My wife and I are both retired and have no mortgage. Because of this we use the standard deduction and have a very simple tax return. We each receive a 1099R and a SSA-1099. We also receive a consolidated form 1099 for investments. We have no other dependents or deductions.
We usually get a large refund because we choose to have taxes taken out of our monthly checks. About 6 or 7 years ago, our tax preparer charged what I felt was too much to do our taxes. Each of the following two years, I changed tax preparers. Each year the return cost a little more than the year before, with the final year being $350. None of the preparers would give us an estimation of costs prior to doing the return.
Each year I took in the previous year's return to simplify the preparer's job. I have been doing my taxes myself with tax software the last 4 years.
My question: How do you find a tax preparer who is willing to give you an estimate of the cost BEFORE you have them start your return?
Thanks for your time.
A: In my experience, very few tax preparers give a fixed fee quote in advance of providing services. In order to find one who does, I would suggest calling tax preparers in your area to ask if they prepare returns for a fixed fee and ask for a quote in advance. Be sure to get the quote in writing.
You could also try asking your friends and other professionals, such as bankers and attorneys, who they recommend for tax preparation. Call those referrals to see if they provide fixed fee services.
Most tax preparers don't give fixed fee quotes because of the difficulty in anticipating the complexity involved in preparing a client's tax return, especially for the first time.
For example, you state that your wife is receiving required minimum distributions from her IRA. Does she have "basis" in her IRA for federal or state purposes? Many people have nondeductible contributions to IRA accounts for state purposes that can be recovered tax-free because back in the late 1970s and early 1980s the state IRA deduction was less than the federal counterpart. Additionally, for many years the IRA rules have provided for nondeductible contributions that give rise to "basis" for federal as well as state purposes.
What may appear to be a simple matter of entering the data from the 1099-R form reporting the IRA distribution becomes a lot more complicated if have to go back and review prior year returns, if they are available, to calculate basis and account for it properly.
This is just one example of how something that appears simple may contain hidden complexities that can't be fully anticipated at the start of an engagement. There are many others, too numerous to list.