​How much should you pay for tax prep?

How complex have the U.S. tax code and tax returns become? Even IRS Commissioner John Koskinen said in a recent interview that he hires tax professionals at the accounting firm of CohnReznick to prepare and file his returns, adding they charge him a few thousand dollars.

When the head of the IRS needs to turn to tax pros, it's no surprise that more people are finding themselves in the same boat .

But if you're using a tax professional, especially for the first time, how much should it cost, and how should you be charged for their services?

In its annual survey of Tax Return Preparation Fee Averages. the National Society of Accountants reports the following average fees its members charged to prepare 2014 tax returns:

  • 1040 with state return with no itemized deductions: $159
  • 1040 with Schedule A (itemized deductions) and state return: $273
  • 1040 with Schedule A, Schedule C (business income) and a state return: $447

The average fee at the national tax service firms H&R Block and Liberty Tax Service is $147 per return and $191 per return, respectively, according the firms' annual reports (information for Jackson Hewitt wasn't available, but it should be in that range).

These fees may seem low, and for many regions and taxpayers they are. Costs can vary widely by region (higher in New England and the Pacific Coast) and, of course, by the complexity of your income and tax situation.

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Many tax pros use a set fee for each form and schedule. Some also base their fees on the prior year's cost, adjusted for changes in your situation. Others can charge an hourly rate based on the actual time spent to prepare your return, compared with IRS guidelines for estimated times to complete certain forms. Finally, some firms may charge a flat fee per return.

Be aware as well that you should avoid certain fee setups. For example, don't use a tax preparer who bases the fee on a percentage of your tax refund. Also ask if your tax preparer is compensated or receives incentive pay based on the number of returns he prepares because pay based on volume conflicts with taking the time needed to be through.

According to the National Society of Accountants survey, its members say taxpayers should know a few things to help them save money on their tax prep fees. Here are the two most important:

  • Be organized and thorough: Being well-organized and having excellent records is a common reason tax preparers offer discounts. Two-thirds of preparers said they increase their fee an average of $114 for disorganized or incomplete information.
  • Start and file early: Getting your information to your tax preparer early so he has plenty of time to review it and prepare your return can also help save you money. The average additional fee charged if you don't provide your information at least two weeks before a filing deadline is about $93. The average additional fee for expediting a tax return is $88. And the average fee for filing for an extension is $42.

Finally, it's always a good idea to present all of your information and get a firm estimate for the costs of preparation and filing before you go any further, especially the first time you work with a tax pro.

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Source: www.cbsnews.com

Category: Bank

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