NSA Survey of Accountants and Tax Preparers Includes Fees for Tax Preparation, Accounting, Advisory, Audits, Financial and Other Services by Practice Demographics, National, Regional and State Averages.
The 2016-2017 Income & Fees Survey contains detailed information on fees charged for tax and accounting services, broken down by state, geographic region and practice size. Demographic data on the respondents describes type of practice, community size, gender, credentials, years in practice, and education level. Operating expenses broken down by category are included in addition to information on succession planning, billing practices, practice management and more.
National Overview: The Practice
Tax and accounting firms surveyed are owners, principals and partners of “Main Street” tax and accounting practices who have an average of 28 years in public practice and hold multiple credentials.
The average annual gross income reported decreased to $269,461 from $285,605 two years ago. More than 64% of gross income is derived from tax preparation, planning and related tax services which is up from prior years. Most other client services as a percentage of gross income remain consistent to prior years with the exception of write-up work decreasing almost 2% and payroll services increasing a percent.
In correlation to the gross income decrease, salary and benefit expenses (other than retirement) also decreased to an average of 38.1% down from 43.5% of total operating expenses. The average number of employees reported is down to 3.5 from 4.2, however practices are now hiring more seasonal employees up to an average of 3.2 from 2.3. The average gross income per full time employee in a practice has increased to $100,212.
Most other specific operating expenses as a percentage of total expenses have slight increases, most notably, allocation for technology expenses is up 2.1%.
National Average Fees
The average fee for an itemized 1040 and state return remains unchanged from 2014, holding at $273. The cost to prepare a Form 1040 and state return without itemized deductions increased to $176 from $159. This year, for the first time, we asked practitioners how much they charge for Affordable Care Act forms, Form 3115 (Application in Change in Accounting Method) and Form 8824 (Like-Kind Exchanges).
On average, preparers said they raise all fees annually and increased tax preparation fees 6% in 2016 and plan to raise fees an average of 6.4% in 2017.
Fees vary by region, firm size, population and economic strength of an area. The average tax preparation fee for an itemized Form 1040 with Schedule A and a state return in each U.S. census district are:
- New England (CT, ME, MA, NH, RI, VT) – $333
- Middle Atlantic (NJ, NY, PA) – $290
- South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) – $268
- East South Central (AL, KY, MS, TN) – $210
- West South Central (AR, LA, OK, TX) – $271
- East North Central (IL, IN, MI, OH, WI) – $249
- West North Central (IA, KS, MN, MO, NE, ND, SD) – $214
- Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) – $263
- Pacific (AK, CA, HI, OR, WA) – $329
A typical firm bills for tax preparation by form (39.5%). Accounting, payroll and other services are billed by fixed fees or hourly rates.
Fees vary sharply by state.
Most preparers (89%) continue of offer prospective clients a free consultation. While most do not charge a fee to file extensions (67%), those who do, collect an average of $45. More and more practitioners are adding on fees for procrastinating clients and to expedite returns. The majority of practitioners (71%) continue to tack on to shoebox clients an average fee of $116.74 for time spent on disorganized or incomplete files.
The majority of those surveyed (58.3%) have not seen any change in the number of audits. The average hourly fee for an in-person IRS audit is $150 and the average fee for an IRS audit response letter is $128. Only 8.8% of preparers never charge for an audit response letter. Sixty-two percent charge for IRS audit response letters when the return was prepared by another party; 47.5% charge when they are not at fault for a return they prepared and 10.3% always charge or an IRS response letter.
Most practitioners (80%) are fortunate to not have been involved in any client disputes over the last year. When asked how often they review problem clients, most practitioners (80%) said they do so as problems occur. Those surveyed rank raising fees first (59%) and disengaging second (49%) as the most likely options for handling problem clients.
Most practitioners pay all of the interest and penalties for errors that are totally or partially the fault of the practitioner.
A higher proportion of respondents (71.5) in the 2016 survey indicated they have NOT made succession plans compared to 2014 (64.8%). Most (69.6%) indicate they are not planning on retiring anytime soon or they are building their practice. The average number of years until preparers say they need to plan for succession is 8.1.
It’s no surprise that practices continue to increase technology operating budgets and continue to adopt new technologies. Notably, the typical practice is 50% paperless with most reporting being paperless for tax preparation (46%).
Most practices (54%) are now using secure web portals or cloud platforms to share files with clients compared to 2014 when most did not (56%). When collecting data from clients, more are reporting their clients upload documents into a secure filing sharing program compared to 2014 – 7.8% vs. 2.9%. However, the face-to-face, in person interview is still the most popular way to collect data from clients with 44.1% of practitioners conducing in-office client interviews (down from 45.7% in 2014).
NSA members get free access to the 2016-2017 Income and Fee Survey Report.
About the Author: Jodi Goldberg
Jodi Goldberg is the VP of Marketing & Member Services at the National Society of Accountants