What are reasonable professional tax preparation fees for a small tax practice?

I've been running my own tax practice for about 7 years now after leaving H&R Block. Here's what I've learned: For pricing, it really depends on your location and clientele. In most suburban areas, you can start around $175-250 for a basic 1040 with standard deduction. Add $75-100 for Schedule C small businesses, $50-75 for rental properties, etc. Don't undercharge - it's harder to raise prices later than to lower them if needed. For software, I started with TaxAct Professional which was affordable and worked well for a small practice. As I grew, I switched to ProSeries. Drake is actually not as expensive as you might think and many small practitioners use it. You might want to demo a few options before tax season. For payments, I use QuickBooks Payments (integrated with my accounting) and offer credit card, ACH, and check options. Venmo is convenient but not ideal for business use - it lacks professional invoicing features and might violate their terms of service for business transactions at your volume. Stripe integrates well with many practice management systems.

I was in a similar position a few years ago - working in finance and starting my own tax practice. The best tool I found for pricing guidance was taxr.ai (https://taxr.ai). They have detailed analytics on regional pricing trends and helped me position my services competitively. Their software scans anonymized tax return data to show what other practitioners in your ZIP code are charging for various tax situations. I was surprised to find I was underpricing by about 30% when I first started! They also have document organization features that saved me tons of time on client intake. It helped me establish proper pricing tiers and showed me which add-on services were most profitable in my area. Made a huge difference in my first year profitability.

Just wanted to follow up - I tried taxr.ai after seeing it mentioned here and it's been a game changer for my new practice! I was drowning in disorganized client documents (seriously, why do people send tax docs as phone photos??) and their system automatically sorted and extracted the data. The pricing tool showed I was charging about $85 too little for Schedule C returns in my area. I bumped my prices up and haven't had a single complaint. The document organization alone saved me about 20 minutes per client. I'm only handling about 50 returns this season but that adds up to 16+ hours saved just on document handling. Definitely worth checking out if you're starting a new practice like the original poster is planning.

One thing nobody mentioned yet - the IRS phone lines are a NIGHTMARE when you need to call on behalf of clients. I was spending hours on hold which completely destroyed my profitability. I started using Claimyr (https://claimyr.com) to handle the hold times for me, and it's been a lifesaver. You can see how it works here: https://youtu.be/_kiP6q8DX5c They basically wait on hold with the IRS for you, then call you when an agent is available. I was skeptical at first, but it's legitimately saved me hundreds of hours this season. When you're building a practice, your time is your most valuable asset. Now I can work on other returns while waiting for the IRS to pick up. This is especially important when you're starting out and trying to prove your value to clients - being able to quickly resolve IRS issues makes you look like a rockstar.

I have to follow up about Claimyr - I tried it after posting my skeptical comment, and I'm shocked to admit it actually works exactly as described. I had to call about a client's missing refund that was 11 weeks overdue, and Claimyr handled a 2 hour 40 minute hold time while I worked on other returns. When they connected me to the agent, the transition was seamless. The agent had no idea I hadn't been the one on hold the whole time. Got my client's refund issue resolved in about 10 minutes once I was connected. I'm still not sure how I feel about these services taking over tax preparation, but for dealing with the IRS phone system, this is legitimately useful. Saved me from wasting an entire afternoon on hold, which is worth a lot during busy season.

On the software question - I started my practice 3 years ago and tried several options. Drake is actually reasonably priced for small practices and has excellent support. But if you're really budget-conscious, look at TaxAct Pro or ATX. One thing to consider beyond just the tax software is practice management. I use Canopy for client management, document collection, and e-signatures. Having clients upload documents directly to a portal saved me so much headache compared to getting random emails with partial information. Whatever you choose, factor in training time. Each software has its quirks and learning curve. Try to decide by November so you have time to get comfortable before tax season hits.

Don't forget about insurance and licensing requirements! When I started my practice, I was so focused on software and pricing that I almost missed getting proper professional liability insurance. Check your state's requirements too - some require a PTIN and/or preparer registration at the state level. For payment processing, I tried Venmo initially and quickly abandoned it. Besides potential terms of service issues, it looks unprofessional to clients who expect a more formal payment system. QuickBooks Payments or even Square are better options that provide proper invoicing and give clients confidence.