By Thomas J. Rennie, CPA
When people approach me with a tax question, sometimes I feel like a broken record. “It depends” is an all too common answer to questions on the spot. The tax code is complex, and with the Tax Cuts and Jobs Act of 2017 the complexity has not diminished. A variety of factors can impact the answer to what may appear to be a simple question on its surface.
Similarly, “It depends” is the base answer on questions regarding the fees charged for completing a tax return. Just like the tax code itself, the cost of completing a taxpayer’s return depends upon myriad factors. A one-size-fits-all pricing structure doesn’t work for anyone. Before you hand over your personal data to a tax preparer, be sure you understand what you are paying for. If you get an upfront price quote, here’s what you need to ask:
- Does this fee include all tax forms I’m required to file?
Often a quoted fee is for the federal Form 1040. Remember, though, state and local forms are due in addition to federal tax returns. Fees for preparing these additional returns can add up, particularly in a state like Pennsylvania where there are many local taxing jurisdictions and requirements.
- Does it cost more if schedules need to be attached?
The new tax law requires more schedules if certain credits and deductions are taken. The 2018 Form 1040 has substantially fewer lines, but separate schedules may now be required to be attached to the 1040. Find out if extra forms will result in added charges.
- Is there a fee for estimated tax payment calculations for next year?
If you receive income as an independent contractor, it is important for you to know whether or not this is part of the fee or if there is an additional charge for these forms. Underpaying taxes can be costly, and computations should be correct and paid quarterly.
- What exactly do I receive when I sign a contract with you?
Be sure to understand what is required for filing and what preparers may be offering as an additional service. If the preparer is offering (and charging) for forms or analysis you will not use, make it clear what you will and will not pay for before you agree to have them complete your return.
- What happens if the IRS audits my return?
Some preparers charge an audit protection fee, regardless of whether your return is audited or not. Other preparers may not be readily available outside of filing season if you receive a question or audit notice from the IRS. Be sure you will have the resources on hand when you need them.
When you receive your tax return from your preparer, whether you owe taxes or expect a refund, you don’t want to be surprised by a big tax preparation bill. Getting answers to the above questions should help you avoid an unpleasant surprise when you review your tax return. If you're looking for a CPA in your area, visit PICPA's CPA Locator.
Thomas (Tim) Rennie, CPA, is president of Rennie & Associates CPAs PC.