How Much Do You Charge to Prepare a Simple Tax Return?

Is There a Hidden Message in this Question?

 Penny Wise and Dollar Foolish Thoughts

With each passing week as the April 15 due date approaches, the number of callers whose first question is “How much do you charge to prepare a simple tax return?” exponentially increases. To a seasoned tax professional, the hidden message in this question is that the caller is a price shopper and cares nothing about the experience and expertise of the person entrusted to prepare their tax return. While the cost to prepare a tax return is very important, the benefits of working with an experienced tax professional are much more important.

A former client recently called us to consult with us about a $10,000 IRS tax assessment and a $2,000 penalty that had been imposed on his self-prepared tax return. When we asked this former client why he stopped using us, he said that he thought that he would save the $400 fee and do the return himself. After all, he said that the return did not look that difficult. After reviewing the return prepared by him and the IRS assessment notice, we told him that both the tax and penalty assessed were proper. The taxpayer admitted that perhaps the filing of a tax return is more complicated than he thought. That $2,000 penalty was equivalent to us preparing five years of tax returns for him. Since the taxpayer had made the same mistake in the following year’s return, we advised him to immediately file an amended return before the IRS assessed him another $2,000 penalty.

Some individuals will spend countless hours preparing their own returns and suffer the anxiety of not knowing if the IRS will be contacting them for taxes due. There will also be those who feel comfortable using tax preparation software, but there are circumstances where “you don’t know what you don’t know,” requiring you to call in the help of a tax professional or receive that $2,000 penalty notice in the mail as discussed above.

As we are quick to point out to our clients, the preparation of a tax return, aside from assuring compliance with the IRS and the peace of mind that comes from knowing that your returns are correct, is a relatively low value service compared to the added benefits we provide.

The true value of an experienced tax professional is that by becoming familiar with your tax and financial situation, you will have a trusted adviser in your corner who knows all about your circumstances in the moment of need which can make a critical difference to you, a surviving spouse, or dependent children.

An experienced tax professional . . .

• Allows you to better understand your overall financial picture which may include setting up sufficient emergency funds to cover unexpected medical or unemployment issues; how to plan and reach your savings or investment goals; when is the ideal time to revise your goals; is real estate investing for you; how new tax laws affect your financial security and planning; tax considerations when selling your personal residence or vacation home; how to maximize charitable contributions . . . to name a few examples.
• How to prepare for those big-ticket events in life such as determining if you have sufficient disability and life insurance coverage if you become disabled or die prematurely to provide your family members with financial security; how to pay for the cost of college for a child (for example, the new law allows 529 plans to be used to pay private school tuition and when to withdraw 529 funds to maximize scholarship monies); will your retirement plan allow you to retire early and be financially comfortable.
• Make the most of your retirement, regardless of how you wish to spend your retirement years, there is strategic planning as to when you and your spouse should begin to receive Social Security benefits; when and does it makes sense to convert traditional IRAs to Roth IRAs; what is the best way to satisfy RMD requirements (required withdrawals from traditional IRAs after reaching 70 ½ years of age).
• Estate planning considerations should be coordinated between your tax professional and your estate planning attorney to honor your wishes and minimize taxes for your beneficiaries. Tax reform greatly reduced the number of taxpayers subject to federal estate tax, but only through 2025. If your state taxes estates (e.g., PA’s inheritance tax), you will need to take that into consideration.

Figuring all of the above on your own is tough. Having a trusted adviser in your corner who knows all about your circumstances and looks at the big picture can make a critical difference. An experienced tax professional can help you start thinking about strategic timing and next steps, so you don’t miss out on important opportunities.

Next step: Making the Decision to Engage a Tax Pro

Every year we consult with new clients who tell us that they purchased a rental property, created an LLC, purchased a business, created an estate plan, etc. without first consulting with an experienced tax professional. Sometimes the taxpayer, by acting on his own without first working with a trusted adviser, is costing himself money due to an inefficient tax decision. Oscar Wilde is quoted as saying “Experience is simply the name we give our mistakes.” Yes, one can learn from his/her mistakes, but sometimes those mistakes can be financially costly. To quote Jimmy Dean, “I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.” If you’re not sure you’re on the right financial path, or what your path should even be, adjust your sails by contacting a tax professional today and avoid costly financial mistakes. Having a tax adviser will help save your time and money.

So rather than only asking how much a tax preparer charges to prepare a tax return, consider the valuable benefits and intangibles that an experienced tax professional provides.

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If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.

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About F. Bryan Haarlander, EA, CTRS:

Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester,  Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.

A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.