The cost of hiring a professional accountant to do your taxes varies based on several factors, including your situation, what tax forms you are required to file, and your geographic location. If your tax situation is simple—say, you work for a company and need to submit your W2s—it may be that costly to hire an accountant. If you work for yourself, however, an accountant may be more expensive.
Either way, there are benefits that come from having a professional prepare your taxes if you can afford it. If it doesn’t save you money, it may save you time, as doing your taxes could take days.
Key Takeaways
- The cost of hiring an accountant is based on a few factors, including where you live, how complicated your financial situation is, and the experience of the accountant.
- According to the National Association of Tax Professionals, the average cost for a tax professional to complete your taxes rose to $248 in 2023, a 16% increase over 2021.
- Purchasing tax accounting software and doing it yourself may be a less expensive option.
- Tax software is sometimes free (for simple returns) and may be as expensive as $200 or more, depending on your return and the software you use.
Costs and Considerations
A 2020-2021 study by the National Society of Accountants found the average cost of hiring a certified public accountant (CPA) to prepare and submit a Form 1040. That same year, state returns with no itemized deductions would cost $220, while the average fee for an itemized Form 1040 and a state tax return is $323.
The cost of hiring a CPA also increases the more complicated your return is and the more time that person will spend on your return. The same study from the NSA found if you are self-employed and need to hire a CPA to prepare an itemized Form 1040 with a Schedule C and a state tax return form, the average fee increases to $453.
It is essential to remember that these are the average fees; the cost will differ if parts of your tax filings are under exceptional cases and take longer for the accountant to complete. In these circumstances, accountants may charge you more consultation fees and overtime work.
Tax Accounting Software
Purchasing tax accounting software can be a less expensive option; it can be free (for simple returns), and for more complex filing options, it will generally cost less than $130. Both TurboTax and H&R Block offer reasonably priced options for tax accounting software. Using tax accounting software can be like having a virtual accountant there to guide you through the process.
Although doing your taxes independently using tax software can save you money versus hiring a professional, working with a CPA has many benefits. Accountants prepare tax returns with much more sophisticated software compared to the software sold to consumers. Accountants may also be more likely to get to know your life situation better, unearthing other opportunities for tax benefits that traditional tax software simply won’t explore.
However, humans tend to be more prone to errors compared to well-functioning programs. These programs can scan financial information and organize data accurately, thus reducing any possible errors. Software preparation tools may be faster, more efficient, and more convenient as they can be used at your discretion.
Advantages of Hiring a Tax Professional
When you pay a professional to do your taxes, you are getting the added benefit of numerous other services, including accounting, record-keeping, tax consultation, and auditing. You can also hire an accountant who has a particular specialization, for example, if you own a small business or live abroad. Some professionals are generalists, but it is important to hire someone with a level of experience no matter what.
Accountants can assist in building up an effective accounting system to accurately and conveniently assess profitability, monitor prices and expenses, control budgets, and forecast future speculation trends. Accountants can also consult with their clients on tax-related problems, such as tax compliance and regulations and tax reduction methods. Moreover, accountants can develop accurate audit reports, financial statements, and other accounting documentation required by government regulation and lending institutions.
At the end of the day, hiring an accountant can start a fruitful relationship with a financial consultant. They will learn about your family or business’s financial records and goals. They can give valuable advice and personal tax reduction suggestions and answers to critical questions at any time of the year.
Warning
Consider how changes to legislation may impact the way you file. For example, when the Tax Cuts and Jobs Act (TCJA) went into effect on Jan. 1, 2018, it made some sweeping changes to the tax code. This made filing taxes more complicated and required substantial (and potentially unproven) updates to tax filing programs.
Tax Filing Assistance Options
If you fall within a certain income bracket or are a senior citizen, you may qualify for tax filing assistance. The Volunteer Income Tax Assistance (VITA) provides free tax preparation services to people who earn $64,000 or less per year. In addition, if you are age 60 or older, you may qualify for free tax preparation services through Tax Counseling for the Elderly (TCE) and the AARP Foundation’s Tax-Aide programs.
Is Hiring a CPA Worth It?
Hiring a good CPA is worth it, if your taxes are complex, if don’t have the patience and skill to do your own taxes, or if you are uncertain about how specific tax laws or changes apply to your situation. A good CPA should be able to analyze your specific tax situation and look for ways to help you save money on your taxes.
How Do You Find a Good CPA?
You can find a good CPA by asking your family, friends, and colleagues for recommendations. In addition, the IRS publishes a list of tax preparers, and most states have their own CPA societies.
Should Small Businesses Use a Tax Preparer?
Small businesses often benefit from using a tax preparer who specializes in this area of tax preparation. Tax professionals may save you money and time, and ensure you are following relevant tax rules for business owners.
What Is the Difference in Cost Between an Accountant and Tax Preparer?
The difference in cost between an accountant and a tax preparer depends on the individual. Because a certified public accountant often can provide financial services beyond basic tax preparation, they may be more expensive than hiring a tax preparer to file basic taxes.
The Bottom Line
Your decision about whether or not to hire a professional or file your own taxes with the help of accounting software should be based on how comfortable you are with numbers, your familiarity with basic tax rules, and how much time you are willing to spend.
Read the original article on Investopedia.