How Much Does Tax Return Preparation Cost in the U.S.? How Fees Are Set and How to Keep Them Down

Many people who pay a tax preparer or accounting firm to file their U.S. tax return tell us the same thing: they have no idea whether the fee is reasonable. Every firm quotes differently, which makes prices hard to compare.

In this article, written from the perspective of an IRS Enrolled Agent in New York, we cover typical fees, how preparers set their prices, why returns with Japan-related items tend to cost more, and how to keep your fee down.

Typical tax preparation fees in the U.S.

A 2020 survey by Canopy, a practice-management software company for accounting firms, found these average fees for individual returns (Form 1040):

Type of return	Average fee (2020 survey)
Form 1040 (standard deduction) + state return	$221
Form 1040 (itemized deductions) + state return	$302
Form 1040 + Schedule C (sole proprietor)	$400

Prices have risen since then, so fees today are generally higher. Firms in large cities such as New York, firms that work in Japanese, and returns with many Japan-related items tend to cost more still. Treat these numbers as a rough guide.

How fees are set: usually a flat fee per form

In the same survey, 81% of firms charged flat fees rather than hourly rates. “Flat” rarely means one price for every return, though. Most firms start with a base fee and add a charge for each form or schedule your return needs. The items that push the fee up most often are:

• Number of state returns: you moved during the year, or you live in one state and work in another (New York and New Jersey, for example)
• Itemized deductions (Schedule A): mortgage interest, property tax, charitable gifts
• Self-employment income (Schedule C)
• Sales of stocks or funds (Schedule D and Form 8949)
• Rental income (Schedule E) and depreciation
• Credits for dependents and education

Why returns with Japan-related items cost more

Returns for Japanese expatriates and permanent residents often include forms that rarely appear on a typical American return:

• Foreign tax credit (Form 1116) for income that was also taxed in Japan
• Reporting of foreign bank and brokerage accounts: FBAR (FinCEN Form 114) and Form 8938
• Japanese mutual funds and ETFs, which can be PFICs that require Form 8621
• Dual-status returns for the year you moved to or left the U.S.
• Japanese salary, rental or pension income converted from yen to dollars

These forms take time, and fewer firms can handle them, so preparers who work in Japanese tend to charge more.

Five ways to keep your fee down

1. Hand over everything at once. Fewer follow-up questions and re-sent documents mean less time on your return.
2. Always provide last year’s return. Carryovers and depreciation schedules carry forward cleanly, which saves a lot of checking.
3. Ask for an itemized quote up front. Knowing what each form costs keeps the bill from growing later.
4. Avoid preparers who charge a percentage of your refund. The IRS specifically warns against them.
5. Consider switching. The same return can cost very different amounts at different firms.

Switch to us and save 50% on last year’s fee

CLT NY INC. runs a tax preparer switch campaign: if you filed with another preparer last year, your preparation fee is 50% off last year’s fee (up to $500 off, first year only). Upload last year’s invoice and you’ll see this year’s fee right away.

We keep costs low by using AI to read and organize documents and by running everything from intake to payment in our own system. Every return is prepared, reviewed and signed by an IRS Enrolled Agent.

Summary

Your tax preparation fee is driven mostly by the number of forms your return needs. The more Japan-related items you have, the higher it tends to be, so ask for an itemized quote and hand over complete documents. If you aren’t happy with what you pay now, switching is worth considering.

Sources: Accounting Today, “Big jumps seen in tax prep fees: Survey” (Canopy 2020 survey); IRS, “Quick tips for picking a tax pro”. This article provides general information and is not individual tax advice.