Tax prep cost

[braumeister]

Nice Bloomberg article on the cost of preparing your tax return.

Brick-and-mortar tax shops now have 57% of the business (down from 60% in 2010). They charge an average fee of $273 for a simple Federal return and one state (up from $229).
I thought it was very interesting how the fees varied by region. Average on the west coast was $329 but just $210 in parts of the south.

DIY software (like TurboTax and Block) has 40% of the market (up from 30% in 2010).

Here's a link to the article that has lots of other interesting tidbits:
Are You Paying Too Much for Your Tax Prep?

 

[euro]

Nice Bloomberg article on the cost of preparing your tax return.

Brick-and-mortar tax shops now have 57% of the business (down from 60% in 2010). They charge an average fee of $273 for a simple Federal return and one state (up from $229).
I thought it was very interesting how the fees varied by region. Average on the west coast was $329 but just $210 in parts of the south.

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That seems very stiff to me for a simple return (I assume this means the person has a W2 and a couple of 1099s and that's it?)! Probably takes a few minutes to complete?

 

[braumeister]

That seems very stiff to me for a simple return (I assume this means the person has a W2 and a couple of 1099s and that's it?)! Probably takes a few minutes to complete?

Yes, the article said a 1040 and a Schedule A.

 

[Walt34]

DIY software (like TurboTax and Block) has 40% of the market (up from 30% in 2010).

Frankly I'm surprised their share is that low. But (with absolutely no evidence to support it) I'd think that most of the folks paying for storefront tax prep are the least educated and therefore least able to afford storefront tax prep.

One could make a strong case that spending $250 on a cheap laptop computer and TaxCut for three to five years running is a bargain even if that was the only software run on it.

 

[samclem]

One could make a strong case that spending $250 on a cheap laptop computer and TaxCut for three to five years running is a bargain even if that was the only software run on it.

Absolutely. By walking through the questionnaire, trying out some "what-ifs," and seeing the tips that these programs offer, a lot of people could get a lot smarter on ways to reduce their taxes.

 

[Sunset]

WOW..... I always thought maybe it was outrageous at $100

The people who do it must be too ashamed to admit it, or are criminals who are afraid of attracting official attention ?

This makes me feel so much better about doing it myself and saving money, I think I'll take twice as long as normal because it's worth it !!

 

[easysurfer]

Before I went the software route, I had a prepare who every year would increase the preparation fee though my tasks weren't any more complex and I was one of her clients that was well organized (info in separated folders - income, deductions...).

 

[GrayHare]

The overwhelming cost of paying someone to prep tax forms is the loss of learning oneself how things are taxed and at what rates. For anyone who has investments, not knowing how to optimize them tax-wise costs far more annually than the typical tax prep fee.

 

[Sunset]

The overwhelming cost of paying someone to prep tax forms is the loss of learning oneself how things are taxed and at what rates. For anyone who has investments, not knowing how to optimize them tax-wise costs far more annually than the typical tax prep fee.

I can easily believe using a tax service, leaves a person uninformed.

I noticed this when I started using the software. Going from paper forms, where you have to read the rules, and follow along, gave one time to learn what was happening to the numbers.
When I switched to software, on complex things it difficult to know exactly what was going on, although I could estimate by putting in various numbers to see what happened, but on some points you have to go through a lot of screens to see the effect.

 

[Ronstar]

The overwhelming cost of paying someone to prep tax forms is the loss of learning oneself how things are taxed and at what rates. For anyone who has investments, not knowing how to optimize them tax-wise costs far more annually than the typical tax prep fee.

Totally agree. I've gone with a cpa the last 3 years. Even though he charges me $115, I'm going to do my own this year only for the experience of getting a better handle on taxes and investments.

 

[Philliefan33]

Six years ago we started paying someone to do our taxes, for two reasons. Our situation had become complex, with multiple businesses and DH's involvement with an out-of-state LLC. I was still working and didn't have the time to fully research and understand all the resulting forms. Also, when I did do some research, DH would argue with me if he didn't like the answer ("what do you mean we can't deduct that as a business expense?"). Using a paid preparer let her be the bearer of bad news and gave me peace of mind that I wasn't screwing it up.

I've been following along in Turbo Tax for a few years. Two years I made significant mistakes, but last year I came very close. I think I've learned enough to do it myself this year. Our appointment with the preparer isn't until 4/1, so if I feel confident before then we will cancel and save $600.

 

[LOL!]

When I asked folks at work whether they did their own taxes or not, most of the less educated said they did not. They feared the IRS and really liked the peace of mind of having someone else do their tax return. Yes, they were the ones who could least afford it, but they were the ones sitting in Walmart at a JacksonHewitt desk.

 

[Walt34]

Six years ago we started paying someone to do our taxes, for two reasons. Our situation had become complex, with multiple businesses and DH's involvement with an out-of-state LLC. I was still working and didn't have the time to fully research and understand all the resulting forms.

With complexities like that I'd pay the tax prep person too, at least for the first couple of years like you're doing.

But for what I think of as a "normal" tax return the issues are one or two W-2 forms or pension/SS 1099s, most likely mortgage interest, perhaps some dividend and interest income and for retirees maybe IRA/401(k) withdrawals. It's silly for that person to pay for tax preparation, it's grade school arithmetic. But as LOL! points out, there they are.

With a couple of exceptions I've been doing my own since high school. The two exceptions were when I first got married and I was fuzzy on how that worked on the tax forms, and the first time we bought a house and I didn't know how to deal with the mortgage deduction. Each time, the next year I used the "done for me" return as a template and just plugged in the following year's numbers, did the math, and had no problems.

 

[samclem]

I was a consultant for awhile (paid via 1099), and worked with a bunch of other folks in the same situation. The guys who did their own taxes knew how to maximize their income, the guys who used a tax preparer generally did not. Also, the IRS has put tax preparers on notice that they can lose their credentials if they prepare returns using interpretations of rules different from those of the IRS. So, preparers tend to steer a wide margin rather than run afoul of the IRS and lose their livelihood. This is often a disadvantage to the customer. There are many grey areas in the guidance provided by the IRS, and if the guidance was unclear, I gave myself every reasonable break. I even made notes to myself with the publication citations, etc showing my rationale, in case I needed them later. I've never been audited, saved a lot in taxes compared to the "safer" (but maybe still not correct) interpretation.

When the IRS gives crummy guidance to the public, nobody should have to cheat themselves of deductions, etc just to "stay safe." And if you hire a tax preparer, this can happen.

 

[jazz4cash]

I just got a flyer in the mail today advertising CPA Tax Prep for $349 including
1040, Sch A,B,D and a state return.

The flyer includes a discount coupon that reduces the cost to $99 til 3/31 and $199 after that. I was in the middle of preparing my return with Tax Cut when I got the coupon out of the mailbox. It made me think twice about doing my own.

 

[Luck_Club]

For years I've had 2 businesses and 4 rental properties. Have always paid an accountant, to insure my return. The fee has typically been under $1,000, and I think the peak was $900, just before I switched. On average I think it has been $500-750. The cost is higher then I like, and I did buy turbo tax 1 year to check the accountant, but wouldn't do it any other way given my present situation.

When I eventually transition to all passive income (rentals and distributions), I think it may be expensive, but maybe not. Would be interested in hearing from others with rental income, on how they handle tax preparation, and costs for returns. HCOL area for me.

 

[scrabbler1]

I can't imagine ever paying someone to prepare my taxes. I have been doing my own for over 30 years, since 1985. Some of those years I had 2 state returns (my home state and a non-resident form when I worked in another state) including in 2008 when I had a huge lump-sum distribution from my ESOP and became subject to the AMT. Mine since I ERed have been easy some years (1040A) and harder in others (1040+Scheds A, B, D, and forms for sales of MF shares and ACA premium subsidies).


I have been doing the tax returns for my best friend since around 2003 and for my ladyfriend since 2004 when she first moved to NY. That first year for her was tough because she had two state returns, one for NY and another from her home state. But the last few years hers have become very easy (1040EZ). For my best friend (male), he pays me some money to do them and to oversee the large (mostly inherited) portfolio he has since his remaining parent died in 2012.


My dad, who recently turned 86, pays a preparer to do his. I have seen his and they aren't very tough but I wouldn't think of offering to do his, even for half what he pays his preparer.

 

[gerntz]

Six years ago we started paying someone to do our taxes, for two reasons. Our situation had become complex, with multiple businesses and DH's involvement with an out-of-state LLC. I was still working and didn't have the time to fully research and understand all the resulting forms. Also, when I did do some research, DH would argue with me if he didn't like the answer ("what do you mean we can't deduct that as a business expense?"). Using a paid preparer let her be the bearer of bad news and gave me peace of mind that I wasn't screwing it up.

I've been following along in Turbo Tax for a few years. Two years I made significant mistakes, but last year I came very close. I think I've learned enough to do it myself this year. Our appointment with the preparer isn't until 4/1, so if I feel confident before then we will cancel and save $600.

Your issues and experiences and following along with TT are similar to ours. After two years of matching the CPA's results to within $10, I went to TT alone. Even when the CPA was doing them only, I followed along & found a few mistakes he made over the years.

 

[gerntz]

The overwhelming cost of paying someone to prep tax forms is the loss of learning oneself how things are taxed and at what rates. For anyone who has investments, not knowing how to optimize them tax-wise costs far more annually than the typical tax prep fee.

Bingo!

 

[gerntz]

When I asked folks at work whether they did their own taxes or not, most of the less educated said they did not. They feared the IRS and really liked the peace of mind of having someone else do their tax return. Yes, they were the ones who could least afford it, but they were the ones sitting in Walmart at a JacksonHewitt desk.

Sad but true. It's why the tax system needs to be much simpler - few deductions, higher standard deduction, fewer brackets, no AMT.

 

[Philliefan33]

When I asked folks at work whether they did their own taxes or not, most of the less educated said they did not. They feared the IRS and really liked the peace of mind of having someone else do their tax return. Yes, they were the ones who could least afford it, but they were the ones sitting in Walmart at a JacksonHewitt desk.

There are some deductions and credits that are available to low-income taxpayers that I never even knew about until I recently finished a tax prep course in order to volunteer as a tax counselor for AARP. Understanding who qualifies and doing the calculations isn't always easy.

The ACA part of tax returns can also be confusing, as evidenced by the hours we spent going over that in class. And this was for a room full of people with an interest and at least some aptitude for filling out tax forms. I can understand how it can be intimidating to some portion of the population.

(This forum has more financially astute, highly educated members than the general population. For some people, math is hard and instructions written by the IRS are above their reading level)

 

[Sunset]

For years I've had 2 businesses and 4 rental properties. Have always paid an accountant, to insure my return. The fee has typically been under $1,000, and I think the peak was $900, just before I switched. On average I think it has been $500-750. The cost is higher then I like, and I did buy turbo tax 1 year to check the accountant, but wouldn't do it any other way given my present situation.

When I eventually transition to all passive income (rentals and distributions), I think it may be expensive, but maybe not. Would be interested in hearing from others with rental income, on how they handle tax preparation, and costs for returns. HCOL area for me.

I do my own, always have, its pretty easy, and you are already doing nearly all the work by giving the acountant the list of expenses, repairs, taxes, rent income, insurance costs you have for each rental.

You are already doing all the hard work, about 90% of the total effort.

The Accountant just plugs those numbers you spent hours gathering together into a field in the program and it's done.

 

[gerntz]

(This forum has more financially astute, highly educated members than the general population. For some people, math is hard and instructions written by the IRS are above their reading level)

Agree. That's why the system should be so much simpler.

 

[target2019]

Part of the self-prepared joy comes from keeping records straight throughout the year. Some are digital, some paper. I've found that digitizing key records, and standardizing filenames helps a lot.

 

[MichaelB]

Nice Bloomberg article on the cost of preparing your tax return.

Brick-and-mortar tax shops now have 57% of the business (down from 60% in 2010). They charge an average fee of $273 for a simple Federal return and one state (up from $229).
I thought it was very interesting how the fees varied by region. Average on the west coast was $329 but just $210 in parts of the south.

DIY software (like TurboTax and Block) has 40% of the market (up from 30% in 2010).

Here's a link to the article that has lots of other interesting tidbits:
Are You Paying Too Much for Your Tax Prep?

Very interesting, thanks for the link.

Being able to do our own tax prep is not about smarts or math skills (IMHO), it's about being able to learn. In this case, that's especially difficult because IRS explanations are pretty much mandatory but never clear or simple, and that just frightens some people. It's like learning a foreign language as an adult. Some people can, others might be able to pick up the basics but instead just block themselves out.