Tax preparation fees for 2015 tax returns

average tax preparation fees last year

average tax preparation fees last year 

I’ve drawn some attention lately, both positive and negative, for my two personal beliefs that: a) tax preparation industry fees should be bench-marked in some manner, and, b) that fees ought to be available to consumers in advance of making a request for service. I should be clear that this is purely a personal value, not a considered business decision and not something that I endorse for others in the industry.

These are my benchmark fees for online remote tax preparation services for 2015 tax returns. The benchmark fees are not the actual fee that I may charge. In fact little of my work involves solely the preparation of a tax return. The actual fee will be stated in an engagement agreement sent via email and work does not begin until we confirm the agreement in writing.

The term “benchmark fee”, as I use the it here, means that the fee is based on published average fees for the mid-Atlantic region reported by the National Association of Accountants. The Association reports fees from a wide range of tax preparers, not just CPAs. The figures below are increased by 5% over 2014 reported averages and then rounded up or down to the nearest $5 increment. The result, I believe, is a fee schedule that represents good consumer value for consumers who elect to use a CPA preparer through a cost-saving non-traditional online virtual professional service. In other words this fee schedule is intended and believed to be a good deal for an individual taxpayer working with a CPA to establish the lowest legal and sustainable tax liability. 

Benchmarked fees for 2015 federal income tax returns

Form 1040 (individual income tax return) with Schedule A and one state tax income tax return, e-filed, with taxpayer’s copy delivered electronically: $330

Schedule C (business): $200

Form 1065 (partnership):  $700

Form 1120 (corporation): $900

Form 1120S (S corporation):  $855

Form 1041 (fiduciary): $500

Form 990 (tax exempt):  $750

Form 940 (Federal unemployment):  $75

Schedule D (gains and losses):  $125

Schedule E (rental):  $140 per rental property

Schedule F (farm):  $175

The list includes only the most common tax forms, not all tax forms.

Tax preparation fees do not include accounting procedures necessary to obtain the figures for tax returns nor the cost of research to establish documentation of sustainable positions.

 

CPA Tax Rates for 2015

Until now, I have used negotiated flat fees for all accounting services – including tax services – under an approach commonly called “value pricing”. These fees should have some reasonable basis and market rate or competitive pricing may be one input into this basis of pricing. We presume that there is social value in having consumers well-informed about market prices in any purchase situation. Yet pricing of  services in the tax preparation industry has been far less than transparent. In addition, a range of new issues for 2015 make market pricing information even more uncertain. In fact, if you are reading this blog post based on an internet search or you clicked through to this page from another link, there is a good chance that your curiosity is driven by the lack of readily available and reliable published information on this topic.

This tax service pricing chart is not finalized for 2015 but represents my current thinking on the blended base rate for professional tax preparers – including both CPA and non-CPA, virtual and in-person – in our local Philadelphia, Pennsylvania region. The inputs include the historical published rates from the National Association of Accountants and more recent information compiled mostly through social media and personal communications. My own pricing strategy is not very sophisticated: the goal is simply to avoid being the least expensive and avoid being the most expensive. The rest is negotiated based on individual circumstances that are more important that the industry “averages”. But just to be redundant and perfectly clear: these rates listed below are not the same as my fees but rather may be the basis of my fees for this coming tax season. See www.tonynovak.com/taxes.html for the actual final/published rates.

New Issues for 2015

2015 is likely to bring most disruptive changes to tax preparation services we have seen in our lifetime. IRS warns that service will be shockingly poor, refunds will be delayed and little is known about the potentially severe consequences of Affordable Care Act enforcement. Most smaller tax preparation firms are likely not operating profitably at their current pricing levels and so there is considerable pressure to raise fees for new clients (who require more work), Earned Income Credit clients (due to tough new interview and documentation requirements) and Affordable Care Act compliance. See my article “Tax preparers should be scared“.

Price Comparison

When my rates below are compared to the rates reportedly charged by big tax preparers (H&R Block) it seems likely that the 1040 rate is less but that my listed rate for some business returns might be higher. Limited information is available on competitive rate rates but CPA tax preparers, including myself, typically attempt to avoid charging less than the  largest non-CPA tax preparers to avoid adverse selection of price-conscious customers. In other words, if a CPA practitioner learns that his rate is less than H&R Block then the typical reaction is to raise the rate. I presume that smaller CPA firms and those operating in a virtual environment charge lower fees than larger firms with substantial infrastructure. The tax services of larger CPA firms may include multiple levels of review not included or considered in my pricing below.

Assumptions

These rates presume a tax service operated in a virtual service environment rather than a paper and face-to-face environment: documents are transported and stored electronically, return are filed electronically, interviews are done online or by telephone and signatures are collected electronically. This is not because the “old-fashioned” service is not available or desirable but rather simply because it is easier to forecast operating costs in a virtual environment.

These rates include fees for electronic filing and audit protection (see details elsewhere) but do not include the fees for accounting services and optional bank products. The rates assume that required documentation is available in electronic format (scanned PDF or cell phone photo) and that the customer is able to answer the questions on the verbal, written or electronic tax service preparation interview.

Tax Service Fees for 2015 – GUIDELINES NOT FINAL RATES

Individual Tax Returns

Form 1040 with standard deductions, ACA compliant, and state return   $195

Form 1040 with Schedule A (itemized deductions), ACA compliant, and a state tax return   $300

Schedule EIC (Earned Income Credit)  $150  *

Form _ (not ACA compliant with exemption or with individual mandate penalty calculation)  $80

Business Tax Returns

Schedule C (business)    $300

Form 1065 (partnership)    $700

Form 1120 (corporation)   $1000

Form 1120S (S corporation)     $1000

Form 1041 (fiduciary)   $600

Form 990 (tax exempt)    $800

Form _ (ACA excise tax penalty for businesses) $200

Form 940 (Federal unemployment)    $80

Schedule D (investment gains and losses)     $200

Schedule E (rental property)   $200  *

Schedule F (farm)   $200

Self-filed Returns

Self-Filed returns through 1040.com (electronic filing of federal and state) $30

Review of self-filed return $100

As always, I welcome comment and feedback.