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Average cost of filing taxes
According to the National Society of Accountants, recent fees for tax preparation by a certified public accountant (CPA) average anywhere from $220 for a Form 1040 claiming the standard deduction to $323 for a Form 1040 with itemized deductions. Fees for a corporate tax return (Form 1120) cost about $913.
If your tax situation is complex, or you need to file additional IRS forms, additional fees could apply. For example, if you’re self-employed, the average cost for Schedule C is $192. If you want to itemize deductions and file a Schedule C form along with your basic 1040, the average cost is about $515.
These are average tax preparation fees, and they’ll fluctuate depending on:
- your region
- the complexity of your tax forms
- the CPA’s expertise, and
- the level of service you need
If the help of a professional means preventing costly mistakes or an IRS audit, it’s no doubt worth it.
Cost to file taxes by filing option
There are several ways to file your taxes. This includes options that are free and others with different costs.
1. Filing with tax software
If you feel at ease navigating business-related tax forms, filing your own return makes sense. You can do it for little to no cost with the help of tax software programs.
But expect to give it your full attention. The IRS estimates business taxpayers spend about 21 hours per year gathering records and reviewing completed returns before filing. If you feel this time might be better spent working on your business, having someone (like Bench) handle your books and tax filing can be one more “taxing” thing to take off your plate.
If you decide to forge ahead and file your return, your success boils down to your business situation, how familiar you are with any relevant changes in tax rules, how involved you want to be, and how comfortable you are with numbers.
To meet IRS requirements for filing your return, you’ll need accurate, up-to-date bookkeeping for the entire tax year. Be sure to review the tax form that applies to your business and decide what facts and figures you’ll need to complete it. Most will come from your financial statements, including your income statement and balance sheet.
Preparing your return on your own can come with risks, especially if your situation seems complicated. Simple mistakes and overlooked deductions can end up costing you thousands of dollars in overpaid taxes or fines—money that you could have put back into your business.
Helpful resource: How Do You File Business Taxes? (3 Step Process)
What to consider before filing with tax software
Before you decide self-preparation is the way to go, ask yourself the following questions (and be honest):
- Do you have the patience and time to do your taxes?
- How organized are your books?
- Do you know what forms you need to submit with your return and when to submit them?
- Are you legally entitled to trim dollars off your tax liability?
- Do you know how to write off expenses related to running your business?
- Do you have to collect sales tax?
- Do you understand tax law and the implications of recent tax law changes?
To help you stay ahead of deadlines this year, check out our small business tax checklist for a guide to the basics you’ll need to address before you file.
Choosing the right tax software
You can save considerably by buying tax accounting software. The cost is much less than hiring a tax expert, and the expense is tax-deductible.
Many online tax services offer specifically-designed software for business owners and pricing tiers for different needs. The most popular are Intuit TurboTax, H&R Block, and TaxAct.
Some versions of tax software are for sole proprietors in particular. They include TurboTax Self-Employed, H&R Block Self-Employed, and TaxAct Sole Proprietor.
There are even tax service packages that are free to use for simple returns. If you don’t qualify for the free version, the costs will vary. For instance, H&R Block's DIY pricing is around $85, plus $44.99 for a state return, for most individuals and small businesses. In comparison, TurboTax pricing ranges from $89-$169, plus $39 for a state return.
These prices don’t include discounts, which online tax preparation services often offer during tax season.
Tax software offers a do-it-together approach. You answer a detailed questionnaire and fill in your return with relevant information. If you have a question, online support is on hand to help but at an extra cost.
Using this software can help you file accurate returns, maximize your deductions and refunds, and lower your risk of paying penalties. However, it’s always best to act with caution when filing. Self-prepared returns completed with software aren’t always correct and can end up costing you more money in the long run.
2. Hiring a tax preparer
If you don’t have a good understanding of estimated taxes, deductible expenses, depreciation, and inventory accounting, hiring a tax preparer who does is the way to go.
A tax pro can help you determine which IRS forms apply to your small business and use their expertise to uncover tax credits, deductions, or incentives you may not be aware of. They can also help trim your tax bill and reduce your chances of an audit.
Who can help with your business tax preparation?
The only professionals qualified to help you are CPAs, accountants, enrolled agents, and tax attorneys. Here’s a look at what they can do on your behalf to make tax time easier.
- Certified public accountants (CPAs) are accountants licensed by their state board of accountancy. Not all CPAs work with taxes, but those who do likely qualify as experts. CPAs can work with you to ensure your business complies with tax regulations and follows the latest accounting standards. CPAs can represent you before the IRS if they audit you.
- Accountants keep you on top of current regulations for business taxes. They prepare your tax returns to make sure you’ve minimized your tax liability and also represent you before the IRS in the case they audit you.
- Enrolled agents are tax specialists who focus on tax compliance issues, whereas most CPAs and attorneys aren’t. They help with tax planning, offer tax advice, prepare tax returns, and could represent you in an audit or other tax situation before the IRS (many enrolled agents are former IRS agents).
- A tax attorney specializes in working with taxes. While they typically don’t file taxes, they can help individuals or businesses manage federal, state, or local tax law issues.
Each of these tax professionals may structure their service pricing differently. Many charge a flat fee per return, while others charge an hourly rate for the same task.
Hiring a CPA or accountant to file your taxes costs between $220 and $800, depending on the size, complexity, and type of business. You’ll pay more for tax prep if your business records are messy or your bookkeeping isn’t accurate and tax-ready.
When looking for the best deal, it’s wise to ask for an estimate of what tax preparation services might cost and what the fee includes. For example, do they charge extra for e-filing, phone calls, or audit protection?
Further reading:
What to consider before hiring a tax preparer
There are many benefits to hiring the right tax professional:
- Find ways to save your business money
- Save you time and patience
- Personalized tax advice and help
- Avoid DIY errors
- Reduce your risk of an IRS audit
- Keep your books organized year-round
- Identify tax deductions
Keep in mind, even with all the bells and whistles that come with a pro, when you sign your tax return, you’re responsible for everything on it—even if someone else prepared it.
As you prepare to file your tax return for the year, consider your options and go with the one that makes the most sense for you and your small business so that you have everything you need before the next tax deadline rolls around.
Set your business up for success with Bench
Small business tax filing is different with Bench. You get the best of both worlds. You can either use our year-round bookkeeping service to supply your tax preparer with up-to-date, tax-ready financials or upgrade to our Bookkeeping and Tax plan to let us handle your tax planning, prep, and filing.
Our unlimited tax advisory support makes tax filing a breeze, so you can focus on running your business. No extra fees, no year-end surprises—just expert tax support you can rely on for total peace of mind. Learn more.
