Tax Prep Costs? Am I getting ripped off?

[robby]

I've been using the same tax prep firm, based in NY, for about 7 years. I have and continue to live overseas this whole time. They have always charged about 5-6K per year to do my taxes, which I accepted as the cost of living overseas while I was working given how few firms really know how to handle all the overseas rules, and they truly do a lot of it. Now, however, I only have investment income from US investments (no overseas income). although I still live overseas. But they are still billing me 5-6K per year. Does this sound like a crazy amount to pay for tax prep? They are basically just doing a US head of household filing, and three state tax filings given K-1 investments I have in California, Maryland and Hawaii.

I have another accountant handling some small US-based LLC work for me, and he's offered to do my personal taxes for as little as $1500 and claims "he'd know what to do" with any overseas issues that might arise, but admits he does very little of it.

My concern here is just that "you get what you pay for". Am I being taken to the cleaners by my tax accountant?

 

[Alan]

It does sound like a lot of money, even if the figure includes your tax returns for both the US and your host country, assuming you live in a country that taxes its residents.

We're planning on moving back to the UK next year and I'm pretty sure I'll only need a firm to do one or 2 years at the most of returns before I'll be confident enough to self file. Even the likes of TurboTax has all the forms one needs to file in the US, you just need to understand the tax treaty between the US and UK to avoid being double taxed. The quotes I've seen have been under $1,000 for the UK returns (one each for myself and DW)and similar amount for the US joint return.

Does the country you live in have a Double Taxation Agreement with the US? If so, have a little look at the sections on the few sources of income you have to see how they should be treated and look at a recent return you have had prepared and decide yourself whether you think it is worth it.

United States Income Tax Treaties - A to Z

 

[robby]

Thanks Alan,

Good points! On the issue of filing myself, since my filings total about 250 pages, and I frankly don't really understand how they are doing things from year to year, I realize this isn't something I can do for myself. On costs, these are only for my US filings, as they jurisdiction in Asia I live in doesn't tax residents on capital gains or interest income not earned in country, and I have none. I do have about a dozen K-1 filings that require a lot of paperwork and juggling gains and losses between years, but I just feel like I'm paying way too much, as when I read online I hear quotes like you mentioned, i.e. around $1000.

 

[MichaelB]

My guess is with only US sourced income and no exemptions for living abroad, tax SW can take care of your needs, as could the US based accountant. Your tax return will be no different than if you were living in the US. Overseas taxes can be complicated, but the $5k tax preparer has a skill you no longer need.

When I lived overseas the local English newspaper ran ads for US expat tax preparers that worked with people not being paid megabucks by their megacorps, their fees were reasonable and the job they did just as good.

 

[Alan]

Thanks Alan,

Good points! On the issue of filing myself, since my filings total about 250 pages, and I frankly don't really understand how they are doing things from year to year, I realize this isn't something I can do for myself. On costs, these are only for my US filings, as they jurisdiction in Asia I live in doesn't tax residents on capital gains or interest income not earned in country, and I have none. I do have about a dozen K-1 filings that require a lot of paperwork and juggling gains and losses between years, but I just feel like I'm paying way too much, as when I read online I hear quotes like you mentioned, i.e. around $1000.

Your return looks to be about 3 times the number of pages of my 2013 return so you are in a different class of complexity I think. It would still be worth maybe getting a quote from another firm.

 

[EastWest Gal]

I started using a CPA as things got complex. $300-500 depending on how complicated the K1s with two partnerships are. Per partnership/ personal return. Max $1500 total. And free advice calls year round. He was a huge help when my dad passed away, with estate returns, etc. the returns also come with year to year analysis, which I would be to lazy to do.

This year I'd like to get tax software and try to parallel what he does and see how good I am at it.




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[2B]

I started using a CPA as things got complex. $300-500 depending on how complicated the K1s with two partnerships are. Per partnership/ personal return. Max $1500 total. And free advice calls year round. He was a huge help when my dad passed away, with estate returns, etc. the returns also come with year to year analysis, which I would be to lazy to do.

This year I'd like to get tax software and try to parallel what he does and see how good I am at it.

My FIL was being charged $600 by his CPA (10 years ago) to file a simple return for a married couple taking standard deductions. Income was pensions, SS and a small amount of interest and dividends from mutual funds.

That was a total rip-off. It took me only a few minutes to do is return the years up until he passed away.

 

[Walt34]

My FIL was being charged $600 by his CPA (10 years ago) to file a simple return for a married couple taking standard deductions.

Long ago and far away - ~1980 - I used to pay to have the tax returns done, two W-2 incomes, maybe some dividends on the savings, mortgage interest deduction, that was it. He was charging ~$150/year until "light dawned over Marblehead" and I realized that the only thing that changed year to year was the numbers and I could plug them in and do the math with a hand calculator.

I still remember how disgusted with myself I was for taking so long to figure that out.

 

[ArkTinkerer]

$1500-1800 for me and wife both having income this year, LLC with multiple rentals, personal rentals outside the LLC, some outside investments. Arkansas may be cheaper than most places and all of ours are in-state.

 

[Htown Harry]

This report might be of use:
Tax Return Preparation Fee Averages $273 For Typical Individual Tax Returns

 

[Sunset]

OP - have you considered simplifying your investments in the US ? That is a lot of K-1's
After you subtract the tax return cost from your "special" investments, is it really that much better than some etf's ?

Please tell us, as perhaps we all need to get into K-1's

 

[swakyaby]

My CPA charged $750 last year. Our tax return is much simpler: joint return, W-2s, mutual fund investment income/losses, donations, alternative minimum tax, no rental properties, no K-1s. So $1500 sounds about right.

 

[pb4uski]

....Am I being taken to the cleaners by my tax accountant?

Perhaps. Have you discussed with them that their fees seem high given that the complexity of your return had declined dramatically?

 

[scrinch]

At $100/hr, you're paying for a week and a half of full time CPA. It's hard to imagine that returns for US investment income can require that much time, regardless of where you live. The Megacorp I w*rk for pays 10-15% of what you pay per expat employee's state+federal return. In that case the clients (we) key virtually all the information into a questionnaire, and much of the work is done in India. But still...hundreds instead of thousands.

 

[Fishingmn]

$1500-1800 for me and wife both having income this year, LLC with multiple rentals, personal rentals outside the LLC, some outside investments. Arkansas may be cheaper than most places and all of ours are in-state.

That's a lot.

My wife's on W2, I'm a sole proprietor with LLC and we have 11 rental properties (none of those are in LLC). I pay $190/year which includes the state taxes and e-filing. I do think my guy is pretty below average.

 

[Chuckanut]

Do they fly you back business class to sign the return?

If not, they should.

 

[Sue J]

My Dad's accountant charged him $280 last year. Back when Dad was self employed having an accountant do his taxes was important. Since he retired in 1985 his taxes have been much simpler but he still had the accountant do his taxes. Many times it was much more than $280.

He's almost 89 now, living in assisted living and I am his POA. I have all his tax records and the last 2 years I prepared all the numbers for the accountant and Dad filled out the forms in the packet and mailed it back to the accountant. This year Dad has deteriorated so much that he does not want to participate and asked me to handle the packet of info for the accountant.

Dad's situation is simple, Soc Sec and withdrawls from his Traditional IRA offset by huge medical expenses. I took a look at the packet for the accountant and I have to do all the work to get the info and fill out the forms. This is simple enough and I am fully capable of handling this!

But I will continue to file using Dad's accountant. Dad has been with him for over 30 years and out of a sense of continuity I will follow his pattern. If anything is ever questioned, the accountant is another layer of intelligence. But this seems silly that I gather all the records, come up with all the numbers and prepare the packet and pay the fee.

 

[sheehs1]

That is a huge amount for a tax return and my guess is because he is based in New York and there are multiple states involved. Still…it is high…the highest I have heard of for personal returns.
Any accountant should be able to mirror prior year returns. I'd let your other accountant give it a shot. I'd ask him if he has the tax software already in place to take care of it for you. The 250 pages is not a huge deal…the tax software is spitting it out once the numbers are entered.

 

[38Chevy454]

OP, your fees seem *very* high. However I have not dealt with your situation, and do my own taxes with Turbotax or similar. I think you could do a lot of your taxes, especially since your situation seems to be getting simpler.

 

[aja8888]

I've been doing my own taxes for years and that includes several different K-1's and filing a Sub S Corp return on top of the personal one. K-1's are getting easier to handle with the latest tax software.

$5 - $6K is a bit over the top, if you ask me, for a personal tax return.

 

[ArkTinkerer]

That's a lot.

My wife's on W2, I'm a sole proprietor with LLC and we have 11 rental properties (none of those are in LLC). I pay $190/year which includes the state taxes and e-filing. I do think my guy is pretty below average.

Wow! Is this a CPA or a bookkeeper? Is this a family member discount? I take it the below average is the fee and not the quality!

I can't imagine ours takes any less than 5-6 hours for the CPA to prepare and I think DW does a really good job of keeping all the figures in an orderly format. It would take me several weekends to get it all done. We do get some financial advice as well on how to structure some things for best tax advantage as part of that fee but I think that is relatively minor.

 

[pb4uski]

One thing that posters need to consider is that the OP's tax accountant is in a specialized niche of the business that is very complicated and requires a lot of expereince to get right so it isn't fair to compare their fees with those of your typical main street CPA tax preparer who is more of a generalist. That said, I would think that the fees should have declined as the complexity of the return declined, but it is unclear if the OP has asked why.

 

[Fishingmn]

Wow! Is this a CPA or a bookkeeper? Is this a family member discount? I take it the below average is the fee and not the quality!

I can't imagine ours takes any less than 5-6 hours for the CPA to prepare and I think DW does a really good job of keeping all the figures in an orderly format. It would take me several weekends to get it all done. We do get some financial advice as well on how to structure some things for best tax advantage as part of that fee but I think that is relatively minor.

He's a CPA but works out of his house so expenses are low.

I do most of the work of being prepared - he then plugs all the numbers into the tax software and we discuss various items before he prints and files.

Now he isn't giving me detailed analysis regarding tax strategies or any other assistance during the year but I really appreciate a 2nd set of eyes on the numbers and not having to buy the software or file anything.