Where, in the world of taxes, is the rise of the robots?
Right here online, surely, as H&R Block, Intuit's TurboTax, and others slug it out for taxpayers’ tax returns. And yes, such do-it-yourself tax software has enjoyed a surge in market share of U.S. individual tax returns from 30 to 40 percent over the past six years, according to estimates from Intuit.
Yet the share that brick-and-mortar tax businesses command has remained stable, down just three percentage points to 57 percent last year from 60 percent in 2010.
So what gives with the human beings?
Most taxpayers who use flesh-and-blood preparers have seen their tax prep fees rise steadily, according to the National Society of Accountants' biennial survey.
(See ") (The society describes its members are "owners, principals and partners of local 'Main Street' tax and accounting practices.") In 2010, for example, the average fee for an itemized Form 1040 with a Schedule A and a state tax return was $229. From 2012 to 2014 that fee rose by an average of 5.4 percent a year, far above the U.S. inflation rate and even as the machines were slugging it out with cut-rate service and, in some cases, freebies. Fee for a 1040 averages $176: NSA.”
Today, the average amount professional tax preparers at those “Main Street” firms charge for an itemized Form 1040 with a Schedule A plus the state return, one of the most common jobs, is $273 (the same as it was in 2014). Many people still pay that, though with online do-it-yourself services and some tax preparation chains, taxpayers with the simplest returns may be able to file for free. (That said, fees for things like importing your prior year's return can find their way onto bills.)
Most people with accountants remain loyal to them, said Kathy Hettick, a past president of the NSA. Like doctor-patient and lawyer-client, it's a relationship, after all. Who else gets to see your whole, stark financial life in the raw? Plus, many of us are glad to avoid putting in an average of five hours to do a 1040 and state return on our own, and maybe screwing it up.
"With fair warnings about fees, everyone understands that the cost of living goes up, and with the complexity of the Tax Code in recent years and the last-minute tax changes, people understand that fees continue to rise," Hettick said. (What clients do grumble about: The Tax Code getting more complicated to begin with.)
How much a taxpayer pays depends largely on how complicated their finances are, so all these NSA numbers are just a benchmark. But with the IRS already processing returns, as of Jan. 23, the clock is ticking.
Costs were highest in the New England and Pacific states and lowest in the East South Central region, which is made up of Alabama, Kentucky, Mississippi, and Tennessee.
Preparers also sometimes charge clients extra if, for instance, they show up with a mess of disorganized papers. Seventy-one percent of preparers charge a special fee for dealing with sloppy or incomplete files; the average is $117. If a client turns in information after a deadline, the average fee for that is $79.
"A lot of practitioners will charge more if someone comes in really late and wants to file on time, and those people are usually willing to pay it," Hettick said.
As more practitioners levy such fees, they are jacking up the main cost of their services, too, raising their fees by an average of 6 percent last year and planning to raise them again, by an average of 6.4 percent, for the 2017 filing season, the NSA survey found. It also notes that the average annual gross income reported by its members dropped from $285,605 two years ago to $269,461 in the latest survey.