The cost of tax preparation can add insult to the injury of forking over checks to Uncle Sam. A number of factors, including your geographic location, the complexity of your finances and how late you wait to file your returns, can affect your costs. But tax preparation costs aren't just limited to the amount you pay your accountant. Money you pay to gather information about your taxes, as well as the cost of lost time that could be spent earning money are also factors.
Factors Affecting Cost
There's no single rate that everyone pays to complete their tax returns. If you use tax preparation software or file yourself, you may be able to complete your returns for very little money, or even for free. Tax preparation costs can also vary from location to location. Accountants living in areas with higher costs of living generally charge more. The complexity of your tax returns is also a major factor. A simple return may be pretty cheap, but complex returns with lots of documentation can cost hundreds or even thousands of dollars. You might end up paying more if you wait till the last minute and have to file an extension or have your taxes completed in only a few days.
The National Society of Accountants reported in 2013 that the average nationwide cost of tax preparation was $246. But not everyone uses accountants. Tax software can also be pricey, particularly if you pay for software rather than filing online. Some online filing companies complete simple returns for free, while others charge a fee depending upon the complexity of your returns. For example, Turbo Tax charges $74.99 for a combination of home and business returns, but will complete a 1040EZ for free, as of February 2013.
One of the hidden costs of filing your taxes is the cost of getting the documentation together that you'll need to claim deductions and credits. You may have to pay for old bank statements or credit card receipts, and if you're printing hundreds of pages, you could be stuck replacing printer ink or even your printer. These costs are small, but can add up quickly, particularly if your returns are highly complex.
You're not just losing money when you're shelling out bucks for getting your taxes done or coughing up the dough for old documents. You're also losing time, and time is money. Particularly if you own your own business or are a freelancer, preparing your own taxes can cost you. To reduce the costs, try estimating the time you'll need to do your own taxes. If your hourly wages for this period are greater than this sum, you'll save time and money by paying someone else to do your taxes.
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