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How to Determine Tax Preparation Fees

Updated on May 10, 2012

Self-employed certified tax preparers and tax accountants, and certified public accountants (CPAs) often wonder, what would be a fair price to both me and the client?

Self- employed tax accountants, CPAs, and tax preparers should take many things into consideration when determining tax preparation fees. When determining a fair price self-employed CPAs, tax accountants, and tax preparers must look at competitor prices (both commercial, franchise and independent establishments), how much time it is going to take to prepare a return, and how many different forms a client is going to have.

Being self-employed, the business owner needs to make sure enough money is coming in to cover all costs, but make sure that the price is fair and reasonable enough for the customer. Customer retention can make or break a self-employed accountant.

There is competition all over in the accounting industry. Self employed accountants compete with private practices, freelancers, bookkeepers, other Certified Public Accountant firms, franchise firms and corporate firms. When determining tax preparation fees, take into consideration what the competition is offering. Many companies will do a fake “shop” to call around and ask the prices of other company’s rates.

A business does not want to go too far over what the average is or clients will pick the competitor over then, even if they offer better service. The opposite holds true as well, a business does not want to be too cheap or people will hold true to the “you get what you pay for” and tend to shy away.

According to the Tax Planning Guide, William Perez, on; The National Society of Accountants reports that the national averages for fees from CPA firm are: Federal 1040 with Schedule C and State return $205, Federal 1040 and State return $115, and the average hourly rate is $122.12.

Perez states that corporate chains like H&R Block, who also has franchises, average $187.17 per return and its competitor Jackson Hewitt averages with $188.96 per return. Liberty Tax, the smallest competitor offers no average amount for comparison.

Having worked for H&R Block for five years a simple return can cost much less. A federal return with no schedules (Schedule C for example) and only one W-2 will average of $35 and a state return with no schedules and only one W-2 will run $10-$15 depending on state. H&R Block also offers extra services, like audit guarantee and various rapid returns, which will make the price of the return increase. Many banks and other lending companies offer these services to tax companies that are why the prices vary.

Despite returns having a national hourly average of $122.12, there are a few other factors to consider. The time it takes to prepare a return as well as the amount of forms needed is just two of the factors. For example, if Mr. Jones has two forms for federal and a state, but he has three W-2s and investment income he might only take an hour. In contrast, if Mr. Smith also came in with two W-2s as well as investments, but he also had rental income and business income he is going to have much more paperwork and should be charged accordingly for that extra time.

No matter what fee structure an accountant comes up with for tax preparation, they should keep in mind the client has the right to know the price before the tax preparation even begins. At the H&R Block office I worked with, we could not give prices over the phone, but instead offered for them to come in, we would prepare the taxes and they had no obligation if they were not happy with the results or the price.

In the corporate office I worked for, clients would try to negotiate a better price, and often it was not given. In the franchise office I worked for, clients and preparer worked together on a fair price if the amount exceeded the customer’s budget.

Good work and good price go hand in hand and will bring your clients back to you year after year. So when trying to determine tax preparation fees take all things into consideration and always keep the price fair and reasonable. This is not only for yourself, but your clients as well.


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      Dean Reese 2 years ago

      I agree that there is competition all over the accounting industry. There are so many people employed in that businesses now that it's incredibly difficult to find the best one that will work for you. That's why it's so important to do research before ever hiring a company. It can end up saving you time and money!