cost for tax preparation
Finance Tips

Average Cost for Tax Preparation: How Much Should You Expect to Spend?

As a CPA, here’s a question I get asked a lot: what’s a reasonable cost for tax preparation?

The answer….

Well, it depends!

Ok, so I know what you’re thinking.  That wasn’t at all helpful!  But before you stop reading, please give me a chance to explain.

In this article I’ll share:

  • The average cost for tax preparation
  • The various ways you can go about preparing your tax return (plus discounts on tax software)
  • The costs of using a professional CPA firm
  • The benefits to using a professional CPA firm
  • Ways to reduce the cost for tax preparation when using a professional CPA firm

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Average Cost for Tax Preparation

Tax returns are like snowflakes.  Each one is different.  So, naturally, there is not a clear cut answer as to how much you can expect to spend on tax preparation. 

However, according to a recent study, the average cost for Form 1040, Schedule A, and a state income tax return was $323 (Investopedia)*At a minimum, this is what I’d recommend for a basic, simple return!  If you know you won’t have enough items to itemize and will take the standard deduction, you don’t need to bother preparing a Schedule A, or in this case, paying someone to prepare a Schedule A.  

Also, according to Investopedia, more than half of American taxpayers seek professional help to prepare and file their tax returns.  With so many people seeking assistance preparing their tax returns, it’s no wonder the average cost is $300+.  

How to Prepare a Tax Return

Here are the various ways you can prepare a tax return, along with the associated costs:

Prepare Tax Return By Hand

For all you old-school, penny pinchers, preparing a tax return by hand is the route you may decide to go.  All tax forms are available to download and print on the IRS website.  

cost for tax preparation

Now although you’ll save a good chunk of change, preparing a tax return by hand is NOT easy.  And the likelihood of errors significantly increases.  This means you could overpay or need to amend your return.  Neither of which you want – believe me!  


Also note that as a CPA, I have never prepared a tax return by hand.  Nor, do I intend to.  I would only recommend this for someone with a very basic return (I’m talking a W-2 only and maybe some interest income) who has prior experience preparing tax returns.

The Cost to Prepare a Tax Return By Hand:

It’s free to download the form and fill it out electronically.  Alternatively, print it out for minimal costs (i.e. the cost of paper and ink) if you prefer to physically fill it in by hand.

Prepare Tax Return Using a Software

Are you familiar with TurboTax or H&R Block?  Yup!  These are some of the more well-known tax softwares.  Using a tax software to prepare tax returns yourself is a good middle-of-the-road option that works for most people.  It provides a basic level of support, but not as much support as if you were to hire a CPA to prepare your return.

Tax software is a good option if your return is simple to moderately complex.  And although you’ll need to pay fees to purchase the software, the cost for tax preparation will likely be substantially lower than if you were to use a CPA.

The Cost to Prepare a Tax Return Using Tax Software:

You can reasonably expect to pay between $35 – $120, depending on which software you choose and your specific needs.  Luckily, you can save some of that cold hard cash by using my discount codes below:

Save 20%!

Save 20% or $25 when filing with a tax pro!

Pay a CPA to Prepare Your Tax Return for You

Perhaps the most obvious method to preparing your tax return is to pay someone else to do it.  Because when isn’t that an option?  Just the other day I heard a story on the radio about a guy who pays a third party provider to handwrite cards for him.  Who would’ve guessed such a service existed?!  

But, with tax preparation, you wouldn’t just turn to any old company.  You’d turn to  your local, trusted CPAs.  I’ll discuss the specific benefits of using a CPA later on in this article.  For now, it’s worth noting that using a CPA is best for people who’s returns are COMPLICATED.  

The Cost to Prepare a Tax Return Using a CPA:

You can reasonably expect to pay $250+ if you choose to hire a CPA to prepare your return.  In the next section, I’ll provide a detailed overview of the costs when hiring a CPA.

The Cost For Tax Preparation if You Use a CPA

Generally speaking, the cost to hire a CPA to prepare your tax return is based on their time, billed out at a certain rate.  However, broken down further, the fee structure includes 1) a base fee, 2) incremental fees for any complexities associated with your return, and 3) incremental fees associated with follow-up.

Let me explain…

1) Cost for Tax Preparation by a CPA: The Base Fee

The base fee is the starting price you’d pay a CPA for a simple return.  Essentially, this is the price you pay just to walk in the door and be accepted as a client.  

Note, most returns don’t fall in this bucket because people have investments and business activities, which require additional schedules.  In my experience, simple returns were most often associated with teenagers or those starting off in their careers, who hadn’t yet built up wealth.  

Expect to pay about $250 for a base price.

2) Cost for Tax Preparation by a CPA: Your Specific Circumstances

In addition to the base price, expect to pay incremental fees for any complexities with your return associated with your specific circumstances.  So, for example, if you have capital gains or losses, you’ll need a Schedule D.  If you have rental property, you’ll need a Schedule E.  If you have a business (a sole proprietorship or a disregarded entity for the sake of our discussion), you’ll need a Schedule C.  And so on and so on.  You get the point!

The requirements for your return are based on your individual circumstances.  The more complex the return in terms of the various schedules needed, the longer it will take a CPA to complete and the more you should expect to pay.

3) Cost for Tax Preparation by a CPA: The Follow-Up

Last but not least, is the dreaded follow-up.  If something is unclear to your CPA, they may reach out to you.  For instance, if you provide a 1099-INT from a brokerage firm, but don’t provide a 1099-DIV (usually the two forms go hand-in-hand), you might have the CPA reach out to you to ask whether you have a 1099-DIV.

As you might expect, following-up with clients takes time.  So, if extensive follow-up is needed to accurately complete your return, the more you should expect to pay.

Why Use a CPA Despite the Cost for Tax Preparation

Here are a few reasons why you might find it worthwhile to use a CPA to prepare your tax return, despite the higher cost for tax preparation services vs. alternative preparation methods discussed above:

    • Saves you time
    • Reduces likelihood of errors resulting from unfamiliarity with the tax code
    • Potential for higher refund or lower payment because CPA will have an understanding of available deductions and credits
    • If self-employed, the ability to deduct CPA fees in the following year’s return, helping to subsidize the cost

Ways to Reduce the Cost for Tax Preparation by a CPA

Tip #1: Be Organized

CPAs determine the cost for tax preparation services based on the amount of time it takes them to complete your return.  So, the #1 way (in my experience) you can reduce your bill, is by being organized.  Please – I beg of you! – do not submit a bunch or random papers and documents all loosely thrown together!

Instead, organize the pages of your statements together using staples and paperclips.  Also, consider creating a list for the CPA, detailing what each statement is and potential credits and deductions you think you might be eligible for.  This will reduce the time it takes for a CPA to puzzle it out and reduce the time spent on follow-up questions.


Additionally, open all your mail yourself.  I can’t tell how you many times, a client would submit a tax document without opening it!  If it takes me 30 minutes to open a pile of tax documents and my time is getting billed out at ~$200/hour, that’s $100 right there added to your bill just to open mail.

cost for tax preparation

Tip #2: Bulk Discount

Are you looking to get your return done along with your business return or your teenager or adult child’s return?  Good news!  You may receive a discount if you bundle all these returns through a single CPA firm.

If you’re unsure, ask your CPA whether they offer any discounts if you use them for various returns.  And remember – everything is open to negotiation!

Tip #3: Shop Around

Picture this: one CPA firm quotes you a fee for tax prep services that’s twice as high the other CPA firms in the area.  They must be really good, right?  They’d have to be to charge double the price!  


Some CPA firms (like the one I used to work at) don’t want a lot of tax returns; they’d rather focus on other service offerings, such as auditing, bookkeeping, or consulting.  Why?  The reasons could be endless, but it might be because they’re earning higher profit margins or they feel their core competencies better align with other service offerings. 

So, if you’re a CPA firm who doesn’t want to get bogged down with tax returns from January through mid-April, what would you do?  You’d simply raise the price for each return!  

Of course, I recommend finding a reputable CPA firm, regardless of price.  But if you can find one that wants your business, you may end up paying less for the same quality of service.  This is why you might consider shopping around.

Shocked by the Cost for Tax Preparation?

I’ll be the first to admit the cost for tax preparation is not cheap!  But hopefully, this article gave you some great insight into alternatives and methods to reduce your costs.

If you’re looking to buy tax software and hoping to save money (cause who isn’t?), don’t forget to take advantage of my discounts below:

Save 20%!

Save 20% or $25 when filing with a tax pro

And don’t forget to check out my other investing and finance-related articles to find out how you can make more money to offset some of these costs. 

Thanks for reading!  Until next time, friends.

Data provided from a 2021 study performed by the National Society of Accountants, and is the latest data available (Investopedia).

Hi! I'm Mikaela, a blogger, CPA, soon-to-be bride, dog-mom, and self-proclaimed finance enthusiast. Join me on my journey to uncover some of the best financial practices and investment opportunities.

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