What Is the Average Cost of Tax Preparation?

Tax preparation services involve hiring a professional or using software to file income tax returns with the Internal Revenue Service (IRS) and state tax authorities. The cost for these services is not standardized and fluctuates based on a taxpayer’s financial situation and the assistance required. Costs have been trending upward, and due to rising operational expenses and a shortage of accountants, many firms planned to increase their fees for the 2025 tax season.

Average Costs by Tax Return Type

The fee for preparing a tax return is tied to the specific forms required to report a taxpayer’s income and deductions. A survey by the National Society of Accountants (NSA) for the 2020-2021 tax season found the national average fee for a Form 1040 with no itemized deductions was approximately $220, which included a state return. This price point reflects a tax situation where the filer uses the standard deduction, simplifying the return.

When a taxpayer’s financial situation allows for itemizing deductions, such as mortgage interest and charitable contributions, a Schedule A must be filed with the Form 1040. The inclusion of this schedule increases the complexity and the cost. Based on the same NSA survey, the average fee for preparing a Form 1040 with itemized deductions rose to about $323.

The cost increases further with the addition of schedules related to business or investment income. The NSA survey found that for sole proprietors who must report business income on Schedule C, the average additional fee was around $192. Taxpayers who report capital gains from the sale of assets on Schedule D saw an average added cost of $118, while those with rental property income filing Schedule E paid an extra $145.

Factors That Influence Preparation Fees

The complexity of a tax return is the most significant driver of its preparation cost. A return that involves multiple sources of income, such as a business, rental properties, and investments, requires more forms and schedules. The presence of foreign income or complex investment transactions also adds layers of work for the preparer, increasing the final fee.

A client’s level of organization also plays a role in the cost. When a taxpayer provides well-organized records, the preparer can work more efficiently. If a client submits a box of unsorted receipts or incomplete records, the preparer must first perform bookkeeping, which is often billed separately. The NSA’s survey reported an average fee of around $166 for disorganized files.

The credentials and experience of the tax professional are a major component of the fee. A Certified Public Accountant (CPA) or an Enrolled Agent (EA) typically charges more than a non-credentialed preparer. Hourly rates for CPAs can range from $150 to over $500, depending on their experience and the market.

Geographic location impacts preparation fees, with professionals in major metropolitan areas generally charging more than those in rural areas. Engaging a preparer late in the tax season, particularly close to the filing deadline, may also result in higher charges. Some preparers add a fee to expedite a return, which averaged around $136 according to the NSA survey.

Fee Structures of Different Tax Professionals

National tax preparation chains often use a model with a base fee for a simple return, with additional charges applied for each extra form or schedule. This per-form pricing structure means the cost escalates as complexity is added, such as for itemized deductions or investment income.

Certified Public Accountants and Enrolled Agents frequently charge by the hour or set a higher flat fee for the entire return. Their fees reflect advanced training and the ability to handle complex tax scenarios, including business returns, trusts, and estates, as well as represent clients before the IRS.

Local accounting firms often position themselves between large chains and specialized CPAs, offering a blend of pricing models. They might use a fixed-fee structure for common return types while billing hourly for more complex issues or consulting.

Do-it-yourself tax software presents a distinct alternative with a tiered pricing model. A basic federal return might be free, but support for itemized deductions or self-employment income requires upgrading to deluxe or premium versions, costing from $20 to $170. Additional fees are often charged for state filing or for access to live support from a tax professional.

Additional Services and Associated Costs

The initial quote for tax preparation typically covers the filing of the federal income tax return only. Preparing and filing state or local income tax returns are considered separate services and will incur additional charges, as each state has its own forms and regulations.

Tax planning services are a separate engagement from tax preparation. While preparation focuses on reporting historical financial activity, planning is a forward-looking service to help clients make strategic decisions to manage future tax liability. This advisory work is billed separately, often at a professional’s hourly rate.

Should the IRS or a state tax agency select a return for an audit, the work required to respond is a distinct service. A preparer’s assistance in corresponding with the IRS, gathering documentation, and representing the client is billed independently. The NSA survey reported that retainers for IRS audit representation averaged $902.

If an error or omission is discovered on a previously filed tax return, it must be corrected by filing an amended return using Form 1040-X. This is not a revision of the original service but an entirely new engagement. The preparer will charge a separate fee for the time and work involved.