What Does A Small Business Tax Return Cost?

When it comes to your return preparation methods, you have three main options:  

1. DIY – The IRS makes all forms available on its website. If you have a background in tax and have a simple return, you might decide to prepare your return yourself. While compiling your return is generally free, you may need to pay a fee to electronically file your return.  
2. Tax Preparer – The IRS lets anyone with a Preparer Tax Identification Number (PTIN) prepare and submit tax returns. Tax preparers don't need any formal background in tax, which is why they are limited in their scope of services. However, working with a tax preparer can be cheaper than enlisting the help of an accounting firm.  
3. CPAs and Accounting Firms – CPAs and accounting firms have extensive experience preparing and filing tax returns. After all, it's what they specialize in. CPAs and accounting firms are the most expensive preparation method, but they can provide you with valuable tax advice that can result in cost savings.  

Most small business owners refrain from the DIY method and will use a tax preparer, CPA, or accounting firm for peace of mind.  

Each preparer or firm will have its own pricing model. Nevertheless, here are some types of pricing tiers you might encounter.  

Charging a flat fee for your small business return is one of the most common pricing models. Your preparer will evaluate the forms on your return and give you a fixed price. This is generally done by looking at the prior year's tax return and adjusting for any new items in the current year. For example, a preparer might charge $500 for Schedule C preparation and $1,000 for an S Corporation return. The advantage of this pricing method is transparency before your return is filed. However, the preparer can increase the fee if an unexpected item or form pops up.  

Some preparers will charge an hourly rate, but it’s less common. The hourly rate can range from $25 per hour for freelancers to over $300 per hour for partners at accounting firms. Hourly rates can be beneficial if your return is straightforward and requires minimal time. On the contrary, if you have a complex return that takes dozens of hours, the costs can quickly add up.

If your small business tax return only has a handful of forms, your preparer might charge a per-form fee. This type of pricing model is not very common since most returns require additional schedules and statements. Like fixed contracts, a per-form fee can give you clarity into your expected bill.  

Growing small businesses might choose to have an accountant on retainer. A retainer pricing model requires advance fees, such as monthly or quarterly. However, all tax services are included at no additional cost. For example, you might pay a CPA $5,000 per quarter to handle all of your tax and accounting work. When tax time rolls around, you aren't required to pay any additional costs.  

Each business return is unique, which is why it can be hard to ballpark a fair price. Here is a general breakdown of the average small business tax return by entity type: 

• Sole Proprietorship / Single-Member LLC (Schedule C): $500 – $1,000 

• Partnership / Multi-Member LLC: $1,000 – $2,000 

• S Corporation: $1,000 – $2,000 

• C Corporation: $2,000 – $4,000 

Remember, the factors of your small business will impact the final price. For example, if you claim credits, like the Research Credit, your return price may be higher. This makes it important to get quotes from multiple preparers.  

Here are a few more small business tax service considerations to keep in mind as you look for a preparer.  

State Returns 

Be sure the price quoted includes all applicable state returns. Some preparers might only quote the federal return and blindside you with additional state return filing fees. Have your preparer break down the price for the federal return and each state to give you transparency.  

Unexpected Forms 

How does your preparer handle unexpected forms? Will they honor your original quoted price, or will they send you a bill for additional work? While you shouldn't assume your preparer will do extra work for free, they should consult with you before increasing your bill. To avoid unexpected fees, ask your preparer if they have a price cap for your form. For example, they might quote an hourly contract at five hours of work and have a seven-hour cap to account for any unexpected items.  

Extensions  

Depending on the items of your tax return and when you get your documentation together, you may need to file an extension. Ask your tax preparer if an extension is included in the fee they charge. Extending your tax return is relatively straightforward and shouldn't result in high costs, but it's important to check beforehand.  

Filing Method 

Most preparers have electronic filing capabilities, but be sure to check before entering into a contract. The IRS has significant delays when processing paper returns. Additionally, the IRS may require you to electronically submit your return. Most tax preparers use software that has built-in electronic filing capabilities, but you still want to double-check. 

Tax Planning 

If you are trying to minimize your tax burden, tax planning is an integral component. While tax planning will come with an additional cost, it can be beneficial to work with a provider that offers both planning and filing services. Ask if your preparer can put together a tax plan before the end of the year and help you uncover viable strategies for lowering your tax bill. Most CPAs and accounting firms will offer planning services.   

Finding the right tax preparer can lead to timely filings, lower tax bills, and added transparency. Here are five characteristics of good tax preparers.  

Valid Credentials 

A good tax preparer will have valid credentials. At a minimum, your tax preparer should have an active PTIN. The IRS requires PTINs to be renewed each year. Your preparer should be able to send you their number and an active confirmation statement.  

Additionally, if you are working with a CPA or an accounting firm, be sure their credentials are in good standing. Most states allow you to check the status of CPA licenses online. Doing a quick search can save you a headache down the road.  

Experience and Expertise  

The experience and expertise of your tax preparer are other characteristics to vet. The tax preparer should have experience preparing the forms included in your tax return. For example, if you are claiming special depreciation options, your preparer should know the proper claiming process. Improper experience can lead to mistakes, which can trigger IRS inquiries and audits.  

Experience and expertise are especially important for unique items on your return, such as using the cash basis method on your tax return or calculating year-end accruals to expedite deductions. Check on return item, industry, and entity type experience before choosing a tax preparer.  

Scope of Services  

Understanding the scope of services a potential tax preparer offers is non-negotiable. For example, if you want to claim a certain credit, be sure your tax preparer has the capabilities to fill out those forms. Ask about tax planning, return types offered, and any other limitations.  

If you are looking for a large scope of services, partnering with a CPA or accounting firm from the start can be beneficial. While a freelancer or individual tax preparer might be able to meet your needs now, they might not have the capabilities in a year or two as your return complexity expands.  

Effective Communication  

A good tax preparer should be able to explain every aspect of your return in simple language. This helps you understand the ins and outs of your tax situation to make more informed decisions going forward. For example, your tax preparer might explain how Section 179 Depreciation works and the limits for your business. This insight might influence your decision on when and what type of assets to purchase in the future.  

Effective communication also entails being accessible and responsive to questions, even outside of tax season. For example, if you receive a notice related to your tax filing, will the tax preparer help you sort through it? If you can't reach your tax preparer outside of filing season, it might be time to look elsewhere.  

Transparent Fees 

Fee transparency is another characteristic of a good tax preparer. They should be able to give you an estimate for the price of filing your small business return in advance and stick to that estimate. For example, if a preparer quotes you $500, but the final bill is $1,000, it might be time to switch preparers.  

Having a formal contract and quote can help you avoid unexpected filing fees and costs. While you might not be able to avoid additional fees related to last-minute add-ons, like a credit, your baseline return price should remain consistent with what was quoted.  

Is your small business tax return a fair price? Finding a tax return preparer that charges a fair, transparent price can seem like an overwhelming task. At KDG, we prioritize transparent communication so you’re always informed about your project. Our team delivers comprehensive solutions backed by deep experience, ensuring you receive exceptional support and meaningful results at every step.