The True Cost of Tax Preparation:  a word or two about our fees.

Every year the tax code increases in complexity, and this has occurred exponentially at the individual level.  Ironically, corporation and partnership tax returns are not that much more time consuming for us to prepare than they were ten years ago.  However, the time required to prepare individual returns for our clients has, on average, doubled over the last ten years. We have tried to increase efficiencies in other areas to avoid passing this cost on to our clients, but there is only so much to be done, and we’ve done it.

As I have asserted for many years now, tax complexity is the enemy of “the people”.  It unfairly penalizes those who are least able to exploit the tax code to their benefit; the people who most need to reduce their taxes to the lowest possible level cannot possibly afford to hire an experienced CPA to prepare their tax returns. 

In addition, the accounting field is experiencing an extreme shortage of qualified CPAs.  Hence, high salaries, signing bonuses, and recruiting fees are now common among small and large CPA firms alike.  High salaries mean high billing rates, and higher costs to our clients.

Health insurance premiums for employees have skyrocketed over the last ten years.  Our own premiums have more than tripled since ten years ago.  Other costs of doing business continue to rise, including the new cost of protecting the latest kind of currency:  private information.  CPA firms must now take precautions similar to banks to insure that confidential client data is secure.

All these costs drive prices upward, prices that must be borne by the consumer: you, our client.  While we have strived to minimize this upward pressure, the trend cannot be changed. 

You can expect to continually pay more for tax preparation and tax planning in the coming years, unless something occurs to reverse these trends.  In the meantime, one of the best ways to control your accounting fees is to be as organized as possible and to strive to minimize the amount of time required to process your information.  It is much more cost effective to pay a clerk or bookkeeper to process your financial data and reserve the services of an experienced (and more expensive) CPA for complex procedures such as tax preparation, tax planning, and audit representation.

Most at risk for higher accounting fees are business owners who prepare their own books but are not accountants or bookkeepers.  When the accountant must untangle financial records in order to prepare a company’s tax returns (resulting in much higher fees), it makes good financial sense to have an experienced bookkeeper take over those duties and streamline the process for tax preparation.

So, yes, accounting fees are going up, so consider taking action now to help minimize your costs in the future.