What Is the Average Cost for a CPA to Do Taxes?
Navigate the costs of CPA tax services. Get insight into fee variations and find expert guidance tailored to your financial needs.
A Certified Public Accountant (CPA) is a licensed financial professional who provides a range of accounting services, including tax preparation for individuals and businesses. Engaging a CPA for tax filing offers benefits, such as ensuring accuracy, leveraging their expertise to identify deductions and credits, and saving time for the taxpayer. While the cost for CPA services varies, their understanding of tax laws often provides a worthwhile investment.
Understanding CPA Fee Structures
CPAs typically employ several billing methods, with the most common being hourly rates, flat fees for defined services, and value-based billing. Hourly rates often range from $150 to $500, depending on work complexity and the CPA’s experience. Flat fees are used for standard tax preparation, offering clients a predictable upfront cost.
The complexity of a tax return influences the overall fee. Returns involving itemized deductions, self-employment income (Schedule C), rental properties (Schedule E), or investment income (Schedule D) require more time and specialized knowledge, leading to higher costs. Income from foreign sources or filing in multiple states also adds to complexity and expense.
Geographic location also plays a role in CPA fees. Professionals in metropolitan areas or regions with a higher cost of living typically charge more than those in rural areas. For example, CPAs in high-cost states like California or New York generally have higher rates. A CPA’s experience and reputation affect pricing, as experienced CPAs or those with niche specializations often command higher fees.
Client organization directly impacts the time a CPA spends on a return. Disorganized or incomplete financial records can increase the CPA’s workload, resulting in higher preparation fees. Providing clear and well-organized documentation can help reduce the cost of tax services.
Average Costs by Tax Return Type
The average cost for a CPA to prepare tax returns varies based on the type and complexity of the filing. For a simple individual federal tax return (Form 1040) with only W-2 income and a standard deduction, the average cost typically falls between $200 and $300.
Returns that include itemized deductions (Schedule A) generally incur a higher cost, averaging around $323 to $600. Additional schedules and calculations are required for itemizing deductions, such as mortgage interest, state and local taxes, or charitable contributions. When self-employment income (Schedule C) is involved, the average cost can range from $300 to $700 for sole proprietorships or $500 to $1,200 when combined with a Form 1040 and Schedule A.
Tax returns with rental income (Schedule E) or investment income (Schedule D) also increase preparation cost. A Schedule E might add $60 to $85 per property, while investment income with Form 1099-B could add $75 or more. When multiple state filings are necessary, the cost increases, as each state return requires additional preparation. These figures represent national averages, and actual costs can differ based on factors influencing CPA fees.
Additional Services and Their Impact on Cost
CPA fees often extend beyond basic tax preparation, encompassing supplementary services that incur additional charges. Tax planning and advisory services, which involve proactive strategies to minimize future tax liabilities, are typically billed separately and can range from $3,000 to $10,000, often on an hourly basis. These services optimize a client’s financial situation throughout the year.
Should a tax return be selected for review, audit representation or correspondence with tax authorities like the IRS can add to the cost. CPAs may charge an hourly rate, typically ranging from $150 to $450 per hour, for audit support. Flat fees for audit representation can range from $1,500 for correspondence audits to $5,000 or more for in-depth field audits.
For small businesses, CPAs often provide ongoing bookkeeping or payroll services, usually billed monthly or quarterly. These services help maintain accurate financial records, potentially reducing tax preparation cost by ensuring organized data. Amended tax returns, filed to correct previously submitted returns, incur separate fees, generally ranging from $200 to $1,500 depending on complexity. Preparing and filing tax returns for prior years also results in additional charges. Beyond federal taxes, CPAs handle state and local tax filings.
Tips for Selecting a CPA
When choosing a CPA for tax services, verifying their credentials and active licensing is important. Certified Public Accountants must pass a rigorous exam and meet state-specific education and experience requirements. You can verify their credentials through state boards of accountancy or the IRS directory of tax preparers.
It is helpful to seek a CPA with specialization relevant to your financial circumstances. If you own a small business or have significant investments, finding a CPA with experience in those areas is beneficial. Many CPAs offer a free initial consultation, which provides an opportunity to discuss your needs and assess their compatibility. This consultation allows you to gauge their communication style and responsiveness.
Requesting a clear fee estimate or an engagement letter upfront ensures transparency in billing. This document should detail the services included and how additional services will be billed. Asking for referrals from trusted sources, such as friends, family, or other professionals, can lead to reliable CPA options. Checking online reviews can provide insights into other clients’ experiences with a particular CPA or firm.