As tax season approaches, it’s never too early to start preparing. Many business owners turn to Certified Public Accountants (CPAs) to help with their tax preparation. That naturally leads to the question of the average cost of tax preparation by CPA for small business filings. Yet there’s no hard and fast answer—it depends on a number of factors.
The National Association of Tax Professionals surveyed its members and found the average cost for filing a Schedule C business form was $192, with average hourly fees of $149.95. Jump to Form 1120 for corporations, and you’re suddenly looking at averages of $181.57 to file and $913 in hourly preparation rates. Certain situations, such as incomplete files or filing extensions, can add to the total CPA cost.
These charges are rising among CPAs, too. The NATP survey discovered the overall average charge for business returns increased by $85 compared to the previous year. Several new tax law considerations, rising inflation rates across the country, and a shortage of accountants are a few of the reasons why CPAs are so expensive.
Of course, every business is different. We’re diving into what affects tax preparation costs, how to lower those fees, and what to look for in selecting a preparer.
Key Takeaways:
- For tax professionals, the cost of filing will change based on the form(s) that must be filed. A Schedule C costs $192 on average, while Form 1120 taxes for corporations cost $913. Average hourly fees range from about $150 to $500.
- The cost of tax preparation varies due to several factors, such as the complexity of your tax return, the experience of the tax professional, and the amount of tax services you seek.
- Clean and updated bookkeeping can help you save money when filing your tax return by lowering your tax preparation fees and additional costs.
What affects the average cost of tax preparation by CPA for small business owners?
The average cost of tax preparation fees changes based on each situation. Here’s what to consider:
Hourly, retainer, or flat rate?
Many CPAs charge by the hour for their tax services. Basic tax filing, like a simple Schedule C business form for an individual or sole proprietor, might only take two or three hours, while more complex businesses require more time. Most CPAs start at the $150 to $200 range per hour, though some may charge $300 to $500.
Professional tax preparation services can quickly get out of hand at an hourly rate, so it could be more beneficial for a small business owner to explore other options. Some CPAs will offer monthly or annual retainers, which often works out to a lower hourly rate. Others provide a flat rate or fixed fee for their services, factoring in some of the other items below.
Location
Much like rental and vendor costs, the location of your CPA can affect price. Someone based in a high-cost area such as California or New York typically charges more than someone in Nebraska or Delaware. Some CPAs may also offer a discount working online compared to in-person.
In most cases, it’s a good idea to work with an individual small business CPA or company with a presence in the state where you do the most business. They know the lay of the land best and can identify state-specific ways to lower your tax bill.
Income type
If you only earn income through your business, that’s a more straightforward tax form that will take less time to prepare. Should you and your company also hold rental properties or earn capital gains through investments, it will likely increase the cost of tax preparation and the number of forms to fill out.
Additional forms and taxes
Filing in a state with no state income tax means one less form to fill out. However, only a handful of states don’t have state taxes, so you’ll likely need that additional form at the state level.
CPAs will also consider your business entity type. There are different tax rules to follow for an S corp vs. a C corp, for example. Form 1120-S (for S corporations) also costs slightly less to file than Form 1120 ($913 compared to $923), and the average cost of tax preparation for LLC businesses is different compared to an S corp.
Experience and timing
A CPA with 20 years of experience will probably charge you more than a CPA with one year under their belt. The more experienced CPA has seen just about everything and can identify areas to focus on to maximize your tax deductions and increase your refund — or at least decrease your tax bill — and offer peace of mind you’re not missing anything while filing.
How close the tax deadline is also a factor. Similar to trying to book a flight or hotel at the last minute, should you wait until the thick of tax season to file taxes, you might find CPAs have increased their rates.
Complexity
If you simply want to submit a standard business tax return form (Schedule C Form 1040 or Form 1120) for your federal taxes without any additional forms or schedules, such as itemized deductions, tax preparation services will cost less than if you have other expenses, interest, and earnings to include. Working with freelancers and contractors also means needing to file 1099-NEC forms, which many CPAs charge more to handle.
Complexity extends to how much work the CPA needs to do to obtain receipts, accurately check earnings, and more. The NATP survey reported CPAs charge an average of $166 extra for disorganized or incomplete files and a $377 retainer to do tax prep for a prior year. Having surprise fees tacked to the cost of tax preparation is an unwelcome sight—that’s why proper bookkeeping is necessary!
Ways to lower the cost of tax preparation services
Tax season can be a stressful time, but there are ways to lower the cost of tax preparation and keep your expenses in check. Having clean, organized books that are up-to-date at year-end is a great place to start. When you have your documents readily available and accurate, it makes life much easier for a tax preparer.
Depending on your type of business, you may also be able to deduct your business tax preparation fees on your individual tax return as part of your “ordinary and necessary” expenses. Sole proprietors or independent contractors (Schedule C), landlords or royalty earners (Schedule E), and farmers (Schedule F) all meet the criteria for deducting business tax preparation fees.
Does navigating all that sound like too daunting of a task on your own? Check out our Year End Financial Package, which gives a CPA everything they need to file in a neat and tidy package. It includes an income statement, balance sheet, trial balance, journal entry summary, and general ledger. Consider it your golden ticket for a stress-free tax season.
Selecting a tax preparer for business taxes
Which tax preparer is best for you depends on the above factors. A CPA is likely the best bet for small businesses with complicated taxes and earnings sheets, while a PTIN holder could be helpful for very simple tax filing. Here are some of the common tax advisors you’ll come across:
- Certified Public Accountant (CPA): To become a certified public accountant, one must pass all four sections of the Uniform CPA exam and become licensed by the American Institution of Certified Public Accountants. CPAs must undergo ethics examinations every two years, so they continue their education regularly. Accountants have varying costs and often focus on tax preparation and tax filing. CPAs, as well as tax attorneys and enrolled agents, have unlimited representation rights when dealing with the IRS.
- Tax Attorney: Tax attorneys need a law degree; many also hold a Legum Magister (LLM) degree in taxation. Attorneys might be affiliated with specific bar associations and require continued education to remain compliant and knowledgeable about tax law.
- Enrolled Agent (EA): Enrolled agents have passed the IRS’s Special Enrollment Examination, which covers several areas, notably tax preparation for businesses and tax procedures. EAs have to complete 72 hours of continuing education every three years.
- Annual Filing Season Program Individual or PTIN Holder: PTIN stands for Preparer Tax Identification Number. Annual Filing Season Program individuals are people who have finished the IRS’s Annual Filing Season Program. In both cases, they provide tax preparation services (usually for less than a CPA would charge), but they can’t represent you should the IRS come calling.
- DIY: Doing taxes yourself is the cheapest form of tax preparation—but also the most time-consuming. You can file your taxes via paper return, using tax preparation software, or via the new IRS Direct File, which launched in several states in 2023 and will go nationwide for the 2025 tax season. While the DIY route will save upfront costs, you’ll likely miss out on big tax savings that a professional will catch.
Before making your selection
Once you’ve narrowed down the type of tax preparation route you want to take, it’s time to find the perfect match. Here are a few other steps to finding a good accountant:
- Consider your business needs: If you’re a sole proprietor and only plan to file one form or are doing a self employment tax form, you won’t need all the bells and whistles of a more elaborate tax preparation offering. Certain transactions or more complicated work, like depreciation or listed or abusive transactions, require more time and preparation.
- Check their qualifications and services: If you want to work with a CPA or tax professional, make sure they’re certified and have kept up with their education. Inquire about their services. Some professionals increase the cost of tax preparation in specific settings; others may prefer to work with certain types of businesses. You don't want your tax return suddenly hit with unexpected tax preparation fees.
- Look at referrals and reviews: Any tax professional will do a good job talking up themselves, but what do other people have to say? Contact organizations like the Chamber of Commerce or Rotary clubs, or ask your bank or realtor for any recommendations for handling tax returns. Check the Better Business Bureau and neighborhood groups or review sites to see if anyone has left a complaint about them in the past.
- Don’t be afraid to ask (a lot of) questions: Tax advisors and CPAs have seen far more than you have when it comes to taxes, the IRS, and tax laws, and many offer initial consultations for free or at a reduced rate. Don’t be shy to ask them any questions that you think of, from service fees to filing options to business-specific issues. A tax professional is there to help with tax advice, so take advantage of that.
A look at tax preparation costs
Individual CPAs will set their pricing, and they often will only discuss their tax preparation rates after you’ve spoken to them about your specific situation. Larger companies will do the same, though they’re more transparent with their starter costs. Here are a few comparisons:
As you can see, the cost to file taxes can get quite high, particularly if you need to file across multiple states. Some CPAs only offer annual contracts, as well, which can be a large upfront cost.
Be ready for tax season
Tax preparation doesn’t have to be daunting. We’re here to support you during tax season, and that includes both your business tax returns and individual tax returns. When we file a business tax return for you, we only charge $59 (for annual plans) or $69 (for monthly plans) for an individual return!
Take charge of your tax returns and be more confident in filing taxes. Learn more about our bookkeeping and tax services and get started today.
