What is the Typical Tax Return Cost?

A common question for many taxpayers is the average tax preparation cost they are likely to face. Unfortunately the answer is usually not as simple as the question. That's because there is no such thing as an average or typical tax return. The following information, offers some guidelines when it comes to tax preparation costs.

Who's doing the tax preparation? Generally speaking, the more experienced and qualified the tax preparer, the more the return will cost. That, of course, assumes that similar returns are being compared. The normal hierarchy starts with a tax preparer or worker with a franchise company near the low end of the spectrum. Enrolled agents and then tax accountants will generally be on the higher end of the scale.

How complicated is the return? A taxpayer with his or her records generally in hand who requires only a 1040EZ return will be charged as much as someone with 1040 return that includes deductions, for example. The more complications, the higher the tax preparation cost. A taxpayer who has a business on the side or who has a number of investments or who has bought or sold homes during the year, for example, would be even more expensive.

But what about a basic return? The National Society of Accountants conducted a national study in 2008 and determined that a tax preparer, who put together a 1040 form that included itemized deductions and a state return, but no other complications, charged an average fee of $205. But is that what to expect in New York City or in Boise, Idaho? Regional tax preparation costs varied, according to the study. For example, the average cost in the state of Missouri was $148, but that increased to $188 in the more populated state of Illinois.

What should I expect from my tax preparer? In a word: more. The accountants group found that taxpayers who regularly go to the same tax preparer or agent can expect their bill to increase by a set percentage every year, generally regardless of whether their return was more complex than the previous year.

Ask about costs in advance. Because tax preparation costs can vary so widely, it's wise to ask in advance so there are no surprises. Some tax professionals will charge a certain fee for a particular tax form or schedule. Others may offer a minimum fee and then add charges depending on the number of forms and schedules that must be filled out. Still others charge an hourly fee based on the length of time required to complete the tax return. Despite the many differences, most tax professionals should be able to explain enough about their pricing policies so a taxpayer will have at least an idea of the final tax bill in advance.