The hardest part in tax preparation isn’t the tax preparation process itself…
It’s preparing taxes with no rest in between because your pricing isn’t right.
When you undercharge for tax preparation services, you’re stuck in a cycle of overwork, not only during tax season, but year-round as you scramble to hit your revenue targets.
This guide is for tax professionals who want to break free from that cycle.
We’ll cover how to price your services properly so you can enjoy running your firm instead of constantly working 50+ hour weeks.
Let’s go!
Table of Contents
- How Much Do Tax Preparers Charge?
- Why This Is Problematic
- What You Should Do Instead
- How to Price Your Tax Preparation Services
How Much Do Tax Preparers Charge?
I helped create the 2024 US Accounting and Tax Pricing Benchmark report with Ignition.
In the report, you’ll find that tax preparation pricing varies widely across the industry.
Here are the tax preparation costs for individuals…
- 17.28% of firms charge less than $400
- 26.58% of firms charge from $400 – $599
- 21.93% of firms charge from $600 – $799
- 11.96% of firms charge from $800 – $999
- 7.97% of firms charge from $1000 – $1199
- 9.97% of firms charge from $1200 – $1500
- 4.32% of firms charge over $1500
The cost of tax preparation differs when you factor in firm revenue.
Smaller firms with revenue under $250K tend to charge less, with 36.92% charging under $400.
Meanwhile, larger firms generating $251K to $700K annually show more pricing confidence, with only 19.15% charging under $400.
What’s encouraging is that firms are ditching hourly rates and transitioning to fixed-price and value-based pricing models.
The average prices tell an important story, but they also reveal a troubling pattern that’s keeping many professional tax preparation firms stuck in a cycle of overwork and underprofit.
Why This Is Problematic
Most tax prep firms operate on a “pump out tax returns” model — high volume, low cost.
Here’s a LinkedIn post I reposted because it hit the nail on the head.
While this is considered a “traditional” business model, it’s a terrible one.
Here’s an example. Let’s say your firm pulls in $200K doing tax prep.
You’ve got 2 junior staff helping out, but you’re still reviewing everything, answering every client question, and running the firm.
After payroll and expenses, you profit $100,000.
But to make that happen, you worked 2,500 hours last year.
In other words, you made $40/hour (ie. your Effective Hourly Rate). And you probably didn’t even take a real vacation.
If you’re charging less than $500 for individual returns or $1,000 for business returns, you’re likely working excessive hours just to turn a profit.
It saddens me when I see even experienced preparers price too low. Oftentimes, it’s because they lack the confidence to price their services at the level they really want.
When professional tax preparation services are priced as a commodity, you have to take on more clients to hit your revenue goals.
Because your profits are limited by the time you can spend on a desk, you find little to no time for rest.
And like I shared in my newsletter, this bad approach to pricing is what makes the busy season stressful.
The average tax preparer gets trapped in this cycle because they’re afraid to charge what their expertise is actually worth.
Eventually, unfortunately, some may even start to hate their own firm.
What You Should Do Instead
Instead of relying on high-volume, low-cost tax prep, shift to a model that focuses on fewer clients at higher prices by offering more value.
And to be clear, offering more value doesn’t necessarily mean more work.
(Read on for more…)
Doing this allows you to increase your pricing many times more, like one of my Future Firm Accelerate members below.
This starts with how you position your services.
For example, instead of calling your services “filing taxes,” position them as comprehensive tax planning and advisory services.
Remember, you’re doing more than completing forms — you’re also helping clients navigate complex tax situations throughout the year.
Here are some valuable features that aren’t difficult to deliver:
- Quarterly tax newsletter: Easy to put together and send, and feels valuable to clients. Feel free to check out my guide to email marketing for accounting firms to learn how to do this
- Mid-year strategy call: Takes 30 minutes but can save them thousands in taxes. More importantly, it gives them peace of mind
- Video review summaries: Protects your time by setting boundaries with clients instead of answering questions throughout the year, all while still keeping them informed
- Tax deadline reminders: Automated, but shows you’re thinking of them
You can also tier your services effectively (more on that later).
Offer simple video reviews in basic plans and live meetings in higher-tier packages.
Make sure to set clear expectations about what each level includes right from the initial consultations so you don’t run into scope creep — I talk about that in this podcast episode.
Most importantly, protect your time by setting clear boundaries.
I don’t recommend giving lower-tier clients year-round email access. If you’re charging too little and offering unlimited support, you’re setting yourself up for burnout.
You can also transition legacy clients into these structured packages by highlighting the added value, not just the higher price.
How to Price Your Tax Preparation Services
1. Adopt Value-Based Pricing
Value-based pricing is a pricing method that focuses on the outcomes and benefits you deliver, rather than the time you spend.
Here’s how this changes your approach:
See the difference?
Instead of giving clients a laundry list of tasks you’re going to do for them, you’re giving them a value proposition.
A value proposition is the main reason your clients should choose your firm over your competitors. It should contain 3 components in one concise sentence:
- Who you’re targeting
- The relevant core benefit of what you’re offering
- How you achieve that core benefit
Here’s an example:
“We help small business owners (1) maximize their tax savings and avoid costly penalties (2) through year-round tax planning and proactive IRS compliance strategies (3).”
I love value-based pricing because it allows you to price higher.
Why?
Because, like I shared on LinkedIn, clients care about what you do for them, not how many hours it takes you to do so.
2. Implement Three-Tiered Pricing With Higher Margins
Implementing a three-tiered pricing model is one of the most effective ways to increase your prices while giving clients clear options to choose from.
If you’ve been following me, you probably know that this is my favorite pricing strategy.
I’ve coached hundreds of firm owners who have used it to significantly increase their pricing, like Eric below:
The Gold-Silver-Bronze structure anchors your prices higher and helps you attract the right clients.
Plus, it gives you an opportunity to move clients upstream.
Here’s how to structure your packages:
Gold Package: Your Premium Service
This is your flagship offering for clients who want the highest level of service. Include everything you offer:
- Unlimited tax advice throughout the year
- Custom tax planning and strategy sessions
- Priority handling of business tax returns
- Full audit assistance if needed
- Direct access to senior tax advisors
Silver Package: The Sweet Spot
Most clients will choose this balanced option. Offer substantial value without going overboard:
- Quarterly tax strategy calls
- Email support during tax season
- Basic audit assistance
- Annual tax planning review
Bronze Package: Essentials
Your baseline option should still be profitable while covering the basics.
Video reviews and limited support are great to include in this plan because they protect your time for higher-value clients:
- Basic tax filing with professional review
- Loom video walkthrough of their completed return
- Standard tax document processing
- Limited email support (tax season only)
Here’s a completed three-tiered pricing plan for tax preparation services (feel free to swipe it).
When presenting these packages, always lead with Gold. This anchors the client’s perception of value and makes Silver and Bronze feel more affordable by comparison.
You can read more about this pricing strategy in my three-tiered pricing guide.
In terms of setting prices…
There’s no science to it. Just pick number that you want.
You don’t have to limit yourself to a specific amount relative to your current price (i.e., 10% to 20% higher). Don’t worry about the average cost of tax among other firms as well.
If you want to charge a client $15,000 for the Gold plan and you know you’re delivering that value to your clients, go for it.
But to land higher prices, you have to ask the right questions and evaluate the ROI of your services to your clients.
These are one of the main goals of a discovery call, which you can listen to in this podcast episode.
3. Inform Your Clients of the Price Increase
Building the confidence to stick to your increased prices is the first part…
The second part is communicating that to your clients.
If you can do both, you can get clients to pay you the prices you want.
Just ask one of the users of RyanBot (my on-demand clone trained on all of my Future Firm Accelerate lessons) below.
The key to this is framing the change in terms of the value you’re providing.
Highlight improvements in your firm, such as new team members, apps, or security measures, to justify higher prices.
For example, you might tell clients about:
- New tax preparation software that catches more deductions and reduces errors
- How you’re making your online tax preparation services faster and more convenient for them
- Easier access to your firm’s tax advisors through a new client portal or scheduling system
- Enhanced security measures that better protect their sensitive information
- Additional team members who can address their concerns with more specialized expertise
What’s important is that your price increase should be based on value. Your firm’s expenses or any other additional costs should have nothing to do with it.
Always focus on what clients gain from these improvements. Here’s an email template you can use:
Subject line: Upcoming price changes
Hi [Client’s First Name],
I hope this email finds you well. I wanted to take a moment to share some updates about our services and pricing.
At [Your Firm’s Name], we’re always looking for ways to improve the value we provide to our clients. Over the past year, we’ve made several enhancements to give the best possible service, which include:
- [List improvements you’ve made in your firm]
- [List improvements you’ve made in your firm]
- [List improvements you’ve made in your firm]
We’ve already seen how they’ve helped clients save time, reduce stress, and uncover new opportunities for tax savings.
To better reflect the value of these enhancements, we’ve made the decision to adjust our pricing. Starting [insert date], the price for your current service level will increase to $X.
If you’d like to discuss this further or have any questions, I’d be happy to jump on a quick call.
Thank you for being a valued client, and we look forward to continuing to work with you.
Best regards,
[Your Name]
[Your Firm’s Name]
Use This Tax Preparation Pricing Guide to Earn More
That’s a wrap!
Use this pricing guide to break free from the high-volume, low-margin trap that keeps so many tax professionals overworked and underpaid.
What pricing strategy from this guide will you implement first? Did I miss anything?
Let me know in the comments below!
