How Much Does A CPA Cost?

The average cost of hiring a CPA for a small business.

Though CPA fees vary by location and expertise, their tax services cost $174 per hour on average in 2020 and 2021. The cost of hiring a CPA for your small business usually depends on their hourly rate and the amount of work you need. Your actual accountant fees depend significantly on the help you need from them.

Fortunately, small businesses usually don’t need to hire a CPA full-time. Most can get by paying for CPA services intermittently throughout the year, such as calendar year-end, tax season, and before significant decisions.

Here are the average hourly costs for some popular CPA services.

Average hourly costs of different CPA services.

CPAs also often bill their clients fixed fees for specific services, such as preparing individual tax forms. For example, the average CPA charges $192 for a Schedule C, $323 for an itemized Form 1040, and $913 for a corporation’s Form 1120.

Costs for additional services.

Remember, the hourly cost of hiring a CPA depends significantly on the type of work you need them to do. As you might expect, the more complex and involved the work, the higher the hourly rate is likely to be.

As a simple example, it costs more for a CPA to complete your IRS Form 1040 if you itemize than it would if you were to take the standard deduction. In 2020, the average hourly rate was $161.34 for an itemized return and $153.74 for a non-itemized return.

Here’s what you can expect to pay per hour for the services above:

• Tax planning: $174
• Financial planning: $170
• Compilations, reviews, and audits: $164

Fortunately, there are some services that a public accounting firm won’t charge clients for if they’re paying for something else. For example, 58% of CPAs don’t charge a fee to file a tax return extension.

Because accounting fees vary significantly between providers, you should shop around before committing. Ask each CPA how they bill for services and try to get a quote for your expected needs.

What does a CPA do for you?

CPAs are most well-known for business and individual tax preparation, but they provide many accounting services. Here are some other types of assistance you may want from a CPA.

Tax planning

There’s only so much a CPA can do to lower your tax bill once the year has already ended. As a result, if you only visit one when you need to file your tax return, you’ll probably pay more to the Internal Revenue Service (IRS) than necessary.

However, if you consult a CPA at the beginning of the year and stay in contact with them, they can help you develop and execute a plan to reduce your tax burden significantly.

For example, they might have you file an election so the IRS treats your limited liability company (LLC) as an S Corp, which could lower your self-employment taxes.

Business advisory

The Thomson Reuters Institute shared that 95% of accountants have clients asking for broader business advisory services. As a result, CPAs are increasingly taking on a more general consulting role.

These services may include:

• Cash flow forecasting and analysis
• Mergers and acquisitions assistance
• Outsourced chief financial officer services
• Key performance indicator (KPI) analytics

CPAs are well-equipped to provide this kind of advice due to their in-depth understanding of financial statements, taxes, and individual industries since so many CPAs specialize.

Assurance services

Finally, CPAs provide assurance services for your financial statements. That means verifying the accuracy of documents like your balance sheet and income statement.

There are 3 types of assurance engagements:

1. Compilations: These involve a CPA using data that you provide to create financial statements. Your statements don’t have to follow generally accepted accounting principles (GAAP), and the CPA won’t verify your financial data.

2. Reviews: These provide limited assurance that your financial statements are accurate and conform with GAAP. The CPA will follow procedures designed to reveal unusual items in your documents and investigate them.

3. Audits: These provide reasonable assurance that your statements are free of material misstatement and conform with GAAP. That’s the highest level of assurance possible and involves an in-depth review of your internal controls and financial data.

There are many different scenarios in which you may require assurance services. For example, you may need audited financial statements to qualify for funding from an investor.

Is hiring a CPA worth it? 

Whether or not it makes sense to hire a CPA for your business depends primarily on the complexity of your financial situation. Here are some times when hiring one makes sense.

1. Your tax returns are complex.

The more complicated your tax situation becomes, the more likely you’ll benefit from hiring a CPA. For example, if you’re a sole proprietor with one income stream and no investments, you could probably get by with accounting software.

However, if you have 3 business entities and four rental properties in separate states, you’ll likely need to hire a tax preparer.

2. You’re considering significant financial decisions.

If you’re about to make a change that might significantly impact your tax and financial situation, it’s best to talk to a CPA first. They can explain the potential repercussions and walk you through the process.

For example, if you’re considering moving to another state, changing your legal relationship status, or bringing a partner into your business, ask a CPA for guidance.

3. You’re in trouble with the IRS.

Dealing with the IRS is a major headache, but having a good CPA makes it a lot easier. Not only can they guide you through the interactions, but they can serve as a middleman to take most of the work off your plate.

For example, if you have multiple delinquent returns or are undergoing an IRS audit, it’s a good idea to hire a CPA.

4. You need assurance services.

If you need to verify that your financial statements are accurate so a third party can use them, you’ll need to hire a CPA. They’re the only ones authorized to issue an opinion on financial statements.

For example, if you want to take your company public, you’ll need to hire a CPA firm to audit your statements.

The return on investment of a good CPA.

Whether or not paying a CPA is worthwhile for your business depends on how much their services cost and how much money they can generate for you. They might reduce your taxes, save you time, or help you qualify for financing.

For example, say you’re considering hiring a CPA to perform the following services in 2022, which will cost you the following amounts:

• Tax return preparation: $180 per hour for 3 hours
• Quarterly tax planning: $174 per hour for 4 hours
• Financial statement review: $164 per hour for 3 hours

Your CPA expects that they’ll be able to save you $6,000 in taxes by finding additional deductions and optimizing the way you pay yourself from your business. 

In addition, you’ll need your balance sheet and income statement reviewed to qualify for a $100,000 loan.

In this case, you’d be paying your provider $1,728 for the year, but they’d generate $106,000 of additional capital. In this situation, the return on your CPA would be well worth the investment.