Tax Prep Costs: How Much Will It Cost to Get Your Taxes Done?

Most of the cost of paid preparation lies in the processing cost of untangling the taxpayer’s bookkeeping errors, and hand sorting through many volumes of data to find the handful of it that’s relevant, FWIW.

I used TurboTax for the last few years, as most of my returns have been simple. This year I did my taxes by hand for the first time, because I sold stock this year and TurboTax wanted too much money to deal with that complexity. I used the IRS online tool (FreeFileFillableForms) to e-file my returns. It was tricky, and my submission was rejected the first time, but I fixed my mistake and submitted again. Second time’s the charm?

We’ve been happy with TurboTax for the last 5 years, although we’re probably going with a CPA next year due to business income. You can get 10-20% off TurboTax through various bank promotions. State Farm Bank gives TurboTax Deluxe away free to the first 25,000 customers each year for instance, and my local credit union gives 10% off (since I missed the 25,000 this year) Google around for other promotions and coupon codes.

New Hampshire also does not have an income tax, but it does tax interest and dividends over $2,400 (individual) and $4,800 (joint) at a 5% rate.

I use TaxACT, and they give a discount after the first year. This year for state & federal (simple return) I paid $19.90 for everything, including e-filing and archiving my return. If you commit early in the year to using them (they send an email in the fall) then you can get a lower price.

I think TaxACT is the best. I saw very little difference between them and TurboTax, except the price.

Whatever you decide, avoid refund anticipation loans at all costs. If you file electronically with direct deposit, you’ll usually get your refund within 10 days or so. It’s just not worth paying the outrageous fees on RALs to get your money a few days sooner.

In the last few years, I had to the do the 1040 long form because of some investment losses. (Stupid prosper.com) I’m done with that, and for the foreseeable future, it looks like I’ll be able to get away with using the 1040A. My investments are all in Roth IRA and 401k accounts, but I’ll have student loan interest deductions for awhile.

I won’t pay for e-file. I’ve done my own taxes for awhile now (I advise having a basic understanding of how taxes work — for example, looking at the forms and seeing what kind of deductions may be available to you can be a useful thing) and it’s not that hard to print out the forms, stick them in an envelope, and drop them in the mail.

IMHO, the only reason to pay for efile is to get that refund sooner. However, the smartest thing to do is owe a few $ at tax time, and that filing the forms ASAP just isn’t that big of a deal.

I own my own business, so I would never consider anything other than having my CPA prepare my taxes. I pay him quarterly for his services. The advice he gives me is beyond just tax issues–he has a holistic approach to taxes and business practices. It’s money well spent. I know that I will not have any surprises from the IRS, and I’ve received valuable business advice from him over the years.

“If you had income from multiple states, you may be required to file in more than one state, and this will likely cost you additional tax preparation fees for each state.”

This will actually be my question for next year, but I might as well ask it now while I’m thinking about it. I just moved from Maryland to Virginia. However, I still work in Maryland (and will continue to do so for at least the rest of this year). The Maryland tax form says if I live in VA and did not maintain a place of abode in MD for at least 183 days, I am exempt from Maryland tax withholding. But…
1) Do I take that to mean I am also exempt from filing a return in Maryland next year?
2) What happens to the 12 weeks of state taxes that have already been withheld by Maryland? Do they get sent to Virginia somehow? Do I owe a bunch of money to VA next year but get a correspondingly big refund from MD?

If you are a high income earner or have any sort of complexity in your tax returns (dividends, 1099 income, etc.) you will find that the money you spend having your taxes prepared by a CPA who specializes in taxes (not all do) money well spent…and tax deductbile. I say this as a VP of finance for a small company who routinely guesses my tax liability within a $100 before sending my info to my accountant each year. Why? Two sets of eyes are better than one, especially if one of the sets has spent the best part of his or her career studying the nuances of tax law. That same expertise can come in handy during the year if you have a situation that comes up which might impact your taxes. A CPA who has done your taxes for many years will know almost as much about your finances as you do. Finally, should you be audited, your accountant (who has handled more tax audits than the individual tax payer ever will) will take the lead.

That said, if you are a W2 wage earner making mid-five figures, suck it up and do your own taxes, no matter what kind of math phobias you have. What you learn will be invaluable.

I paid $95 plus tip to have someone do my taxes for me (Brooklyn, NY). I give him a generous tip because he picks up the paperwork from my apartment and bring them back to me.

I’ll chime in with the fans of Tax Act. You get to keep lower rates even if they raise the regular rates. I’ve been using them for years and am grandfathered at their old rate. With the early bird savings I pay $13.99 for deluxe Federal and State e-file. Their site is very comprehensive and they have a lot of help information.

Brian:

Tennesee does tax interest and dividends, so anyone with investment income would have to file a state tax return.

When I started freelancing about 11 years ago, I hired a CPA to do our taxes because I wanted to make sure I did all the self employment stuff correctly. Our taxes are also a little complicated by the fact that my husband owns 1/4 of a house that he inherited (along with some other relatives) in another state. We have had other oddball things pop up in the past few years too (investment losses, IRA conversion to a Roth that then had to be recharacterized and then converted again this year). Honestly, it pains me every year to write the CPA an ever increasing check ($360 this year)but I very much like that I really just gather up information and send it to him in one big envelope and then he does the rest. I also have a little more peace of mind because the house in the other state does cause me some concern from a tax and record keeping standpoint. If it ever gets sold and out of our lives then I probably won’t be as willing to pay someone else to do taxes.

I have used the same CPA for over 20 years, and the peace of mind is worth every penny. It is not cheap (just under $ 400 this year)but he always finds things that I would never think of. My grandmother left a fairly complicated estate in 1997 and he has always helped with that and other inheritances that have come along.

Self-employed and work at home, so I have had a friend of my brother’s do it for the past 10+ years. He is a CPA. He charges $92.00 for federal and state (at least for the past +/- 5 years that has been his rate). I think he is well worth it for my peace of mind knowing I haven’t missed something.

Our taxes were so very complicated last year… that by the time we’d collected everything we needed to bring to a tax professional, had read up and made sure we understood the laws, had talked to the CPA in the family and the retired person in our family who does volunteer taxes… and had gotten luke-warm recommendations from everybody we knew for accountants… (the best recommendation being to ship all of our tax info half the country away)…

..that we ended up just doing the taxes ourselves with the family CPA’s blessing and TurboTax (though not the base version). He said he didn’t think that any tax preparer that we could find would do a better job.

Right now I’m educating myself on cost-basis calculations when the companies spinoff and merge (I know the bottom-line answer, but they want a cost-basis number), and on how exactly to get the right tax numbers on that Roth conversion that seemed like such a good idea at the time.

Next year our taxes should be back to normal, which will be a big relief (unless I decide to sell the AOL single stock and its time warner former affiliates).

I’d totally be willing to pay someone if I had someone I could trust. But I’ve heard so many stories about accountants messing up that it really does seem easier to do it ourselves with software. That and just collecting the necessary documents is most of the work.

I used to have my dad do my taxes every year but I moved overseas for about 14 months and ended up with foreign income statements, foreign tax credits, RRSP homebuyer repayments, etc. My dad told me I had to get an accountant and it was worth the money – if for nothing else than having someone know how the complexities of the varying tax years was going to work out.

I might go back to my dad now that my taxes are going to be “normal” again but may start using UFile or some other online system. I just couldn’t do it with all the complications in my taxes for the past 2 years.

The ~400 I paid last year and again this year are worth it to know there shouldn’t be too many surprises.

One other point when you use an outside professional. Make sure that the CPA has liability insurance as protection in case of fraud or incompetence. I prefer to have my CPA’s have an office (home or business, it doesn’t matter) where they have been for a while and I get a great deal of comfort seeing their various diplomas and certifications tacked on the wall. You get what you pay for when it comes to tax preparers which is why it freaks me out that people are willing to give all their personal info to a guy who picks it up and delivers it for only $95. Identity theft, anyone?

I used OnePriceTaxes for 2009 and it was a dreadful mistake. The software neglected to include my 1099-MISC forms even though I filled them out. It has no audit function, so you are pretty much on your own to get things right. The help was almost nonexistent so that the experience was akin to just filling out the forms I knew were needed. Also, there was no review function and the print function failed, just couldn’t print, so I had to file with no way to review my return. Once filed I was able to print, but then it was too late. Never again! I went back to TaxCut and had to use it to generate a corrected return.

BTW, while I cannot be sure this is true for the 2010 tax year, the 2009 OnePriceTaxes software was just a framework built around their online system. You had to be online for it to work.

My income was pretty low last year due to getting hurt at work. If your income doesn’t pass a certain AGI threshold then you can file for free at online tax places like Turbo Tax Freedom Edition. I think the AGI limit is $31k or so.
In several states you also will be able to file state for free through the program.
I saw last year there were other reputable places offering the same thing.