What Is the Average Cost for an Accountant to Do Taxes?

Hiring an accountant for tax preparation offers peace of mind, helping individuals comply with Internal Revenue Service (IRS) regulations while potentially maximizing deductions and credits. The cost for these services varies considerably, influenced by factors that shape the scope of work an accountant undertakes. Understanding these variables is important for anyone seeking professional tax help.

Factors Determining the Cost

The cost of tax preparation services is influenced by the complexity of an individual’s financial situation. A straightforward tax return, such as one with only W-2 income and the standard deduction, typically incurs a lower fee. As financial circumstances become more intricate, requiring additional forms and specialized knowledge, the cost generally increases.

Tax situations involving varied income streams add to the complexity and preparation fee. Individuals with self-employment income (Schedule C), investment income (Schedule D), rental property income (Schedule E), or foreign income will usually pay more due to detailed record-keeping and specific tax rules. The number and type of deductions and credits claimed also elevate the price. Itemized deductions, education credits, dependent care credits, or extensive business expenses require more time and expertise, leading to increased fees.

Each additional tax form or schedule required adds to the overall fee. A basic Form 1040 with a standard deduction might average around $220. Adding a Schedule C for business income can increase the cost by approximately $192, while a Schedule D for capital gains might add about $118. A Schedule E for rental income could add an additional $145 to the base fee. Returns requiring multiple schedules like A, C, D, and E can collectively push the average fee to around $778.

Geographic location also plays a part in determining tax preparation costs. Accountants in metropolitan areas or regions with a higher cost of living generally charge more. This difference reflects local market rates, overhead expenses, and the demand for qualified tax professionals. For example, average hourly rates for tax accountants can vary from around $32 in some states to over $39 in others.

The type of tax preparer chosen also affects the pricing structure. Certified Public Accountants (CPAs) possess extensive training and licensure, allowing them to offer a broad range of accounting services. Enrolled Agents (EAs) are federally licensed tax practitioners specializing in taxation with unlimited practice rights before the IRS. Non-credentialed tax preparers may have varying levels of expertise and typically charge less. CPAs and EAs generally command higher fees due to their qualifications, experience, and the comprehensive nature of their services.

How Accountants Structure Their Fees

Accountants employ several methods to structure their fees for tax preparation services. Clear communication about the chosen billing method is important for managing client expectations.

One common method is charging an hourly rate. This approach is used for complex tax situations that may require unpredictable amounts of time and in-depth consultation, such as intricate business tax issues or multi-state filings. Hourly rates for tax professionals can range from approximately $100 to $400 per hour, with CPAs often on the higher end. This method ensures the accountant is compensated for the actual time spent, but it can make the total cost less predictable for the client.

Many accountants charge a flat fee for preparing a tax return. This method provides clients with a predictable, upfront cost for a specific set of services, such as a Form 1040 with standard deductions. Flat fees are often determined based on the anticipated complexity of the return, including the number of forms and schedules required. This pricing structure is appealing for individuals with straightforward tax situations, as it offers clarity regarding the total expense.

Some tax professionals offer bundled packages that combine various services for a single price. These packages might include basic tax preparation along with e-filing, or a combination of federal and state return preparation. While less common for simple individual returns, bundled services can provide value for clients who require multiple related services. Accountants typically provide an engagement letter, a formal document that outlines the scope of work, responsibilities, and agreed-upon fees, ensuring transparency and mutual understanding.

Beyond the Basic Fee: Additional Services

Beyond the standard preparation of an annual tax return, accountants offer specialized services that typically incur additional charges. These services address specific client needs that fall outside the scope of routine tax filing. Their costs are usually not included in the basic tax preparation fee.

Tax planning consultations are a distinct service focused on providing proactive advice to minimize future tax liabilities and optimize financial strategies. This involves analyzing a client’s financial situation throughout the year to identify opportunities for deductions, credits, and advantageous financial moves. Such advisory services are separate from the preparation of the current year’s return and are billed accordingly.

Assistance with IRS or state tax audits, known as audit representation, is another service that comes with an additional cost. If a tax return is selected for examination, an accountant can represent the client, communicate with tax authorities, and help gather necessary documentation. The cost for audit representation can vary significantly, ranging from hourly rates of $150 to $1,000 or more, or flat fees from approximately $1,700 for simpler cases to over $10,000 for complex audits involving businesses.

Amending previously filed tax returns also constitutes a separate service. If an individual needs to correct errors or make updates to a return from a prior year, an accountant will prepare and file Form 1040-X, the Amended U.S. Individual Income Tax Return. Fees for amending a return can range from $200 to $1,500, with simpler corrections costing less and more complex adjustments incurring higher fees.

Preparing returns for multiple states typically adds to the overall cost. While some base federal fees might include one state return, additional state filings usually incur an extra charge, often ranging from $30 to $100 or more per additional state. This is due to the varying tax laws and specific forms required by each state’s tax authority. Tax preparation for complex business structures, such as S-corporations (Form 1120-S), partnerships (Form 1065), or C-corporations (Form 1120), is significantly more involved than personal tax preparation and carries higher fees, often ranging from $500 to $5,000 or more depending on the business’s size and activity. Ongoing bookkeeping or payroll services for businesses are also separate engagements, billed independently of annual tax preparation.

Steps to Get an Accurate Estimate

Obtaining an accurate estimate for tax preparation services requires proactive engagement and preparation from the client. Providing comprehensive and organized information to a potential accountant is important for them to assess the scope of work and provide a fair quote.

Before contacting an accountant, gather all relevant financial documents from the previous tax year. This includes your prior year’s tax return, which serves as a roadmap to your typical income and deductions. Collect all income statements, such as:

W-2 forms for wages
1099 forms for various types of income (e.g., 1099-NEC for nonemployee compensation, 1099-INT for interest, 1099-DIV for dividends)
K-1 schedules for partnership or S-corporation income
Detailed financial summaries, including profit and loss statements and balance sheets, if you have a business
Records of itemized expenses, such as medical bills, charitable contributions, mortgage interest statements (Form 1098), and property tax payments
Investment statements, including Form 1099-B for stock sales
Records of estimated tax payments (Form 1040-ES)

When speaking with potential accountants, ask specific questions to clarify what is included in their base fee and what might incur additional charges. Inquire about their hourly rates for any work outside the initial scope, and ask if they have experience with your particular tax situation, especially if it involves self-employment, rental properties, or complex investments. Also ask about their standard turnaround time and their communication process.

Obtain a written estimate or an engagement letter before any work begins. This document should clearly outline the services to be performed, the fee structure, the responsibilities of both the client and the accountant, and any potential additional costs. The engagement letter serves as a formal agreement, protecting both parties and minimizing potential misunderstandings.

When comparing quotes from different tax professionals, consider more than just the price. Evaluate the services included, the preparer’s experience and credentials, and your comfort level with their communication style. A lower fee might indicate a more limited scope of service or less experienced preparer, while a higher fee could reflect specialized expertise or more comprehensive support. Choosing an accountant involves balancing cost with the level of service and confidence you need for your tax preparation.