Average Cost of Tax Preparation by CPA: Navigating CPAs Fees for Personal & Business Taxes

Average Cost of Tax Preparation by CPA: Navigating CPAs Fees for Personal & Business Taxes

The complexities of tax preparation can often feel like untangling a knotty puzzle. Whether you’re an individual with straightforward finances or a business owner with a labyrinth of accounts and deductions, understanding the costs associated with tax preparation is crucial. 

This guide delves into the multifaceted world of tax preparation, unraveling the various elements that influence the cost of hiring a Certified Public Accountant (CPA) and the average cost of tax preparation. We will also explore alternatives for managing your taxes. 

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Factors influencing the cost of tax preparation by a CPA

Tax preparation fees vary based on several factors, making a straightforward answer challenging. It’s a complex issue that requires consideration of multiple aspects.

The complexity of the tax situation

The cost of tax preparation by a CPA varies depending on the complexity of your tax situation. For an individual with a simple financial scenario, such as a single job and no investments, tax preparation is relatively easy. However, for business owners with multiple income streams, investments, and diverse expenses, the complexity increases significantly. 

This in turn requires more time, effort, and expertise from the CPA, who must sort, calculate, and strategically plan to ensure every aspect of the tax situation is properly addressed. Consequently, the more intricate your financial situation, the higher the fee you can expect to pay for tax preparation services.

Geographic location

Just like the cost of living varies from place to place, so does the cost of tax preparation. Hiring a CPA in a big city like New York or San Francisco will surely incur higher fees than the same services in a smaller town. 

This difference is due to factors like demand, the cost of running a business in different areas, and even the complexity of state and local tax laws. In some states, the tax code might be more complicated, which can also drive up the price as your CPA will need to spend more time navigating these complexities.

CPA’s experience and reputation

A CPA with decades of experience, specialized knowledge in a certain area (like international tax law or non-profit organizations), and a great reputation will typically charge more. 

However, a less experienced CPA isn’t necessarily a bad choice. They can be great for simpler tax situations and might offer more competitive pricing. It’s all about finding the right fit for your needs. 

Additional costs and considerations

When budgeting for CPA services, it’s important to remember that the base cost for tax preparation might not be the whole story. We will now look at the potential extra costs and also some ways you might save a bit of money.

Potential additional costs


If the IRS decides to audit your taxes, the cost of having your CPA assist you can be significant. The cost will depend on the complexity of the audit and how much involvement is required from the CPA.

Additional consultations

If you need extra meetings or advice outside of the usual tax preparation process, your CPA may charge for these additional consultations. 

Electronic filing fees

Many CPAs now file returns electronically, which is faster and more secure. However, some might charge a small fee for this service.

Discounts and special conditions

New client discounts

Some CPAs offer discounts to first-time clients. It’s a way for them to welcome new business and for you to save some money on your initial experience with their services.

Loyalty discounts and referrals

If you’re returning to the same CPA year after year, you might be eligible for a loyalty discount. It’s a win-win; you get a break on the cost, and your CPA maintains a steady client.

Referral discounts

Many CPAs offer incentives for referrals, such as discounts on services for clients who recommend new customers to them. Therefore, it’s beneficial to inquire about any potential referral programs or special offers they might have available.

Bundled services

If you need multiple services from a CPA, such as tax preparation and financial planning, they might offer a bundled rate, saving you money.

The role of tax advisors in tax accounting and tax preparation

Tax advisors and tax advisory firms specialize in offering a range of services that go beyond basic tax preparation, including niche areas like forensic accounting where a forensic accountant can play a crucial role in legal disputes or fraud investigations. A tax advisor typically requires a background in accounting or finance, often with a relevant degree and professional certifications such as CPA or EA (Enrolled Agent), along with experience in tax law and regulations. 

These professionals are experts and work closely with both individuals and businesses to minimize tax liabilities and ensure compliance with tax regulations. 

Their expertise is particularly beneficial for complex financial scenarios, including business taxation, international tax issues, and personal financial planning like estate planning and investment strategies. When choosing a tax advisor, it’s essential to consider their area of expertise, reputation, and the range of services they offer, as their guidance can be crucial for those with complex or evolving tax needs.

Standard pricing structures used by CPAs

CPAs generally use one of two pricing structures, flat fee or hourly rate. Just like with any other service, it’s a good idea to get a quote upfront so you know what to expect.

Flat fee

A flat fee is a fixed price so you know exactly what you’re going to pay upfront. CPAs often use flat fees for more predictable work, like a standard tax return. It’s straightforward and you won’t get any surprises when the bill comes.

Hourly rate

In contrast, for an hourly rate, the final cost depends on how long it takes to get the job done. If your tax situation has a lot of intricacies, a CPA might charge by the hour, since it’s harder to predict how long they’ll need to sort everything out. The hourly rates for CPAs can vary widely, often depending on their experience and your location, much like how lawyer fees can vary.

Average cost ranges for different tax situations

Before we head into average fees per tax form, let’s break down the preparation costs based on the complexity of your tax situation:

  • Simple individual return: It usually involves just a W-2 and a standard deduction. For this kind of tax return, the cost might range anywhere from $100 to $300.
  • More complex individual return: Now, imagine you have investments, own a rental property, or have significant itemized deductions. This complexity adds layers to your tax return. Average costs here can vary more widely. You might be looking at a range of $200 to $500 or more, depending on just how complex your situation is.
  • Small business return: Owning a business? There are many more parts to the whole tax picture — think inventory, expenses, employee payroll, etc. For small business owners, the cost of tax preparation can typically range from $500 to $1,200 or more.
  • Complex business return: If you’re running a larger business or one with particularly complicated finances, it’s not unusual for these costs to exceed $1,500, potentially going much higher depending on the specific needs of the business.

Average cost of tax preparation: How much does preparing specific tax forms cost?

The National Society of Accountants (NSA) report from 2021 (the latest information) provides averaged data about the costs associated with preparing specific tax forms by CPAs. Here’s a summary of the costs for some common tax forms:

  • Form 940 (Federal Unemployment): The cost is approximately $78, with an average hourly fee of $111.95.
  • Schedule SE (Self Employment Tax): This form costs about $41, with an average hourly fee of $148.12.
  • Schedule C (Business): The preparation cost is around $192, with an average hourly fee of $149.95.
  • Schedule E (Rental): The cost for this form is roughly $145, with an average hourly fee of $149.52.
  • Schedule EIC (Earned Income Credit): This form costs about $65, with an average hourly fee of $146.70.
  • Form 1040 (not itemized): The average cost is around $220, with an average hourly fee of $153.74.
  • Form 1040 (itemized): The cost for an itemized Form 1040 is approximately $323, with an average hourly fee of $161.34.
  • Form 709 (Gift Tax): This form can cost around $421, with an average hourly fee of $178.29.
  • Form 1041 (Fiduciary): The preparation cost is about $576, with an average hourly fee of $172.66.
  • Form 1065 (Partnership): This form costs roughly $733, with an average hourly fee of $177.29.
  • Form 990 (Exempt Organization): The cost for this form is approximately $735, with an average hourly fee of $171.48.
  • Form 1120-S (S Corporation): The preparation cost is around $903, with an average hourly fee of $179.81.
  • Form 1120 (Corporation): This form costs about $913, with an average hourly fee of $181.57.
  • Form 706 (Estates): The cost for this form is approximately $1289, with an average hourly fee of $188.63.

These preparation costs can vary based on the complexity of the tax situation, the CPA’s experience and location, and other factors.

It’s also important to note that additional fees may be incurred for complex situations, disorganized records, or special services like IRS audits or expedited returns.

If you want to know how to become a QuickBooks ProAdvisor read our article.

Tips for choosing a CPA for tax preparation

Choosing the right CPA for your tax needs is more than just finding the right price bracket. Here are some points to help you assess, select, and work effectively with a CPA automation best suited for your financial scenario.

Understand your needs

First things first, understand what you need from a CPA. Is your tax situation straightforward, or do you have multiple income streams, investments, or a small business? Your needs will dictate the type of CPA you should look for.

Check qualifications and experience

Ensure the CPA is licensed and in good standing. Look for a CPA with experience relevant to your situation. For example, if you have rental properties, find someone who’s savvy in real estate taxes.

Read reviews and get referrals

Check online reviews or ask for client testimonials, they can often give an accurate representation of the quality of services CPAs offer. Ask friends, family, or business associates for referrals. A recommendation from someone you trust can be invaluable.

Discuss fees upfront

Discuss their fees upfront to avoid surprises. Don’t be afraid to shop around and compare rates. Just like you might get quotes for other key services, it’s okay to talk to several CPAs to find the best fit for your budget and needs.

Trust your instincts

Ultimately, go with a CPA you feel comfortable with. Trust your gut — you want someone you feel at ease with and can trust.

Learn more about the accounting landscape. Read our articles about the Big 4 and top accounting firms in the US.

What other options do you have for tax preparation?

Apart from hiring a CPA for tax preparation, there are several other options available, each suitable to different tax needs.

Enrolled Agents (EAs)

EAs are federally licensed tax practitioners who specialize in tax preparation and have unlimited rights to represent taxpayers before the IRS. They can be a more cost-effective option than CPAs, especially for less complex tax situations.

Tax preparation firms

Tax preparation companies offer in-person tax preparation services. These services can be more affordable than a CPA and are suitable for moderately complex tax situations.

Local accountants or bookkeepers

Smaller, local accounting firms or independent bookkeepers can also provide tax preparation services. They might offer a more personalized approach compared to larger chains, potentially at a more affordable rate than CPAs.

Tax preparation software

This is a popular option for those with relatively straightforward tax situations. Software like TurboTax, H&R Block, or TaxAct guides you through the process, asking questions to fill out your forms. They are typically less expensive than hiring a CPA and are user-friendly, making them a good choice for individuals who feel comfortable with accounting and taxation.

Online tax services

Similar to tax software, online services allow you to prepare and file your taxes electronically. Many of these services offer different tiers, from free basic filing to more advanced options that can handle investments, self-employment income, and rental properties.

IRS Free File

For those who qualify based on income (usually under a certain threshold, which can change each year), the IRS Free File program offers access to free tax preparation software provided by various companies.

Volunteer Income Tax Assistance (VITA) Program

This IRS-sponsored program provides free tax help to people who generally make $60,000 or less, persons with disabilities, the elderly, and limited English-speaking taxpayers. Volunteers certified by the IRS provide free basic income tax return preparation with electronic filing.

DIY with IRS forms

For those who are very knowledgeable about accounting and taxes, you can fill out and file paper forms directly with the IRS. This method is the most time-consuming and requires a strong understanding of tax laws and regulations.

Learn how to file income tax returns with the tax filing preparation guide.

Tax prep options for small businesses: online software, hiring a professional, or using a tax preparation service.

Average cost of tax preparation by CPA: Conclusion

Choosing the right tax preparation method and professional is crucial. It’s not just about getting your taxes done; it’s about making sure they’re done correctly, efficiently, and in a way that best suits your financial situation. A good CPA can save you not just money, but also time and stress. 

In the end, the key is to match your tax preparation choice with your specific needs, financial situation, and comfort level. Whether you opt for a CPA, another type of tax preparer, software, or going it alone, make sure it’s the best fit for you. 

Comments 2
  1. I like that you talked about firms that will be able to offer in-person income tax preparation services which are actually more affordable and suitable for those with moderately complex situations. I can imagine how helpful this piece of information would be for anyone who is a professional, self-employed, or with a business. In my opinion, getting help from an expert will be for your own benefit because you can focus on other things that you understand and do while they handle that aspect that you might not be trained for.

    1. Hi Mia, thank you for your insightful feedback! We’re glad that you found the discussion on affordable in-person income tax preparation services useful. You’re absolutely right – seeking assistance from tax experts can be incredibly beneficial. It not only ensures accuracy and compliance with complex tax regulations but also allows individuals to focus on their core activities and strengths. If you have any more thoughts or questions on the topic, feel free to share! Your input adds great value to the conversation.

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