What Should Tax Preparation Cost? The Difference Between a $300 and a $1,000 Tax Return

Check out our latest video on understanding why the same tax return may cost differently from firm to firm (hint: it's all about quality).

Transcript:

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So, tax time is here again.

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Tis the season. It is- we've gone around the sun one more time,

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and now we have to send in our information to Uncle Sam.

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And wanna talk about something that happens every year in my firm,

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you know, inevitably we will get people coming through the door.

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They're needing help with their taxes. We'll talk- talk through their situation a little

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bit and then we'll get to the proposal process and sometimes

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there's a little bit of sticker shock. Someone goes why the heck are

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you charging me $1,000 for a tax return when I can go down the

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street and get that same return for $300?

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Well obviously the assumption there is that you're getting the same return for $300.

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But there is a big difference between a $300 tax return and a $1,000

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tax return. I wanted to break down the differences to those in today's

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video. For those of you that don't know me,

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I'm Dave Lewis, I'm a certified public accountant and the owner of high-impact CPA,

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we're a full service accounting and tax firm helping small business owners grow the

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business of their dreams and pay the least amount in tax as possible while

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doing it. So let's jump right in.

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What is the difference between a $300 return at a $1,000 tax return.

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Well, let's talk about what the tax return is and what it isn't.

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First, a tax return is just a report of what happened financially in a

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year that you send to whatever taxing authorities you happen

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to be underneath them. So the IRS,

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your state tax commissions,

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what have you. So it's just a report.

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Tells the IRS what you made and what you're going to own taxes.

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But it's also a risk document because once you file it,

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you're signing off that it's complete and that it's correct.

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So when you're paying for a tax return, you're not just paying for paperwork.

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You're paying for how much happens before and around that paperwork.

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So let's talk about the $300 return first.

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And to be clear, I'm not saying it's always bad.

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For some people, it's a good fit. If you just have a couple of

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W2s, you know, some children an arm that qualify for the child tax

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credit, simple government forms, that $300 firm may

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be for you, or one of the big box turbo tax H&R block,

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it might work just fine for you. Note that there's still some tax planning

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that can be done before the tax filing due date that they're not going

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to make you aware of. So for a $300 tax return,

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we're talking about a firm that is focused on high volume.

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So the goal is to file and file fast,

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get Get it done, get it out the door, get as many tax returns

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in as possible during tax season.

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The intake is going to be minimal. You're going to upload your documents,

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you're going to answer a couple of questions, and that's often the extent of

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it. There's going to be little to no analysis done on the return if

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you miss something, or something's categorized wrong.

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It might not be caught because nobody has the time to actually go digging

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through it. The review is probably going to be limited as well,

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if there is any review at all. So,

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it's going to be focused on, did we pass all the software system checks?

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Did we get rid of all the flags there?

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So, in the end of the day, the return might be filed,

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but it may not be filed thoughtfully. And the danger is,

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when they filled out the forms, it reflects whatever went in,

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whether it's clean or completely chaotic.

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So, for example, if you've got a small side hustle on a schedule C,

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maybe some things got missed on there. Maybe there are deductions that you qualify

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for that weren't cop that could save you a heck of a lot more

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than the 700 extra dollars that you had to pay our firm.

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And you would never know because nobody asked a single question.

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So here's where the $300 return will often cost you more later.

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You're going to see problems with potentially missed deductions because again no one ask

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follow-up questions. Wrong classifications are deductions.

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Maybe deductions you weren't allowed to take that put you at an increased auto

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risk. Messy books feeding into a return.

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We see that all the time. There is often a lot of cleanup that

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has to go into books to have them be tax return ready.

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And of course the big one, you're not going to get any proactive advice

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with your return. It is purely plug and chug.

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You're going to give them whatever you have. They're going to produce you a

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set of tax forms and you're going to be out the door.

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Now the $1,000 tax return that's a little bit different.

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It is a quality first model. So at this level you're paying for

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a system. You are not just paying for a set of government forms.

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You're going to have a quality intake.

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It's not just upload your stuff and we'll get it done.

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We are going to review everything that you upload and understand what changed

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with your situation this year. Are there any new sources of income?

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Did your business activity change? Did you have major purchases?

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Did you have differences in estimated payments?

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Did you have retirement contributions? Do you have lost carryovers?

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Those often get messed when going from place to place?

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We do a thorough analysis. Does everything in your books tie out?

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Does it tie to the last year's tax return? Do the expenses look reasonable

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for the type of business that you're in, and as everything optimized,

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especially did you forget something.

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There are always deductions that people forget about.

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So we're going to look for those and just by reducing those mistakes and

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asking the right questions, we are often going to save you far more than

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you would have made by just going with the bargain offer.

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There's a quality review process. We're going to look for consistency,

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accuracy, all the support in the documentation.

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Everything has to tick and tie correctly.

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And finally, there's going to be that personal touch.

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You're not just going to go into the void,

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into some queue and get matched with whatever prepare is

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most available that day. I mean,

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this happens especially with the big box guys,

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right? So you're going to go sit down at the desk.

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You're going to get whoever you're going to get. And you're going to get

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your paperwork. So we're here for the personal touch.

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We're going to ask things as human beings because we care about you and

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we care about your position, things like,

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you know, should I be an S-Corp next year?

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Are we getting hit with too much self-employment taxes?

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Are there options for structuring differently?

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How much should I set aside for taxes for making estimated payments?

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How should I pay myself as a business owner correctly and to make

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sure I'm minimizing taxes. And of course,

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just simple, okay, we had a big tax hit this year.

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What can we do to help minimize that next year?

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So who's, what's the right answer?

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And it really depends on your personal situation.

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So a $300 return, that's probably right for like I mentioned,

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simple W2, maybe some interest forms,

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no major changes year to year, no business activities,

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no rental activities, no capital gains,

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no selling stock options, things like that. But if you've got self-employment

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income, you run a business, you have multiple streams of income,

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rental properties, stock activity,

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anything that might add a layer of complexity,

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it's worth having someone with an expert eye check it out.

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The cheaper option is cheaper for a reason,

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and we've all heard that you get what you pay for.

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So at the end of the day,

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the difference between a $300 tax return and a $1,000 one isn't the forms.

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The forms are all the same. The difference is,

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is someone just plugging numbers or is someone doing actual tax work.

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So if you want to help with the quality tax return this season,

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a proper intake, an analysis review,

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and real advisory, feel free to reach out.

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And if you found this video helpful, please like and subscribe,

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it definitely helps our channel. and comment text down below.

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I'll make a follow-up video on the most common mistakes I see in budget-done

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tax returns. Alright, thanks so much everyone.

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I've been Dave Lewis with High Impact CPA. We're trusted advisors driving impactful outcomes.

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Have a wonderful day.