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  • Writer's pictureDurham & Durham

Are You Paying a Fair Tax Prep Fee?

Taxpayers are having to pay more on average to get their taxes done.

According to Investopedia, “Roughly 84.46 million Americans the IRS estimates use paid preparers to complete and file their electronic tax return.”

According to the National Association of Tax Professionals & Investopedia:

  • Tax professionals charged an average of $218 for new clients in 2023, a 25% jump from $174 in 2021.

  • Tax pros also bumped repeat clients’ fees to $205, a 22.7% increase from $167 two years ago.

  • The average fee for individual Form 1040 with the standard deduction, plus a state income tax return, was $220.

  • The overall average charge for individual returns, regardless of method, increased $35.

  • The additional fee for a sole proprietor/independent contractor aka Schedule C was $192.

  • The additional fee to report capital gains and losses aka Schedule D was $118.

  • The additional fee to report rental income and losses aka Schedule E was $145.

  • The average fee for preparing an individual Form 1040 with Itemized Deductions aka Schedule A, and a state income tax return, was a flat fee of $323.

  • So individuals whose returns require Schedules A, C, D, and E paid an average total fee of $778

  • The overall average charge for business returns, regardless of method, increased $85.

  • 25% of tax pros do not charge any additional fees for any state returns when they prepare the federal return.

How is this based?

On the most common fee structure, where clients are charged a base fee plus costs forms required and complexity of their return. Remember, fees vary considerably across the country. Those in the Southeastern U.S. pay the lowest costs.

How do we know these numbers?

National Association of Tax Professionals (NATP) states, “Every other year, NATP conducts a study to help members determine if they are charging appropriate fees for their services. The study also includes information to help gauge past and future trends tax pros are seeing, such as hiring more staff, offering additional services, etc.”

Why the increase?

The more complex your return:

  • The more you’ll pay for preparation because you’ll likely need an experienced preparer.

  • An individual with one required form will not pay the same fee as another with several required forms, especially if the form requires numerous entries.

Rising Cost due to:

  • Increasing Federal security regulations that require costly equipment, software, policies, etc.

  • Supplies have double and tripled in price.

  • Hiring additional staff to implement new IRS regulations.

Talent Shortage:

  • Fewer people choosing accounting as a career path.

  • As a result, top CPA firms not being able to have adequate staff.

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