How Much Does a CPA Cost for a Small Business?

When running a small business, managing finances effectively is crucial for success. Many entrepreneurs reach a point where they consider hiring a Certified Public Accountant (CPA) to handle their accounting needs, but wonder about the investment required. How much does a CPA cost for a small business? The answer varies widely depending on several factors, including the complexity of your financial situation, the specific services needed, your geographic location and the CPA’s experience level. Some CPAs charge hourly rates that range from $150 to $400, while others offer monthly retainers or fixed-fee packages for specific services like tax preparation or bookkeeping.

Consider working with a financial advisor if you need financial advice tailored to your personal business situation.

How Much Does a CPA Cost?

According to accounting firm DeMercurio Advisors, a small business owner should expect to pay between $1,000 and $1,500 on average to have a CPA firm prepare both their individual and business tax returns. DeMercurio notes several factors that determine how expensive it would be for small businesses to hire a CPA. Here are some of the most impactful:

The complexity of your returns: If your business operates in multiple states, rents real estate or you have multiple business entities, your taxes are likely to be more complicated and therefore cost more money to file. Anything that makes your returns more complicated makes it more time-consuming and potentially creates the need for a CPA with more specialized knowledge, all of which can cause the cost to rise.
How good you are at bookkeeping: The quality of your records will also play into how much a CPA ends up charging you. If your records are organized, comprehensive and accurate, the costs are likely lower. If they’re unorganized, are missing information or contain errors, your CPA will have to fix these issues before they can even get started on filing your taxes — and you’ll see that reflected in your bill.
The time needed to file: Many CPAs will charge an hourly rate in addition to a flat rate per return, so the total number of hours they need to spend on your small business’s taxes will play into the total cost. The two previous points will impact the time your CPA has to devote to your return. If they’re puzzling over messy notes in the margins of your financials, having to research a complex niche business issue or answering a lot of questions for you, the bill will grow.
The pay range and fee structure of each firm/practitioner: Obviously, each CPA and CPA firm will have its cost structures and price breakdowns. Based on expertise, location and internal decisions, prices can vary widely, so there won’t be a one-size-fits-all price you can expect.

Hourly rates can vary widely, with many falling between $150 and $400. It’s important to understand what you are expected to pay before agreeing to work with someone. Make sure you get specific details and know how your bill might end up being higher than expected.

Why Do You Need a CPA for Your Small Business?

How Much Does a CPA Cost for a Small Business?

While a CPA’s expertise can cost a good deal, using a CPA can save you money in the long run. Small business owners who do their own taxes can make mistakes that cost them more time and money. The IRS warns that small business owners often underpay estimated taxes, don’t separate business expenses correctly, or deposit employment taxes incorrectly or late — all errors that can cause the IRS to charge a penalty and, in some cases, may trigger an audit.

While the penalties themselves may cost about as much as a CPA would have in the first place, IRS audits can be quite costly and time-consuming. For a mail audit, the most common audit, the average amount owed is $7,000, according to H&R Block, and for an office or field audit, that amount skyrockets to $65,000.

But a CPA can often do more than just prevent you from paying fees. Because of their deep expertise in tax law, CPAs will often know ways you can reduce your tax liability, the various deductions you may qualify for and offer other strategies that can save you money on your taxes.

How Can I Lower the Cost of a CPA?

When looking to lower the cost of a CPA, it’s important to first understand what drives their pricing. CPAs typically charge based on the complexity of your financial situation, the services required, and their level of expertise. Some CPAs bill hourly while others offer flat-rate packages for specific services like tax preparation or financial planning.

Timing matters when hiring a CPA. Rates often increase during tax season (January through April) when demand is highest. Consider engaging a CPA during their off-season when they may offer discounted rates or have more availability to discuss cost-saving strategies for your specific situation.

Not every financial task requires a CPA’s expertise. Consider handling simpler tasks yourself using accounting software, and save the CPA’s time for more complex matters like tax planning or business consulting. This unbundling approach can significantly reduce your overall accounting expenses.

Don’t hesitate to discuss fees upfront with potential CPAs. Many are willing to negotiate their rates or create customized service packages based on your specific needs. Some may offer discounted rates for long-term commitments or for bundling multiple services together.

Shop around before committing to a CPA. Rates can vary significantly based on location, experience level, and firm size. Consider working with a smaller firm or a solo practitioner who may offer more competitive rates than large accounting firms while still providing quality service.

Bottom Line

Hiring a CPA may come with an upfront cost, but their expertise can provide significant financial benefits over time. A CPA can analyze your financial situation to develop effective tax strategies, helping you minimize your tax liability, avoid potentially expensive IRS penalties, and uncover deductions or credits you might have overlooked. It’s important to note, however, that the cost of a CPA’s services will depend on factors such as the complexity of your financial circumstances, the scope of work required and your location.

Business Tax Tips

Some CPAs also work as financial advisors. The combination of skills can be the perfect mix for managing your personal and business finances. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Because you run your small business for profit, you can likely deduct your costs of running it. Consdier using SmartAsset’s small business tax deduction guide to help you identify common tax deductions to help reduce your business taxes.