Does It Cost a Tax Preparer to E-File?

How much does tax prep cost? And how much does it cost to e-file? Well, it depends. If you do everything on your own, you may end up paying nothing to e-file. And simple tax preparation software may cost you a little bit of money.

However, if you use complex tax preparation software or pay a professional to do the work for you, the cost to e-file a federal return may be much higher. And it will vary, depending on the associated services and charges.

How Much Does It Cost to Electronically File Taxes?

You won’t pay anything if you use the IRS Free File Program or free fillable forms via designated IRS partner sites. But you must adhere to the instructions the IRS sets for opening an account and filing a federal tax return to enjoy the free services. Also, you must file your taxes within the set open period.

In addition, you must be careful to pick the right option based on what you earn. For example, if you earn ​$72,000​ or less, you will be guided on how to file electronically on an IRS partner site. However, if you make more than that, you must know how to prepare your own federal income tax forms with minimal guidance.

How Do Tax Preparers Collect Fees?

How much can a tax preparer charge? To obtain the answer to that question, you need to consider their:

  • Labor costs
  • Tax preparation software costs
  • Administrative costs
  • Location

For that reason, you need to research further about what these charges are for the tax preparers on your shortlist before choosing the best one for your needs. But remember that tax preparation professionals earn a median hourly wage of ​$21.30. So expect them to charge you around that amount when they provide you with relevant services.

1. Labor Costs

There is more to tax preparation than just e-filing. Tax preparers must ensure all your financial and personal details are in order. If your financial documents are well-organized, their work will be easier. But if they are not, the tax professionals must first take the time to arrange everything properly. And you will pay for that service.

In addition, they may also make the necessary deductions, such as IRA contributions, charitable donations, student loan interests and medical and business expenses. By claiming deductions, you will obtain the tax relief you qualify for. So, the more deductions you need to make, the more labor costs the tax preparers will charge you for.

It is also worth noting that some tax forms are much more challenging to fill out than others because they require more detail. So, expect to spend more for them. On average, a tax preparer will charge you anywhere from $150 to $200 ​on average to prepare your taxes. However, the work involved may lower or raise this price range significantly.

For example, tax preparers will charge you an average of​ $220 for a standard Form 1040 that is not itemized. However, an itemized version of the same form will cost you an average of ​$323​ because more work is involved.

2. Tax Preparation Software Costs

The kind of tax preparation software that one uses will also influence their costs. For example, the tax professionals you hire could purchase a pay-per-return tax software subscription that enables them to pay as they go for each individual or business tax return. However, when filing taxes electronically, they may need to pay additional fees. But these fees will likely apply for the e-files they use on your behalf.

On the other hand, other tax professionals may pay a flat fee for making unlimited tax returns. And some of these digital tools may include the e-filing fee for all the returns, while others may charge the price separately.

3. Administrative Costs

While administrative costs are not directly tied to the core tax preparation functions, they still influence the overall tax e-filing costs. These include employee wages, office supply costs, business insurance, rent and leasing expenses, etc.

Typically, the tax preparer will distribute these expenses across multiple services and clients. Therefore, some of the costs will be passed on to you when you hire someone to prepare and e-file your tax return.

4. Location

Where you or your tax preparer resides also influences the cost of e-filing tax returns. That is because the location affects the cost of living and, by extension, the cost of doing a business. For that reason, if you live in a more expensive area, you should expect to pay more for tax preparation services.

For example, the cost to e-file a California tax return is likely to be higher than the cost of doing so in a state like Texas, which is more affordable to live in. The former may cost you an average of $250, while the latter may cost you only ​$195.

There is no simple answer to the question: how much does it cost to electronically file taxes? When calculating how much it will cost to e-file, the best approach is to consider the work that needs doing, where you live and the software and administrative costs the tax preparer incurs. And remember, the more work the tax expert has to do, the more money you will pay.