Tax professionals use a variety of different methods to set prices, including per-item, per-form, or per-hour rates. For example, a practitioner might charge any of the following:
- A set fee for each tax form or schedule.
- A minimum fee plus an amount based on the complexity of the client’s return.
- A fee based on the subjective value of the tax preparation service.
- An hourly rate for time spent preparing the tax return.
- A set fee for each item of data.
Whether you use one of these methods, a combination of methods or some other approach to setting your fees, it’s a good idea to conduct an annual review in advance of tax return season to ensure that you are not shortchanging yourself. Your fee structure should factor in your cost, plus a reasonable profit margin. On the other hand, you’ll want to make sure you are not charging more than the market will bear.
While not definitive, comparative data on what other tax professionals are charging can be a useful guideline for assessing your fee structure. For example, the 2018–2019 Income and Fees Survey from the National Society of Accountants (NSA) provides some insight into the fees charged by tax professionals for various tax preparation services.
Tax preparation national averages
The NSA study reports the following national averages for Form 1040 income tax returns and a corresponding state return:
- $188 for a Form 1040 without itemized deductions.
- $294 for an itemized Form 1040 with Schedule A.
- $481 for an itemized Form 1040 with Schedule A and Schedule C reporting business income.
The location of your tax practice will have a bearing on the fees you can charge. For example, the NSA study found significant regional differences in the average fee for a Form 1040 with Schedule A and a state return — as well as variations within each region — with the highest fees reported on the east and west coasts.
- In the West, average fees ranged from $285 in the Mountain states (AZ, CO, ID, MT, NV, NM, UT, WY) to $339 in the Pacific region (AK, CA, HI, OR, WA).
- In the Midwest, average fees ranged from $137 in Western North Central states (IA, KS, MN, MO, NE, ND, SD) to $212 in the more Eastern North Central states (IL, IN, MI, OH, WI).
- In the Northeast, fees ranged from $246 in New England (CT, ME, MA, NH, RI, VT) to $314 in the Middle Atlantic states (NJ, NY, PA).
- In the South, fees varied from $211 in the West South Central states (AR, LA, OK, TX) to $230 in the East South Central states (AL, KY, MS, TN) and $259 in the South Atlantic region (DE, DC, FL, GA, MD, NC, SC, VA, WV).
Delinquent or disorganized clients
It is not uncommon for preparers to charge a higher fee to clients who submit their return paperwork at the eleventh hour or who submit a jumbled mess. The NSA study found that 72 percent of preparers increase their fees by an average of $132.88 for disorganized or incomplete paperwork.
Editor’s note: This aritcle was updated with new content on Dec. 7, 2020.