Feb 24th 2010
Individuals who hire professional tax return preparers are getting their money's worth, according to the National Society of Accountants (NSA).
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Alert: The NSA's biennial survey of nearly 8,000 tax preparers showed the average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return is only $229. Rates for non-itemized returns are even lower – the average cost to prepare a Form 1040 and state return without itemized deductions is only $129.
"The tax code becomes more complex every year – especially this year with so many new tax credits and other rules as the federal government attempts to provide some taxpayers with relief during the economic downturn," says NSA President Robert L. Cross, PA, ABA, ATA.
"With the constant changes and new provisions, it pays to have a professional tracking all the potential tax breaks for clients, who may miss them on their own. Even one extra deduction or tax credit can more than cover the fee paid to a professional tax preparer."
The survey found that tax preparation fees for an itemized Form 1040 with Schedule A and a state tax return averaged $217 at one-person firms and jumped slightly to $245 for firms with three or more staff.
Firms with lower levels of gross income also charge less on average than larger companies. For example, tax preparation firms with gross annual income of $50,000 or less charge an average of $174 for an itemized Form 1040 with Schedule A and a state tax return, while a company with gross income of $400,000 or more charges an average of $305.
The survey found that the average fees for preparing other IRS tax forms include:
• $212 for a Form 1040 Schedule C (profit or loss from business)
• $551 for Form 1065 (partnership)
• $692 for Form 1120 (corporation)
• $665 for Form 1120S (S corporation)
• $415 for Form 1041 (fiduciary)
• $2,044 for Form 706 (estates)
• $584 for Form 990 (tax exempt)
• $58 for Form 940 (Federal unemployment)
Note: All fees assume a taxpayer has gathered and organized all necessary information.
Fees also vary by region. The average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return in each U.S. Census district are as follows:
• New England (CT, ME, MA, NH, RI, VT) – $205
• Middle Atlantic (NJ, NY, PA) – $252
• South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) – $243
• East South Central (AL, KY, MS, TN) – $137
• West South Central (AR, LA, OK, TX) – $220
• East North Central (IL, IN, MI, OH, WI) – $193
• West North Central (IA, KS, MN, MO, NE, ND, SD) – $192
• Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) – $207
• Pacific (AK, CA, HI, OR, WA) – $292
The NSA survey shows 60 percent of accounting firms do not require payment until returns are completed and clients are satisfied.
About 10 percent require a percentage of the payment upfront, while 23 percent require payments during tax return processing.
The NSA says 91 percent of accountants offer electronic filing services for federal and state tax returns (84 percent of clients eligible for electronic filing choose this option).
Many accountants also hold one or more professional credentials that demonstrate their experience and expertise. These credentials, and the percentage of NSA survey participants holding these credentials, include:
• Enrolled Agents (federally authorized tax practitioners) – 49.2%
• Accredited Tax Advisors – 26.3%
• Accredited Tax Preparers – 26.2%
• Certified Public Accountants – 24.8%
• Accredited Business Advisor/Accountant – 16.2%
• Registered/Licensed Public Accountants or Accounting Practitioner – 11.8%
Advisory: Use this information to compare your firm's fee structure to other practitioners.
Reprinted with permission from The Tax Strategist, March 2010. For continuing advice on this and numerous other tax strategies, go to www.TaxStrategist.net. Receive 2 FREE Bonus reports and a 40% discount on The Tax Strategist when you use Promo Code WN0013.