The tax code is very complex and changes each year. Certified Public Accounts are required to have 120 hours of continuing professional education every three years in order to maintain an active license. During this three year period a Certified Public Accountant must complete a minimum of 60 hours out of the 120 each year due to the many changes that occur from year to year. With that said it would make it almost impossible for the average tax payer to understand and know the tax code on an annual basis.
Storefront tax preparers that advertise on the streets of your town and on television typically do not have a Certified Public Accountant preparing your tax return. The staff of these establishments largely consists of seasonal part-time employees who take an 8 week course on data entry and depend strictly on the software to create your return based on the information you provide. If you do not provide the information, it does not get reported in the return. Typically there is no assistance in understanding what deductions you may be missing or consulting advice on how to improve your tax situation from year to year. These establishments charge fees similar to a restaurant menu. If a cheese burger costs $4.50 at your local diner, you can expect the same type of menu for your tax return, meaning if you require a Schedule C because you started a part time side business, you will be charged a flat fee similar to the cheeseburger of around $250 just for that schedule no matter how simple or complex the schedule may be to prepare correctly. The more schedules you have, the more you pay. Fess for these establishments usually run $300-$900 for an individual tax return depending on the number of schedules you require to submit to the IRS and the state.
If you feel you have a fairly simple return, you can choose to prepare the return on your own by purchasing software. The software can come in many different versions starting as low as $19.99 for a simple program all the way up to $89.99 for a program that will create a more complex tax return. In addition, to the software cost you will need to consider your time, energy, and stress you will put into preparing the return on your own. Finally, there is always an extra charge to submit the state return through the software as this is viewed separate from the federal filing. After all is said and done you are looking at a fee of $100-$150, not including your time spent preparing it. You are responsible for this return as you are the one signing it as the preparer. If this is your preferred method of preparing your tax return I still highly recommend you have your return reviewed by a Certified Public Account or prepared by one for at least for one out of every three years you file so you can see if you have missed anything and become educated on the deductions you are eligible to take.
Finally, if you choose an active Certified Public Accounting or Accounting Firm to prepare your tax refund first check your Secretary of State website to make sure they have an active license. Most CPA’s will base their fees by the complexity of the return and not how many pages or schedules it includes, or by an hourly rate for the time it takes them to prepare the return. You can also count on getting advice and consultation of how to improve your bottom line and get ideas on what you can and cannot deduct for the future during your appointment. If you make an appointment just to get advice you are normally charged the CPA’s hourly billing rate.
Since a CPA’s fees are typically based on the complexity of the return or the hours it takes to prepare the return, it is possible you will pay a much lower fee than you would a storefront tax preparing service using the restaurant menu method if you have maintained good records and present your information in an organized manner. Hourly rates typically are $150-$200 an hour with other staff on hand who can assist in the preparation at a lower billing rate. Usually the other staff members are able to help you compile your un-organized receipts and documents at a lower hourly rate of $25-$100 an hour before the CPA prepares the return.
If the CPA chooses a fee based on the complexity of the return, a typical fee can run anywhere from $125 for a very simple return to $500 for a complex return. If you are in need of tax preparation for a Partnership, LLC, S- Corporation, or C-Corporation, fees are typically $400-$1,200 depending on the size of the business. Many CPA will give a multi return discount and annual consulting services at no charge if you are a loyal client. Another nice feature is you establish a working relationship with one person over the years who becomes to know you and your family’s tax situation and can be proactive in assisting you from year to year.
The bottom line is that a tax preparation fee should never be viewed as an expense (even though it is deductible!) but as an investment. You are investing in getting the best advice, refund, and security of knowing you are abiding by the IRS rules and regulations. The government agency called The Internal Revenue Service is never an area where you want to cut corners in quality and price.
