I have these four personal beliefs or principles that guide my tax preparation work. Publishing these as “beliefs” here does not mean that they reflect current realities in the industry.
- Tax preparation fees should be bench-marked in some manner simply because tax filing assistance is a service stemming from a government requirement that affects virtually everybody. Tax preparation clients represent the most diverse user group possible. This should mean that there is more social value in requiring public disclosure, in my opinion, than other types of services.
- Consumers deserve to benefit from the cost savings available through online tax filing services (as opposed to brick buildings and paper forms). Since I work almost exclusively online, I am able to offer CPA-preparered tax return services based on the published average industry fees that include the services of non-professional preparers.
- Tax return preparation should be the least important thing that your accountant or financial adviser does for you over the course of the year.
- Most taxpayers should be able to file their own tax returns. Our time together should be spent primarily focused on planning how to better manage taxes in the future.
These guiding beliefs are reflected in the two rules of tax preparation fees.
The average income tax preparation fee in the mid-Atlantic region was $314 this year; an increase of about 4% over last year. That average rate is calculated as a benchmark for a tax return with a Schedule A for itemized deductions and on state income tax return. Average fees for other tax schedules are listed below. These rates are the average of all preparers including CPAs and non-professional preparers. In general, CPA rates would be higher than this average and non-professional preparers would be a little less. The nation’s largest national tax preparation firm is priced higher than smaller firms however the fees are boosted by selling supplemental services like refund advances.
These statistics are calculated by the National Association of Accountants (NSA) that compiles the largest database of tax return preparation data in the country. The NSA notes that the amount of time required to prepare a tax return is rising faster in recent years than the fees charged. Specifically time-consuming are tax returns with an Earned Income Credit, Home Office Deduction or individuals who purchase their own health insurance. This means that tax preparation services represent a growing value for consumers.
Average fees for other tax forms:
$174 for a Form 1040 Schedule C (business)
$634 for a Form 1065 (partnership)
$817 for a Form 1120 (corporation)
$778 for a Form 1120S (S corporation)
$457 for a Form 1041 (fiduciary)
$688 for a Form 990 (tax exempt)
$68 for a Form 940 (Federal unemployment)
$115 for Schedule D (gains and losses)
$126 for Schedule E (rental)
$158 for Schedule F (farm)
This past tax season my pricing strategy was to position a little lower than the average fee (that includes both CPAs and non-professional preparers). Next year I expect to set prices a little higher than the regional average because of client feedback about providing a higher level of personal service and attention. In other words, it turns out that the majority of clients in my natural affluent niche market is would prefer to pay a bit more for premium service.