Navigating tax season often induces stress, even for those who delegate the task of preparing and filing taxes to professionals. However, many find the peace of mind in ensuring accurate tax preparation worth the investment. Surprisingly, the expense of tax services is often more reasonable than anticipated.

Cost Breakdown: Hiring a Tax Professional

Recent data from the National Society of Accountants reveals that the average cost for a straightforward, non-itemized Form 1040 and state return preparation is $220. While this figure might initially seem insignificant compared to the average tax refund—reported at $3,054 according to IRS data from October 2023—it’s essential to maximize your retained refund amount.

Who Handles Your Taxes?

Choosing to self-file can potentially result in no expense at all. Conversely, engaging a tax professional typically incurs an average cost of $220 for the preparation and filing of basic federal and state returns.

Filing Tax Returns: Exploring Options

When it comes to filing your tax returns, various services are available to guide you through the process, making it more straightforward and convenient. While most of these services offer a free version, they often come with additional charges, sometimes for even basic features like including a state return or deducting student loan interest.

Among the free options are Cash App Taxes and the IRS Free File program. However, it’s important to note that the latter is only accessible to taxpayers with an adjusted gross income of $79,000 or less.

Different Types of Forms

The expense associated with filing your taxes hinges largely on the complexity of your financial situation. For instance, opting for an itemized Form 1040 along with a state return typically incurs an average cost of $323, which is $103 more than simply taking the standard deduction. Furthermore, if you’re a business owner, you’ll need to allocate an additional $192 for processing standard tax forms.

Geographic Disparities in Tax Preparation Costs

According to research conducted by the National Society of Accountants, the cost of hiring a professional to file your tax return can vary significantly depending on your location. For instance, if you require an itemized Form 1040 and a state return, the average cost in Alaska is $288, while in Hawaii, it can reach $486. In contrast, the same service averages $244 in Kansas but is considerably lower at $163 in Ohio.

Determining the Appropriate Cost

The amount you should allocate for tax preparation varies according to your individual circumstances. In my personal experience, I managed to file my taxes for free over several years as my financial affairs were relatively straightforward, even with business-related expenses factored in. However, since becoming the owner of an S Corporation, the complexity of the reporting process has necessitated hiring professional assistance for comprehensive tax handling.

If you find yourself uncertain, it might be worthwhile to explore free services like Credit Karma to gauge their suitability for your needs. Should the platform cover all aspects of your requirements, you can proceed with filing at no cost. Conversely, if doubts arise regarding the accuracy of your filings, the complexity of your situation, or simply the desire to avoid the hassle, engaging a certified public accountant could prove beneficial.

Tax Season Savings Strategies

As tax season approaches, prudent financial planning can offer valuable benefits. Whether anticipating a refund or preparing for potential tax liabilities and associated costs, setting aside funds proactively is a judicious course of action. High-yield savings accounts present an opportune solution, enabling automated savings and gradual accumulation of a dedicated tax fund through regular contributions or payroll deductions. Furthermore, those expecting a refund may consider depositing it into a savings account to generate additional interest until the time arrives to utilize those funds.

Herein are our recommendations for the most advantageous high-yield savings accounts.

1. UFB Direct Secure Savings Account

• APY: 5.25% (UFB Direct categorizes balances into five tiers; however, at present, a single interest rate applies to all tiers.)

• Features: No minimum deposit requirement & No monthly maintenance fees

2. SoFi Checking and Savings

• APY: 0.50% - 4.60% (Customers can earn up to 4.60% APY on savings balances by setting up recurring monthly direct deposits or by maintaining a monthly balance of at least $5,000. Checking balances earn 0.50% APY.)

• Features: No minimum deposit requirement & No monthly maintenance fees

3. CIT Bank Platinum Savings Account

• APY: 5.05% (Earn 5.05% APY on balances exceeding $5,000, while balances below this threshold earn 0.25% APY. APY is accurate as of July 27, 2023. Interest rates are variable and subject to change)

• Features: $100 minimum deposit requirement & No monthly maintenance fees

4. CIT Bank Savings Connect Account

• APY: 4.65% (APY is accurate as of July 27, 2023. Interest rates are variable and subject to change.)

• Features: $100 minimum deposit requirement & No monthly maintenance fees