Not everyone has the time nor expertise to prepare a complicated tax return or balance the general ledger for a small business. If you’re feeling overwhelmed, it may be time to hire an accountant who can do the work for you.
But before you hire someone, it’s vital that you have a basic understanding of how much an accountant charges. In the world of professional services, the cost isn’t always transparent; that’s why it’s important to ask for rates ahead of time and compare it to other providers. (For more, see How To Find A Smart Accountant.)
Many individuals only talk to an accountant a couple times per year during the heart of tax season. The amount you can expect to pay for help with a filing depends on the complexity of your return and the type of company you engage.
According to a National Society of Accountants (NSA) survey, the average price tag for both a Form 1040 and state return with a standard deduction was $159 last year. Putting together a federal return with itemized deductions takes a little more time; these filings, together with the state return, carried an average cost of $273.
However, the base price will vary based on where you live. The cheapest cost for an itemized 1040 was in the Midwest, where the average cost was $198 for Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. The priciest part of the country was the Pacific West Coast (Alaska, California, Hawaii, Oregon and Washington), where a typical tax preparer charged $348. (For more, see Taxes in California for Small Business: The Basics.)
On top of the standard rate, clients may face fees for additional services. Expediting a return typically ran around $88, according to the NSA survey. Need to file an extension? On average, you can expect to pay $42 on top of the standard charges.
If your finances are more complex than most, you may need a professional who can offer year-round assistance. High net worth individuals sometimes require more demanding tax planning, for example. And small business owners frequently hire an outside professional to handle payroll or generate income statements. (For more, see Breaking Down Taxes for Different Income Brackets.)
Most providers charge an hourly rate, although here again, costs vary significantly. The experience level and credentials of the person you work represent two of the biggest factors in price variations.
Partners at a national accounting firm will often charge more than double what a less experienced associate does, per the most recent Management of an Accounting Practice (MAP) Survey.
At a small firm – one with annual revenues under $500,000 – owners typically billed around $160 an hour, compared to $73 an hour for a junior associate. At firms on the other end of the size spectrum – those bringing in upwards of $10 million a year – the prices were significantly higher. There, partners billed at an hourly rate of $312 and associates billed $118.
Bear in mind that these are national averages. Other factors, including geographic location and the type of services required, tend to have a large impact on rates. Providers will likely charge significantly more for tax consulting and auditing work than they will for transaction recording.
Figure 1. Average hourly billing rates for U.S. accounting firms, according to the 2014 Management of an Accounting Practice (MAP) Survey from the American Institute of CPAs (AICPA) and the Texas Society of CPAs (TSCPA).
Source: MAP Survey, Journal of Accountancy
If you know you’ll need certain tasks, such as payroll or bank account reconciliation performed on a regular basis, you might consider working with an accountant who charges a set monthly fee rather than a per-hour rate.
The advantage of fixed charges is that you know exactly how much you’re going to spend ahead of time and you won’t be hit with a surprise bill for an unusually busy month.
Getting a Good Value
Finding a fee survey that’s broken down by the type of work performed and geographic location can be tough. Often, the best way to gauge rates is by talking to a few different firms in your area.
The firms with the lowest fees don’t always represent the best value, however. Professionals with the Certified Public Accountant (CPA) designation may be able to perform the same work more quickly than less-qualified employees. Additionally, they can sometimes identify strategies that will save you or your business significant money in the long run.
The Bottom Line
National surveys offer a general picture of how much tax professionals and other accountants charge for their services. But if you want to find typical prices in your specific area, there’s no substitute for meeting with multiple providers one-on-one.