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Average Cost of Tax Preparation for Small Business

Average Cost of Tax Preparation for Small Business


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If you own a small company, you probably already have some idea of how much money the Internal Revenue Service (IRS) may expect you to pay in taxes for this coming year. There is no straightforward response available to the question of how much money tax preparation will cost you. The average cost of tax preparation for small business is affected by a number of factors. The location, degree of difficulty, and tax preparer or service you select are all variables that affect the normal cost of getting your taxes done.

“Your methods of record-keeping and tax preparation directly influence the amount of money that will be spent on your administrative fees.”

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Who Can Help Me File My Business Taxes?

The Internal Revenue Service (IRS) identifies four distinct types of tax professionals that are qualified to offer assistance with the preparation of your taxes.

Registered Tax Return Preparers (RTRPs)

An RTRP must pass a knowledge and skills test given by the Internal Revenue Service. The examination’s main focus is on individual tax returns such Forms 1040 and any associated schedules; it excludes business tax filings. RTRPs must also have produced and signed the client’s return in question before they may represent their clients in an audit. RTRPs might be advantageous when you file your personal tax return, but it doesn’t necessarily indicate your small business would benefit from them.

Enrolled Agents (EAs)

“Enrolled agent” refers to a person who has finished the education and training required to obtain a license from the Internal Revenue Service (IRS) and operate as a tax expert for the federal government. EAs can represent any type of client in any tax situation because they have unrestricted access to practicing their profession. To pass the three-part IRS test, EAs must show that they have a working knowledge of individual and business tax returns, taxpayer representation, and IRS approved practices and procedures.

Certified Public Accountants (CPAs)

CPAs must pass the Uniform Certified Public Accountant Examination and get a license from their state’s board of accountancy, the District of Columbia, or one of the U.S. territories in order to practice accounting. A number of board requirements, such as continued education, adherence to ethical standards, and prior job experience, must be met by CPAs. Like EAs, CPAs are able to represent any client in any tax matter, including tax audits, issues with the Internal Revenue Service over payment and collection, and appeals. CPAs also have unlimited practice privileges.


A state court or the state bar must grant a tax lawyer a license before they can practice. Legal professionals normally need to have a law degree, pass the bar exam, and engage in continuing education programs. Many lawyers who are also CPAs place a strong emphasis on tax planning and return preparation. Additionally, lawyers have an unlimited number of clients they can represent. Consequently, they are qualified to represent any client in a variety of tax matters, much like EAs and CPAs.

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Advantages of Hiring a Tax Professional

You will get a wide range of extra services, including accounting, record-keeping, tax advice, and auditing, if you engage a professional to manage your taxes. This is an added benefit of hiring a professional to handle your taxes. If you run a small business or reside abroad, for example, you may choose to work with a certified public accountant who specializes in that area. Even though some specialists specialize in more than one field, it is imperative to pick someone with a specific level of experience.

With the help of accountants, an efficient accounting system may be created, enabling accurate and practical profitability assessments, as well as the monitoring of prices and spending, the control of budgets, and the forecasting of future trends in speculation. Accountants can also provide their customers with advice on tax-related matters, such as tax compliance and rules, as well as strategies for reducing taxes. Accountants can also produce reliable audit reports, financial statements, and other accounting records that may be needed by lending institutions or to comply with legal requirements.

You shouldn’t have to worry about the price of hiring a certified public accounting firm to prepare your tax return. You should budget anywhere from $1,000 to $15,000 or more, on average, if you want to work with a CPA firm to handle your personal or corporate taxes. Because a CPA firm’s costs are based on a variety of different criteria, it is impossible to give a precise estimate of how much it will cost to have tax returns prepared by them. Keeping all of this in mind, the following is a brief rundown of the average cost of tax preparation for small business:

  • Tax returns for single-member LLCs without a tax election (individual returns): Around $300 to $500
  • Tax returns for partnerships and S corporations: Around $700 to $1,000
  • Total cost for an individual and business tax return: Around $1,000 to $1,500

Hiring an Accountant

You might decide to have an accountant handle all of the preparation of your taxes. There are some business owners who opt to hire an accountant on a full-time basis. The process of preparing their company’s income tax returns is one that many companies choose to have done for them by an outside party.

The cost of hiring a certified public accountant to prepare your taxes can vary depending on your unique situation and the types of tax returns you must file. It might be more cost-effective to hire an accountant if your tax situation is simple, such as if you work for a company that asks you to submit your W-2s. If you’re self-employed, it’s probable that employing an accountant could increase your expenses.

Regardless of the circumstance, there are benefits to having your taxes prepared by a professional if you have the financial means to do so. Even if you don’t end up saving money, you can end up saving days of your time, which is more valuable than money.

In the end, hiring an accountant can create the foundation for a fruitful collaboration with a financial advisor. They will learn about your family’s or company’s financial standing and goals. They can offer wise advice, suggestions for reducing one’s personal tax liability, and solutions to immediate issues at any time during the year.

Using an Accounting Software

The cost of tax accounting software, which you have the option to use, can be anything from free to several hundred dollars. This is a more affordable option than employing a tax expert. Another option that will allow you to avoid paying any fees linked with tax preparation for your federal returns is to file your taxes independently and for free. Using the IRS.gov website or the IRS2Go mobile app, practically everyone will be able to complete their taxes for free starting in 2022. You can complete and submit your federal income tax return online using the guided tax preparation technique, and you can find extra guidance in the abundance of free tax resources online that are tailored exclusively for self-employed people.

The purchase of tax accounting software can be a less expensive option; it is typically less than $120 for more complex filing options and free for simple returns.  It almost feels like you have a virtual accountant helping you along the way when you utilize tax accounting software.

Although preparing your taxes yourself with the use of tax software can save you money in comparison to hiring a professional, working with a certified public accountant (CPA) has a number of benefits. Accountants employ software that is far more sophisticated than what is accessible to the general public when it comes to producing tax returns.

These programs can accurately arrange data and evaluate financial information, which reduces the possibility of errors. Accounting software can be used to keep track of all financial transactions for your business. The software will automatically calculate the totals for you, which you’ll need to complete the required tax forms. Cash-based accounting software solutions can help you obtain the data you need to submit taxes considerably more rapidly.

Due to the availability of a wide range of systems, the costs of accounting software for small firms can vary greatly. For a more affordable overall solution, choose online accounting software with a low monthly membership price.

The fact is that effective use of a good accounting software can actually reduce the average cost of tax preparation for small business.

The Bottom Line

Since the average cost of tax preparation for small business depends on several factors, you should make your decision regarding whether or not to hire a professional to do your taxes or to do your own taxes with the assistance of accounting software based on how comfortable you are with numbers, how familiar you are with fundamental tax rules, and how much time you are willing to spend in order to complete the process.

For the 2023 tax year, the IRS is starting to operate normally again after a few years of COVID uncertainty. This also applies to the customary April deadline. However, you still have a few extra days available because the deadline for this year is not until Tuesday, April 18, 2023.

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