What Will I Pay for Tax Preparation Fees?

Filing your taxes can be time consuming and complex. That’s why over 85 million Americans turned to professional help for their electronic tax returns in 2024, according to the Internal Revenue Service (IRS)

What Affects the Cost of Tax Preparation?

Most preparers charge a flat fee per return, but some may charge an hourly rate. Many variables can determine what you’ll pay for this service.

Type of return

The first is the type of return you have. The return you file affects the price you’ll pay for preparation.

According to a National Society of Accountants study from 2021 (latest information):

• The average fee for preparing Form 1040 with Schedule A to itemize personal deductions, and a state income tax return, was a flat fee of $323.
• The average fee for Form 1040 with the standard deduction, plus a state income tax return, was $220.
• The additional fee for Schedule C for a sole proprietor/independent contractor was $192.
• The additional fee for Schedule D to report capital gains and losses was $118.
• The additional fee for Schedule E to report rental income and losses was $145.

Individuals whose returns required Schedules A, C, D, and E paid an average total fee of $778.

Location

Location also plays an important part in the fees you pay. Fees vary considerably across the country. Those in the Southeastern U.S. pay the lowest costs, while those in New England, the Mid-Atlantic, and the West Coast pay the highest.

Preparers’ credentials

Finally, your expert’s experience influences how much you have to pay. The credentials of the preparer, as well as their experience, also have an impact on the fees that are charged. For example, a certified public accountant (CPA) usually charges more than an enrolled agent.

Determine Your Needs

Before you select the person or firm that will help you, decide what you require.

• Complexity: More complex returns, like those with passive-investment income, require more time and cost more because you’ll likely need an experienced preparer.
• The volume of work: An individual with one rental property will not pay the same fee as another with 10 properties, each requiring numerous entries on Schedule E for rental income and expenses, including depreciation calculations.
• Special situations: Abusive or “listed” transactions may require additional disclosures and guidance. The preparer may also offer advice about what to do with the investment going forward.

Select the Best Preparer for You

Look at the type of preparer that can meet your needs. Your choices for a paid preparer include:

• Attorney: Working with an attorney can afford attorney-client privilege for matters discussed if they establish a so-called Kovel Agreement, whereby the taxpayer hires a tax attorney who, in turn, engages the services of a tax accountant to prepare the returns.
• CPA: A person who has passed the Uniform CPA examination and is licensed as a CPA. A CPA may specialize in tax preparation and planning.
• Enrolled agent: This is a person who passed the Special Enrollment Examination and has completed continuing education courses. Like attorneys and CPAs, an enrolled agent has unlimited representation rights before the IRS.
• Annual filing season program participant: This individual is not an attorney, CPA, or enrolled agent but has completed the IRS’s Annual Filing Season Program. Such a person has limited representation rights before the IRS.
• PTIN holder: This person is not one of the above but has obtained a Preparer Tax Identification Number (PTIN)​ to file tax returns during a filing season. This professional has limited representation rights before the IRS.

How Will I Use This in Real Life

Understanding tax preparation fees can help you avoid surprises at tax time. Whether you choose to work with a CPA, use an online filing service, or handle things yourself, knowing the costs upfront lets you budget accordingly.

If your finances get more complex, say you start a side gig or buy a rental property, you’ll likely need to pay more for a knowledgeable preparer. Planning ahead helps you choose the right level of help.

Save and Prepare Your Taxes Yourself

Hiring a professional to do your taxes costs money. If you want to save some cash, it may make sense to do your taxes yourself. Some of the options below are free:

• Paper return: This is the traditional way to file your taxes. You can print the forms, crunch the numbers, and fill everything out by hand. Or you can fill out the forms online and print them out. Don’t forget to sign your forms, submit your supporting documents, and mail them off. Your tax return must be in an envelope and post-marked by the due date to be considered on time.
• Tax preparation software: You can use apps or special software designed to help you prepare your taxes. Preparing simple returns is often free. More complicated returns may require you to pay a fee. Once completed, the forms are sent directly to the IRS.
• IRS Direct File: This was the IRS’s pilot program, which allowed individuals in certain states to file their taxes directly with the IRS for free. According to the IRS, over 420,000 taxpayers logged into Direct File and over 140,000 submitted accepted returns in 2024. However, the Direct File program’s future is uncertain because some reports indicate it may be cut in 2026.

The Bottom Line

More than half of American taxpayers seek professional help preparing and filing their electronic tax returns. Before you choose a preparer, ask for a quote on the fees you’ll be charged. Consider the preparer’s credentials and level of expertise if your return is unusual or complicated.