Finally, the complexity of your tax return affects your preparation cost. Tax professionals typically charge per form, per hour, or a combination of both; for example, an hourly rate for organizing a shoebox full of receipts plus separate charges for tax forms. If you show up to your tax preparation appointment with a shoebox full of documents, receipts and miscellaneous statements, you'll pay an hourly rate to a preparer to organize and add up your items. The more complex your return is, the more you'll pay for preparation, as you'll likely need an experienced preparer.
According to a study published by the United States Government's General Accounting Office last year, most taxpayers (77% of 71 million taxpayers) believe that they benefited from using a professional tax preparer. A person with investments classified as passive activities may face higher preparation fees because the preparer must determine items such as cumulative losses and not just fill in the figures. Working with a lawyer may allow attorney-client privilege in the matters discussed if the so-called Kovel Agreement is established, according to which the taxpayer hires a tax lawyer who, in turn, hires the services of a tax accountant to prepare the returns. Because a certified public accountant provides financial services that go beyond tax preparation, they can be more expensive than hiring a tax preparer to file basic taxes.
If you're a DIYer and you're comfortable with tax preparation software, you can do your taxes yourself one afternoon or a weekend and save on fees. The directory of federal tax return preparers with select credentials and requirements from the agency lists preparers who currently have professional credentials recognized by the IRS. If you are self-employed or earn income from rented real estate, assets that are depleted or depreciated, partnerships, or foreign sources, your costs may be much higher than your state's average tax preparation charges. Tax professionals cannot legally charge “an excessive fee” for tax services or charge tax preparation fees based on the information in your return; for example, professionals can help you respond to requests for information from the IRS, negotiate payment options if you owe more than expected, and create a tax plan to save on taxes in the future.
Companies such as H&R Block and others offer various levels of help, from explaining how your statements were prepared to accompanying you with an audit and guaranteeing services that cover the fines and penalties that result from any preparation errors.
