What to Charge for 1040 Federal Tax Preparation

What to Charge for 1040 Federal Tax Preparation
Tax preparation services vary in cost according to complexity of the return.

1040EZ

The 1040EZ is a one-page form that can be used for federal tax preparation. It is commonly used by students and younger people who don't earn much, don't have any dependents and have only one regular job. When you use this form, it is because the customer has nothing else to report except for income under $100,000 and there are no non-standard deductions to account for. You can complete a 1040EZ return in a matter of minutes. A reasonable price to charge for this type of federal tax preparation would be no more than $40 to $50.

1040A

The 1040A form is also straightforward to fill out. Like the 1040EZ, it can be used by people who make less than $100,000 per year and do not need to itemize deductions. But it includes certain income types and adjusted gross income adjustments that are not present on the 1040EZ. The common charge for a 1040A federal preparation ranges from $50 to $150.

Regular 1040

The 1040 is the comprehensive form that applies to all other taxpayers. This form takes into account every type of deduction, income and credit that could possibly apply to a taxpayer. With a standard 1040 you will likely need to itemize deductions for the client, collect some receipts and additional forms, and find out about all of the other life situations that might apply to the case. Many deductions and costs need to be accounted for under adjusted gross income, such as early withdrawal from savings penalties, student loan interest, tuition and fees, and moving expenses. Additional schedules might need to be filled out and attached to the 1040. Finally, a 1040 form is also commonly used by married people who are filing jointly, which can further complicate the return.

Because of these additional considerations, the tax preparation fees will likely range from $150 to $300 or more depending on the complexity of the return. According to the Wall Street Journal, the average H&R Block tax client paid about $183 in fees in 2011, which falls right into this range for the 1040, the most common tax form used.

Businesses

The most complicated tax preparation will be for a business owner. With a business tax preparation, you have to account for business income that can come from several sources, a number of business expense categories, depreciation on business property, home office use and other specific tax deductions. You might be required to sort through the customer's business receipts and do calculations for cost of goods sold. This is all in addition to the owner's personal 1040 tax return. It's time consuming, which is why many tax preparers will charge as much as $500 up to $2,000 or more to file a tax return for a business.