A small business CPA costs around $2,000 for tax preparation services for an individual and business tax return. Generally, the price includes federal and state preparation.
Looking for a small business CPA can be challenging for many reasons, one of them is understanding “How much does a small business CPA cost?”
There are a number of factors that determine how much a CPA will cost you, including:
- The complexity and volume of your return(s)
- The services you want
- The pricing model of the CPA
- The market area of your CPA
- The overlooked cost of working with a CPA
After discussing the above topics, I will describe some overlooked cost that you will need to consider when deciding to work with a CPA.
The Complexity of Your Return
The industry you work in, the investments that you have, and the operating structure of your business all impact the price.
Certain industries have specific rules that apply to them and not other industries. This requires specialization and also the potential for more time that must be incurred to complete the tax return. For example, a business in construction has special issues unique to their industry such as “work in progress” whereas a Dental practice does not.
Some business owners also have real estate, multiples businesses, and investments held at a brokerage. This increases the volume of form required to be input into a return. Inherently, it increases the level of risk associated with ensuring tax compliance. Therefore, in these cases, additional review is required that results in more time. In most cases, a CPA will request the client’s most recent tax filings to assess this part of the project.
There are alternative operating structures that a business may desire to operate as. For example, a business can operate as a Corporation, S-Corporation, Partnership, Single Member LLC, or sole proprietor. Each structure has differences in how they should report their taxes.
The Services You Want
CPA services generally include tax and accounting services. These services often are segmented into the following sub-categories:
Tax Services: Tax preparation, Tax planning
Accounting Services: Clean up, monthly accounting, and CFO services
When a CPA gives you a price for your tax return, it does not generally include the other services mentioned. This is part of “overlooked cost” for working with a CPA. When considering how much does a small business CPA cost, you need to be specific about the services you need, at the same be open to the possibility you might need additional services in the future.
For example, in some cases if your accounting records are not adequate this might require “clean up” services. Generally, a CPA expects to make some “reasonable” adjustments when preparing someone’s tax returns and this is included in the quoted price. However, the line between needing “reasonable” and “clean up” services is not black and white.
It’s best practice for the CPA to discuss situations that need additional services prior to working on them or charging the client, but this is not always the case. I recommend to discuss how these situations might be handled by the CPA prior to engagement.
The CPA’s Pricing Model
CPA firms have some form or combination of the following pricing models: fixed prices, hourly billing, fixed + hourly, and or percentage of value delivered.
Fixed pricing means that the price of the service delivered will not change. CPA firms offer fixed pricing solutions for tax preparation, tax planning, and accounting. There will be no additional charges associated with the service delivered. Nonetheless, be weary of “services outside the scope”, which can result in additional services. If you are signing an engagement letter, there should be a section about what the engagement is covering and what it is not covering. Most tax compliance services have fixed pricing agreements.
The hourly rate for a CPA can range from $100 – $250 for a small business. If working with a larger firm, the rate for a CPA can go up to $500. Hourly billing might be a better solution, however, it can also be risky if a project lasts longer than projected. Hourly billing makes it difficult to know how much does a small business CPA cost.
Fixed + Hourly
In a fixed + hourly billing arrangement; the CPA quotes a minimum fee, but allows for additional fees to be charged if the project goes over budget. This is not ideal, as it gives you a baseline for fees, but does not provide a “fee cap”
Percentage of Value
In this pricing model, a CPA charges a percentage of benefit delivered. This benefit can be provided tax savings or increased business valuation.
The Market Area You Are In
The market area that you are looking for a CPA will influence pricing. A CPA that has a HQ in California will generally have different pricing than a Houston CPA. This is something to consider because you can work remotely with a CPA firm that is another geographical location. With that in mind, be cognizant of whether the CPA has experience with state taxes in the place you reside.
Overlooked Costs of CPA Services
A CPA can help a small business with a catalog of issues. You might overlook the cost of working with a CPA if you do not consider other areas that you might need help with. If you really want to know how much does a small business CPA cost, then you need to consider other costs that you might not have thought about. Below are common overlooked issues that could cost you more money when working with a CPA.
Correspondence (Calls and Emails)
Does the CPA charge for correspondence? At a rate of $250 an hour, this could add up during the year.
How much does the CPA charge for tax estimates? This can cost $250-$1,000.
Clean Up Due To Poor Accounting
Do you need your financials to be cleaned up or will there be significant adjustments? This can range anywhere between $1,500 – $3,500.
Prior Tax Issues
Do you have prior tax issues that need to be resolved? This will probably fall under “services outside the scope”.
Wrapping It All Up
In conclusion, tax preparation for a small business can cost around $2,000. That depends on the factors mentioned above. You can always prepare your own taxes using a software like TurboTax, but might feel better working with a CPA to ensure accuracy or find more tax savings.
If you are interested in working with a CPA, you schedule a consultation with us today.
View our range of tax services here.
Author: Joe Gallegos, CPA/CVA Partner-in-Charge
Joe is s a Certified Public Accountant (C.P.A.) and a Certified Valuation Analyst (C.V.A.). Joe’s professional career in public accounting began in 2012 with one of the “Big 4” international
accounting firms. Since 2012, the focus of his professional engagements has been primarily in the area of tax planning, cash flow planning, business valuations, and business consulting for small businesses.