How Do Tax Preparers Get Paid?
Tax season comes around every year, and many people turn to tax preparers for help. But have you ever wondered how tax preparers actually get paid? Whether they work for a large company, run their own business, or help people out part-time, tax preparers have different ways of earning money.
Their income depends on many things, such as their experience, the complexity of the return, location, and who they work for.
Let’s go over the main ways tax preparers earn money:
1. Flat Fee Per Tax Return
Many tax preparers charge a flat fee for each tax return they prepare. This means they set a fixed price depending on how complicated the return is.
For example:
- A basic individual tax return might cost $100 to $200.
- A return with business income or itemized deductions could cost $250 to $500 or more.
This method is very common because clients know the price upfront.
2. Hourly Rate
Some tax preparers charge by the hour. The more time they spend working on your return, the more they earn.
Typical hourly rates:
- Beginners or part-time preparers: $25–$50/hour
- Experienced professionals or CPAs: $100–$400/hour
This method is useful when the work is complex or requires a lot of paperwork and review.
3. Per Form Charges
Some preparers charge based on the number and type of IRS forms they need to complete. Each form has a separate cost.
Here’s an example in the table below:
| Form Name | Purpose | Average Charge |
|---|---|---|
| Form 1040 | Main individual tax return | $200 |
| Schedule A | Itemized deductions | $75 |
| Schedule C | Self-employed income | $150 |
| Schedule D | Capital gains and losses | $100 |
| Schedule E | Rental property income | $125 |
This method allows clients to pay for only the forms they need.
4. Commission-Based or Percentage Fees
Although rare and sometimes discouraged, some tax preparers charge based on a percentage of your tax refund. For example, they may ask for 10% of your refund amount.
If you’re getting a $2,000 refund, they could take $200 as their fee.
However, this can be risky. The IRS warns against percentage-based fees because they might motivate unethical behavior like inflating deductions to increase refunds.
More on this topic can be found on Refund Anticipation Loan.
5. Salary or Wages (for Employees)
Tax preparers who work for a tax company (like H&R Block, Liberty Tax, or Jackson Hewitt) often receive a salary or hourly wage. This is common during tax season when companies hire many seasonal employees.
Their pay may include:
- A base salary
- Bonuses based on performance or number of clients
- Commission (if allowed)
Working for a company also means getting training and tools to help with returns.
6. Starting Their Own Business
Many experienced tax preparers eventually start their own tax preparation business. This allows them to set their own prices, choose their clients, and make more money over time.
Income in this case depends on:
- Number of clients
- Types of returns handled
- Marketing and reputation
- Seasonal demand (January to April is the peak season)
Some tax preparers also offer year-round services like bookkeeping or payroll to earn extra income when it’s not tax season.
7. Offering Additional Services
Besides tax filing, some preparers earn more by offering additional services such as:
- Tax planning
- IRS audit support
- Budgeting advice
- Financial consulting
- Business setup help
These services help them bring in extra income, especially if they work with small businesses or high-income clients.
8. Refund Transfer Fees
Some tax preparers offer a service called refund transfer, where their fee is deducted from the client’s refund. This way, the client doesn’t have to pay anything upfront.
However, this service often includes extra charges, and preparers earn a small part of the fee.
9. Franchise Opportunities
Some preparers buy a franchise from companies like H&R Block or Liberty Tax. They get the brand name and support while running their own office.
In this case, they make money like any business owner but also pay a percentage of their income to the parent company.
Franchise owners can earn more, but they also have more responsibilities and costs.
How Much Do Tax Preparers Make on Average?
The income of a tax preparer can vary widely.
Here’s an overview:
| Type of Tax Preparer | Average Annual Income |
|---|---|
| Entry-Level/Seasonal | $20,000 – $35,000 |
| Experienced Preparer | $40,000 – $80,000 |
| Self-Employed (Part-time) | $30,000 – $60,000 |
| Self-Employed (Full-time) | $60,000 – $150,000+ |
| CPA or EA with Business | $100,000+ |
Earnings can grow with experience, licensing, and better client service.
You can also read about Certified Public Accountants to know how CPAs earn differently.
What Affects a Tax Preparer’s Pay?
Many things can affect how much a tax preparer earns:
- Location: Urban areas with high cost of living tend to have higher fees.
- Experience: More experienced preparers can charge more.
- Certifications: Licensed professionals can offer more services and charge premium rates.
- Type of Clients: Businesses and high-income individuals usually pay more than average clients.
- Seasonal Demand: Most money is made between January and April.
Conclusion
Tax preparers play a very important role during tax season, helping people and businesses file accurate tax returns. They get paid in different ways – flat fees, hourly rates, by form, or as salaried employees. Some even start their own businesses to earn more and serve more clients.
If you’re thinking of hiring a tax preparer or becoming one, understanding how they get paid will help you make better decisions. It’s a flexible job that can be done full-time or part-time and offers opportunities for growth and higher earnings over time.
Also Read:
Frequently Asked Questions
How do tax preparers usually charge clients?
Tax preparers usually charge a flat fee or an hourly rate. Some may charge based on the type of tax forms used. The price can also vary depending on how simple or complex your tax return is. You’ll often know the cost before they start.
Can tax preparers take a percent of refund?
Some tax preparers may offer to take their fee from your refund, but charging a percentage of the refund is not recommended by the IRS. It could lead to dishonest practices. It’s better to pay a fixed fee or hourly rate to avoid problems.
Do tax preparers earn more with experience?
Yes, tax preparers often earn more as they gain experience. They can charge higher fees, handle more complex returns, and build trust with clients. Experienced tax pros may also offer extra services like tax planning or start their own business for higher income.
What is the average pay for tax preparers?
Tax preparers can earn $20,000 to over $100,000 a year. Income depends on experience, skills, location, and whether they work for a company or own their business. Full-time professionals with licenses or many clients usually make more money throughout the year.
How do seasonal tax preparers get paid?
Seasonal tax preparers often work for tax firms during tax season. They may be paid an hourly wage, a set salary for the season, or a fee per return. Some may also get bonuses for performance or the number of clients they serve in that time.
