Many tax preparation businesses charge a fee that’s based on the number of forms, worksheets, and document entry required for a particular tax return. (E.g. $100 for a Schedule A, $20 for each W-2, etc.) In my experience, this results in absurdly inconsistent pricing, provides an incentive for the tax preparer to add in unnecessary forms and worksheets, and is just far too inflexible to accurately reflect the amount of work that goes into one tax return versus another.
My pricing is instead based on a combination of time and complexity. I believe this to be a much fairer way of doing things, with the (significant) disadvantage that I can’t print out your tax return, show you the list of forms, add it all up, and say, “This is your final fee.”
It requires a degree of trust, to be sure. But I’ve been doing this work for many years now, and I haven’t found that to be a problem.
Regardless of the pricing method used, it’s always difficult to give an accurate fee estimate for income tax preparation without knowing the details of your particular tax situation. In the interest of providing general guidelines, here’s how it often works out:
- A very straightforward tax return (federal and state) generally costs between $160-$200, depending mostly on the amount of data entry required. A return with not much more than simple W-2 income would be on the $160 side of that scale, while any return with basic itemized deductions (home mortgage interest and property taxes, for example) or simple investment income would more likely be on the $200 side of that scale.
- A slightly more complicated tax return will generally fall in the $220-$260 range. This would include returns with ongoing small-scale self-employment or rental income, more complicated itemized deductions (including buying or selling a main home), basic buying and selling of a small number of stocks or mutual funds, childcare deductions, etc.
- If a number of those “slightly more complicated” items apply, that can put things in the $260-$300+ range. The cumulative impact of multiple items is always greater than the sum of its parts. That is, everything interacts with everything else on a tax return, and the more pieces you add in, the more complex the interactions become, and the more difficult it can be to work everything out.
- Other items that might put you in the $300+ range would be ESPP and RSU transactions, multiple state tax returns, more than $50k in self-employment income, pass-through income from partnerships and trusts, putting a new rental property into service, selling a rental property, etc. And again, one of the above is going to be a different situation than more-than-one of the above.
- A significant percentage (maybe 30-40%) of the tax returns that I prepare end up in the $400+ range (or $500+, $600+, and so on). There are any number of reasons why a return might end up in this range. Some examples would be: multiple items from the previous bullet-point; higher-income earners subject to AMT and “net investment income tax”; tax returns involving mutually-taxed income among multiple states; returns with both self-employment and rental income; returns with large numbers of securities transactions; and returns claiming a foreign earned income exclusion.
Bear in mind that there are many unforeseen issues that can cause your tax return fee to be higher than an initial estimate. Common items in this list would be IRA or 401k over-contribution issues (these can be such a hassle to fix!), and complications determining the cost basis of securities transactions.
If you’re married-filing-separately (for student loan purposes, for example) the minimum fee would be $300 for the two sets of returns. If there’s optimization involved (e.g. figuring out who will claim the dependents or other deductions to provide the greatest tax benefit) it will likely end up closer to $400. Generally speaking, a set of two married-filing-separate returns is more complicated than two single returns, and far more complicated than one joint return.
Amended tax returns usually fall in the $200-$300 range, depending on the level of complexity and whether an amended state return is also required.
Tax returns for business entities (partnerships, multi-member LLC’s, and S-corporations) vary widely in cost. Most straightforward S-Corporation returns end up in the $300-$400 range, assuming your bookkeeping records are in decent shape.
Note that for additional work beyond standard income tax preparation, my billing rate is $120/hr outside of tax season, billed in 10-minute increments. During tax season, Jan 15 -Apr 15, that increases to $180/hr, but I generally refuse to take on any non-tax-preparation work during tax season.