The US has one of the most complex tax systems in the world, like a puzzle that only leads to more puzzles. This makes requirement of CPAs or tax experts not a choice but a necessity, especially for growing businesses. The price for hiring a CPA has only gone up in the last few years, due to the physical shortage of CPAs in the market.
CPAs generally use three pricing models: hourly rates, fixed fees, or monthly retainers. For businesses, they typically consider the level of tax complexity, the type of business, specific services required. How much does tax preparation cost specifically can range from $150 to over $500 per hour.
This blog serves as a guide for businesses to address all their cost-related questions that may arise when hiring a CPA and to explore the key factors influencing CPA pricing.
How much does tax preparation cost?
How much for tax preparation can cost a wide range, depending on factors such as the complexity of the required tax services, which will determine CPA fees. Complexity of Business Model; complexity of Compliance Requirements; Geographic Location; and Qualifications of the CPA. A simple one-time tax preparation (generally an easy process of completing W-2s, 1099s, 1040s, and schedules) has an average cost of income tax return preparation between $200 and $400. A corporation may incur up to $4,000 in costs for complex CPA services. Here is a comprehensive overview of what you should expect from businesses when hiring a CPA.
| Business/Entity Type | Service Level | Average cost of income tax return preparation | Hourly Rate (for Consulting/Add-ons) | Typical Forms/Docs | Key Cost Factors (Beyond Basics) |
|---|---|---|---|---|---|
| Sole Proprietorship | Basic (Schedule C) | $200 – $800 | $150 – $300 | Schedule C, Form 1040 | Bookkeeping quality, business expenses, rental income, investment details. |
| Complex (Multiple Income) | $500 – $1,200+ | $250 – $400+ | Schedule C, Schedule E/F, 1040 | Inventory, assets, state filings, passive income. | |
| S-Corporation (S-Corp) | Standard | $1,200 – $2,500+ | $200 – $450+ | Form 1120-S, K-1s, Payroll | # of owners/employees, payroll complexity, state filings, shareholder distributions. |
| Advanced (Multi-state/Payroll) | $2,500 – $5,000+ | $300 – $500+ | All of above, State Forms | Inventory, payroll filings (W-2, 941), multi-state nexus. | |
| C-Corporation (C-Corp) | Standard | $1,500 – $3,000+ | $200 – $450+ | Form 1120, Balance Sheet | Asset details, ownership structure, loans, complex equity. |
| Advanced (Large/M&A) | $3,000 – $8,000+ | $350 – $600+ | All of above, State Forms | Intercompany transactions, R&D credits, international income. | |
| Partnership | Simple (2-3 Partners) | $1,000 – $2,000+ | $150 – $400+ | Form 1065, K-1s | Partner details, property schedules, tiered partnerships. |
| Complex (10+ Partners) | $2,000 – $4,000+ | $250 – $450+ | All of above, State Forms | Real Estate, Investment Allocations (M-1/M-3). | |
| E-Commerce/Retail LLC | Standard (Sch C/1065) | ~$1,100 – $2,500+ | $150 – $450+ | Sch C/1065, State Sales Tax | Multi-state sales (nexus), inventory tracking, payment processors (Shopify, Amazon). |
| Advanced (Inventory/Payroll) | $2,500 – $5,000+ | $250 – $500+ | All of above, State & Fed Forms | Inventory management, payroll, sales tax compliance, marketplace facilitator issues. |
What factors affect the cost of hiring a CPA for taxes
A CPA charges not only for filling out information on tax forms but also for their expertise in tax compliance, ensuring accuracy on tax return preparation cost, and helping their clients become tax season-ready. The cost of this expertise can be influenced by factors outside of their pricing model.
Business Complexity
As shown in the table above, there is a significant gap between a sole proprietor and a C-Corporation. This is due to the practical complexities involved in their operational differences.
A sole proprietor requires less technical expertise from the CPA because their operational system for accounts receivable and accounts payable is simpler. A C-Corporation faces more complex tax filing requirements, such as “double taxation,” which involves more intricate and stringent tax compliance requirements.
This complexity within internal business operations is a major factor in raising or lowering how much for tax preparation. For businesses, before hiring a CPA, a good step is to conduct an internal evaluation of their specific tax requirements and the services they expect to maintain tax readiness in the long run.
Scope of Services
A single one-time tax filing has a fixed cost; however, many businesses seek out a bundled service or approach when hiring CPAs. In the goal of being tax-ready year-round, on top of tax forms filing, it’s common to receive strategic tax filing, financial consulting or advisory services. These additional services often increase the cost of a CPA’s services. Businesses must have a clear vision of their needs and the services required from the CPA to select the appropriate level of services.
CPA expertise
Not all CPA services hold the same value. Various CPA’s have varying degrees of value based upon what services they produce; therefore, businesses may have a difficult time determining the best CPA for them. Traditional CPA firms offer businesses validation based on their past performance, while some firms provide a more personalized focus to the client by offering services tailored to fit individual businesses. Furthermore, many CPAs develop specializations within CPA services related to specific industries, corporate taxation and multi-state taxation compliance. The total cost or fee(s) associated with a CPA will vary considerably between CPA’s, based on factors such as experience, industry, and area of specialization.
Record Keeping and Filing Costs
Maintaining accurate records and organized filing systems can help reduce the fee a CPA will charge, as it decreases the time needed to review or sort through financial documents. When a business provides clean, organized records, CPAs can focus on analysis and tax preparation more quickly than if the records are disorganized. At the same time, poor or missing documentation increases the time and effort required by the CPA, leading to higher costs. Using accounting software proactively or keeping electronic records ensures that businesses maintain accurate and accessible financial data, thereby helping to control CPA expenses.
Frequency of services needed:
The frequency at which a business requires CPA services factors into the overall cost. A company that uses a CPA once a year at tax time, for example, has a completely different pricing structure than a company that has quarterly reviews, monthly preparation of financial statements, or even weekly bookkeeping services.
While using a CPA regularly allows for more timely access to financial information and compliance with all relevant laws, the cost of monthly/quarterly services is significantly higher due to the amount of time it takes the CPA to provide these services. Businesses need to determine whether they need ongoing assistance from a CPA to run their businesses efficiently, or if they can get by on less frequent basis with two or more reviews and no ongoing contact with a CPA for the sake of budget control and maintaining financial accountability.
Conclusion
The fee structure imposed by CPAs for tax preparation varies significantly depending on each business’s requirements. There is no standard set of services or tasks that are included in the tax preparation costs charged by CPAs to their clients. The services included in the costs associated with tax return preparation cost can vary widely by the individual services that will be rendered.
To best evaluate if a CPA service suits a client’s needs and to ensure the most cost-effective use of resources, clients need to understand the total costs involved. These costs encompass all services included in the fee paid to the CPA for their provision.
Clients should also know what the expected returns from the relationship with the CPA will be. It is imperative that a client knows and understands what is included in their fee before they start a working relationship with a CPA. The services to be provided by a CPA to that client or on their behalf are listed as a minimum to maximize the benefits of using a CPA for their tax return preparation process.
