One of the biggest decisions taxpayers face each year is how to file their tax returns. Last year, 86%, nearly 132 million, of tax returns were filed with tax software. But out of those computer-prepared and e-filed tax returns, almost 79 million were completed by tax professionals.

Why hire a tax pro to do your taxes online when you can use similar software to do the job yourself? Here is a list of things to help you decide.

When should you pay to do your taxes, and when can you use free tax filing software instead?

Generally, tax professionals charge more than $100 to prepare even the simplest federal returns. They may add more fees to file your state return(s). The more complex your taxes are, the more likely you’ll want to pay to have a professional prepare your tax return.

How much are you willing to spend?

Recently, the National Society of Accountants (NSA) conducted a survey that showed that the average cost of professional tax preparation is $261. This is the price that most tax preparers will charge for a 1040 Tax Form with itemized deductions (Schedule A) plus a state tax return. On the other hand, the cost of getting a simple 1040 Form (without itemized deductions) prepared by a professional average around $152.

If your financial situation is a bit more complex and requires filing additional IRS forms, other tax preparation fees may apply, including:

  • $174 for 1040 Schedule C, for business income
  • $115 for Schedule D, capital gains and losses
  • $126 for Schedule E, for rental income
  • $158 for Schedule F, for farm income
  • $817 for 1120, C Corporation
  • $778 for 1120S, S Corporation
  • $634 for 1065, partnership
  • $457 for 1041, estates and trusts
  • $688 for 990, tax-exempt organization
  • $63 for 940, for federal unemployment
  • $53 for Form 8965, for health coverage exemptions
  • $58 for Form 1095-A, for health insurance marketplace statement

They calculated the average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return. Here’s how it breaks down according to the NSA:

  • New England (CT, ME, MA, NH, RI, VT) – $246
  • Middle Atlantic (NJ, NY, PA) – $314
  • South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) – $268
  • East South Central (AL, KY, MS, TN) – $262
  • West South Central (AR, LA, OK, TX) – $205
  • East North Central (IL, IN, MI, OH, WI) – $240
  • West North Central (IA, KS, MN, MO, NE, ND, SD) – $198
  • Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) – $256
  • Pacific (AK, CA, HI, OR, WA) – $348

Most accounting firms offer prospective clients a free consultation, which can be worth well over $100 based on the hourly fees of most tax preparers.

All fees assume a taxpayer has gathered and organized all necessary information. Taxpayers should also make sure they provide information on time to avoid additional fees – most tax preparers will charge an average fee of $114 for dealing with disorganized or incomplete files.

Some will charge an average fee of $42 to file an extension, an average fee of $88 to expedite a return, and an average fee of $93 if the information is not provided in advance of an agreed-upon deadline. For taxpayers who are audited by the IRS, the average hourly fee to handle the audit is $144.

How much time do you have to prepare your taxes?

The IRS estimates that you’ll need 16 hours to complete a Form 1040. That’s the individual return that, according to the IRS, 69% of us use. The hours to complete this longest of the three options take into account gathering records, tax planning and filling out and submitting the return.
If you use a tax preparer, you’ll also have to commit some time to gather tax statements and other material. But once you deliver the necessary documents, you’ll have more time for other tasks.

What are your tax-preparation options?

Basically, there are four options. Here’s the run-down:

  1. Do it yourself. For basic tax returns, preparing it yourself is a fairly straightforward process, especially with federal online forms and instructions. However, the more complicated your tax situation — e.g., your eligibility for itemized deductions or tax credits — the more you might benefit from the type of analysis and advice that a simple online template can’t give you.
  2. Downloadable tax-preparation software. The downloadable tax-preparation software can help walk you through the steps of more complex tax returns, and perhaps present you with more options relevant to your situation that would occur to you just working through a form yourself.
  3. Online tax-preparation services. This provides automation similar to tax-preparation software, only you enter your information online rather than onto software that you download to your computer. The difference comes down to how secure you feel having all that information online in the hands of a third party (i.e., other than you and the IRS).
  4. An accountant.  Accountants can give you customized advice that can save you money this year and perhaps make you more tax-efficient in years to come. However, that advice is only as good as the qualifications of the person giving it, so you need to do some due diligence not just on the firm you use, but on the person responsible for your return.

What do the different tax-preparation options cost?


As you can imagine, costs for the different approaches above vary widely. Even the cost for the same type of approach can differ greatly depending on your situation and which provider you use. As a result, there is no single figure that can be quoted as being indicative of the cost of each approach. Instead, we hope to show the range of costs that are out there which can give you a representative idea of what each entails.

  1. Do it yourself. It costs nothing to use the IRS resources and file your returns on their website, even though some do-it-yourselfers may have to search online to help them understand their tax situation. However, online and mobile solutions have made doing your own taxes exceptionally easy and fast.
  2. Downloadable tax-preparation software. Online tax-preparation software assists you in completing and submitting the necessary forms. We’ve been monitoring these expenses for a few years now, and there hasn’t been a lot of fluctuation in price over time.

Here are some popular options for tax programs and software:

Tax Software
Turbo Tax
H&R Block
  • H&R Block offers online products that range from free to $50 and software products between $20 and $80.
  • Jackson Hewitt offers three online tax programs. The basic one is free, while the most advanced is $45.
  • Liberty Tax offers e-smart tax, an online tax program with a free version and more intricate versions costing up to $40.
  • TurboTax has the best-selling tax software on the market. Prices range from free for the 1040EZ form to $100 for a comprehensive home and business package.
  • TaxACT offers software and online programs, ranging from a free version to a home and business bundle for $55.
  • TaxSlayer has a free online version as well as premium editions up to $30 for federal returns and $10 for state returns. Active duty military personnel can file free with TaxSlayer.
  • The IRS offers free online filing for all taxpayers. Those with incomes of $66,000 or less can use free IRS software.

How To File Your State Return For Free!

As you have probably noticed, many places offer a free filing of a Federal return but don’t offer free state filing. But there are a few ways to get your state tax return done for free. – This is a not-for-profit with funding from the Walmart Foundation, The United Way, and H&R block – and they offer free state and federal tax returns if you meet the criteria.

Local State Government Website – you can go directly to your state’s Department of Revenue website to see if they offer a free filing option.

And Remember before hiring a professional to handle your tax paperwork, Ask a few questions.

  • Check your preparer’s professional designations. A CPA, tax attorney, or Enrolled Agent is a plus. An enrolled agent is a tax preparer who has specific and technical expertise as defined by the U.S. Department of the Treasury. Once they become “EA”s they can represent taxpayers before all administrative levels of the IRS. According to the National Association of Enrolled Agents, you earn the designation if you’ve worked for five years at the IRS “in a position requiring the interpretation of the tax code” or pass an exam plus background check.
  • Make sure a preparer has a Preparer Tax Identification Number (PTIN). The IRS now requires all paid tax preparers to have a PTIN, so steer clear of a preparer who doesn’t have one.
  • Research your preparer’s history. Check with your local Better Business Bureau to see if there have been any complaints. Skim online reviews, remembering to take both highly negative and highly positive reviews with a grain of salt.
  • Full time vs. part-time. Many tax preparers work seasonally, but people with complex tax situations often need advice throughout the year.
  • Ask about audit services. It helps to have assistance from your tax preparer if you are audited. Some preparers include this in the price of your return, others charge extra, and still, others don’t provide this service at all. You should know whether your preparer will back up their work if you are audited, and how much it will cost you to get that assistance.
  • Ask about audit experience. Some successful IRS audit experience can be a plus; multiple instances of audits that went against the taxpayer should be a red flag.

Make sure you choose the right professional to meet your needs.

Perhaps the most important decision in choosing tax-preparation help is fitting the service to your needs. Depending on your situation, free advice can be a tremendous bargain or it could be the most costly mistake you’ve ever made. Know your tax situation, and get appropriate help if you need it. If you’re expecting a large tax refund or have complicated claims, it could be beneficial to have a professional prepare your taxes. They can often catch credits, deductions and other opportunities for savings that untrained individuals might miss. In that way, professional preparation can pay for itself.

The individual who prepares your taxes plays a vital role in your financial well-being. Make sure you choose the right option that meets your needs.

We’re curious to see how much money others are spending filing their taxes these days.

How Much do you Pay to Prepare Your Taxes?

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