax situations, while hourly or flat-fee arrangements can be more appropriate for those with greater complexity.