Survey finds average cost for an itemized return is reasonable at $233
What can you buy for $233?
How about this: the services of a professional tax preparer or accountant who can complete your 2011 tax return, relieving you of endless hours of hassle trying to decipher the ever-changing federal tax code (not to mention state tax law changes).
A biennial survey of nearly 8,000 tax preparers conducted by the National Society of Accountants (NSA) showed the average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return is only $233. Rates for non-itemized returns are also low – the average cost to prepare a Form 1040 and state return without itemized deductions is only $128.
Both average fees are nearly the same as they were two years ago ($229 and $129 respectively), showing that tax preparers and accountants understand the financial challenges that Americans face.
“This is one of the best values out there for any type of professional service,” says NSA Executive Vice President John Ams, “especially when you consider the complexity of the tax code. If a professional finds even one additional deduction or tax credit, it will probably more than cover the fee.”
The accounting firms surveyed are largely local “Main Street” companies – small businesses that typically operate with fewer than six employees. The average annual billing of these companies is $250,000.
“Members of NSA are highly qualified tax professionals who typically hold multiple credentials that demonstrate their expertise,” Ams adds. “Taxpayers receive personal service from people who live and work in their community and fully understand local and state tax laws in addition to their deep knowledge of the federal tax code.”
The survey also reported the average fees for preparing other Internal Revenue Service (IRS) tax forms, including:
- $236 for a Form 1040 Schedule C (profit or loss from business)
- $524 for a Form 1065 (partnership)
- $695 for a Form 1120 (corporation)
- $660 for a Form 1120S (S corporation)
- $396 for a Form 1041 (fiduciary)
- $566 for a Form 990 (tax exempt)
- $61 for a Form 940 (Federal unemployment)
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) – $238
- Middle Atlantic (NJ, NY, PA) – $216
- South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) – $244
- East South Central (AL, KY, MS, TN) – $145
- West South Central (AR, LA, OK, TX) – $223
- East North Central (IL, IN, MI, OH, WI) – $202
- West North Central (IA, KS, MN, MO, NE, ND, SD) – $178
- Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) – $247
- Pacific (AK, CA, HI, OR, WA) – $297
Sixty-two percent of accounting firms do not require payment until returns are completed and clients are satisfied.Others may require a portion of the fee upfront or payments throughout the tax return process. Thirty-three percent accept credit cards.
Some of the professional credentials held by NSA survey participants include:
- Enrolled Agents (federally authorized tax practitioners) – 45.1%
- Accredited Tax Preparers – 26.8%
- Certified Public Accountants – 24.7%
- Accredited Tax Advisors – 21.7%
For more information and to use an online search directory to identify a qualified tax preparer in your area, visit www.nsacct.org and click on “Find a Professional” or call 800-966-6679.
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NSA and its affiliates represent 30,000 members who provide accounting, auditing, tax preparation, financial and estate planning, and management services to approximately 19 million individuals and business clients. Most members are sole practitioners or partners in small- to medium- size accounting firms. NSA protects the public by requiring its members to adhere to a strict code of ethics. For more information, visit www.nsacct.org
This is actually a great tool. I find that in the past I was always under charging for services. I have found that as I raised my prices to levels that were more in line with the numbers in this article my clients have actually responded positively. It is almost as if when I was cutting deals for people it was devaluing the work I was putting in. Thanks for the article!
I would like to say that if you are good at what you do and people trust you and you have current information the networking works. As was mentioned by Michelle Long, it is about expertise and experience. Having the taxpayer do all the leg work helps keep the cost down for me. I teach them how to organize it and keep all receipts if not sure.
This is a useful survey for me as this will be my first tax season operating on my own. Having done the last two tax seasons with one of the national tax chains I would say the fees in the survey are pretty good value for money.
As a sole proprietor I would anticipate coming in slightly lower than these averages.
Thank you Michelle for posting the article.
Now if they would have an end of Tax shopping holiday we could all celebrate Christmas in April!
I am glad to see the results of the annual survey. I am a little below the average but still making a good salary on the work I do. I look forward to see Ken’s results and how they compare. The nice thing about Tax Peparation it is a great compliment to bookkeeping services and helps to generate cash flow in a traditional slow time for other business.
There is another way to interpret this data.
First, you can do it yourself using one of those popular tax preparation software or online programs but you run the risk of missing some deduction that you are entitled to because you didn’t know the right questions to ask. Or worst, taking a deduction that you aren’t entitled to. All because you don’t know better.
Second, having an accountant on retainer because they do your taxes can prevent you from making the mistake a client’s child made to install a new furnance but they didn’t have any federal income taxes due to benefit from the that tax credit so the money was wasted, well, sort of. If they had known, they could have deferred it to the year they had income and taxes to apply it against.
Third, if you’re paid $50 an hour for your services at an employer, if you can’t complete your return in under 5 hours, you’re underpaying yourself. We hire mechanics to fix our cars, handypersons to fix our houses, house cleaners to clean our houses better than we can, and other experts to make our life easier.
Why not accountants?
This survey is outstanding! I am currently taking a survey on Tax Preparation fees by Preparer Types i.e. Large Franchises (H & R, Liberty, CPA. firms, and the small Mom & Pops. The results will be posted on my Linked In profile.
Stay tuned……..Ken A. Anaya