I recently received my tax refund from the IRS, however, I also got an invoice for $500 from the tax preparation service that had helped me file my taxes. Firstly, I have a very simple 1040 tax filing with no itemized deductions, filed as single, and pretty much as simple as can be when it comes to filling taxes. Such a fee seems way too much given the simplicity of my taxes. I have read, "Some pricing models that are illegal and prohibited by the Treasury Department. As a general rule, tax professionals are prohibited from charging "an unconscionable fee" for providing tax services".

Second, I used their service in the past years while working at a company which provided that service for free. Thus, I had filed with them in the past, and at no fee because my company was covering it. I left my company last year in July, and haven't worked since that time, I was filing the income of the time working with the company, so I was under the impression that my company still covered that time of employment.

Can anybody please give me advice on what is the best course of action? I have contacted the tax preparation service, and I do believe $500 for such a simple return is just ridiculous nonetheless, and they were in no way forthright about this.

Is this considered business malpractice?

Update: After writing the accountants, they agreed to lower the fee to $200, and I agreed to pay.

  • It was not a big account firm rather a local one, and I could have used a free service because all the filing consisted of was the W2 form with nothing else to add, so no room for mistakes on my part. I was under impression my company was still covering it, that's why I used their service. I searched online and the maximum price for such a simple filing should be around $120 at most. Of course, most people with my tax situation will just file for free or pay a small price to file with a service like turbo tax. It seems they simply took advantage of me and is more business malpractice. – maverick Mar 6 '18 at 1:34
  • What was their quoted fee? – Hart CO Mar 6 '18 at 1:39
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    Feels like an expensive lesson, unfortunately. – Hart CO Mar 6 '18 at 3:30
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    It's not unusual for a CPA to charge ~$250-350/hr for their time, probably more in some markets, certainly if you had asked ahead of time they would have told you their hourly rate and likely given an estimate for your return. It may be crappy that they didn't do that ahead of time, but as a returning client they maybe didn't think to discuss it. What did they say when you contacted them about your sticker shock? I think it's a poor value, but some people like having an expensive CPA do their simple tax returns, I don't think $500 is too far outside of usual/customary. – Hart CO Mar 6 '18 at 4:09
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    @prl Half an hour is probably unreasonable too, 2 hours may also be unreasonable, they may charge $500/hour or have a flat fee arrangement with the company. Who knows. I'm just saying $500 in general for tax preparation is not too far out of the ordinary, especially in NYC. – Hart CO Mar 6 '18 at 15:22

I’m inclined to agree with Hart that this will be an expensive lesson that you should always get a quote for any service before committing to it.

However, I think you do have a reasonable position to negotiate from. Tell them what you have told us—-that you thought it was covered, that you think it’s exorbitant for such a simple return, that you could have done it for free if they had given you an estimate, etc. I suspect they might come back with a more reasonable fee rather than fight with you. Which will still be way more than you want to pay, but it will be an improvement. I would hope for $100–150, and be unsurprised at $250.

  • Thank you. I have written them, hopefully there can be a reasonable negotiation with them. But yes, it's a lesson learned just to use turbo tax from now on, and such accounting firms should maybe think about customer retention if they want to be competitive with the large nationwide accounting companies and online services. – maverick Mar 6 '18 at 4:58
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    @maverick - please let us know if they reduce the bill. Based on what you described I believe they will. – TTT Mar 6 '18 at 5:06
  • yes, once I know will do! – maverick Mar 6 '18 at 5:45
  • Update! After writing the accountants, they agreed to lower the fee to $200, and I agreed to pay it. – maverick Mar 9 '18 at 1:21

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