What factors determine tax preparation cost?

Like any other business, one of the most common questions we get is about cost. Obviously, it varies by complexity of the return.

If you’re wondering what affects your tax preparation cost, watch this video:

Ways different tax preparers charge

• Per hourly fee (sometimes the fee is different depending on services)
• Fee per page (some franchises charge additional for each form). For instance, they will charge extra if you qualify for the Earned Income Credit – even though their software does all the work for them!
• Up front pricing model – give you a quote when you come in based on what you have and stick to it (with certain exceptions).
• Based on prior year – a lot of places are going to at least charge you what you’ve been paying

Problem with the Hourly Fee

The place I worked with the lowest hourly fee charged the highest prices.

• The firm was incredibly inefficient when it came to getting returns in and out the door.
  • Charging an hourly fee does not necessarily encourage efficiency. If they take longer, they try to charge you more.
• The place I worked with the highest hourly fee charged the lowest prices.
  • The firm was very streamlined and efficient.

Our model: Up Front Pricing for Tax Preparation Cost

• We try to give a price or price range up front and stick to it.  Certain exceptions apply if you end up bringing in new information you didn’t include up front.
• Obviously, we are basing it on how long we expect it to take to prepare the return and how complex it is.
• This avoids unpleasant surprises later on
• Our prices are often lower than our competitors
  • I’ve seen people get charged more from national tax franchises than what they could get from a CPA

We will contact you if something comes up. For instance, if you say you have three rental properties in California you forgot to mention.  Then, we will have to give you a new quote, before moving forward.   This is rare, but things like this do happen.

What can you do to lower your tax preparation cost?

Organize

I’ve had people come in with shoe boxes full of receipts.

If you can run totals and break things down by category, then it saves us time and you money.

For example, let’s say you have high medical bills

If you can total up out of pocket costs by category

• Prescriptions $2,154
• Hospital   $10,841
• Doctors $2,538
• Glasses $256

We don’t need the receipts.

Same thing with business, rentals, etc.

It you can total your income and list expenses by category it will save you money.

• We can tell you how to lay it out in an initial consultation.
• We will determine correct depreciation methods, enter items on appropriate forms, etc. In other words, we will prepare the tax return and give tax advice moving forwards.
• We just give you the option to do things you can do yourself to save money.

Summary about tax preparation cost:

• Obviously we want a copy of any IRS forms (W-2’s, 1099’s, 1098’s, etc.)
• Everything else, the more organized we get it the better (for reducing fees)
• Again, if you don’t want to mess with it, that is fine. We can organize it for you. You can just save some additional fees by doing it yourself.
• You do need to keep receipts in case you are ever audited, but we do not need them if you provide us with totals per category.

For more information about tax preparation cost, contact Derland Bahr CPA, Inc. at 254-432-5724.