A certified public accountant (CPA) is a licensed professional who helps businesses and individuals to plan and reach their financial goals. With a CPA, businesses and individuals can maximize tax benefits, save time, and ensure regulatory compliance. So, how much does it cost to hire a CPA? This article has the answer to this question and more.
The cost of hiring a CPA is dependent on a range of factors. For one, not all accountants are CPAs, while all CPAs are accountants. As of September 2023, there are 672,587 actively licensed CPAs in the United States. This means that the pool of CPAs is a subset of the pool of accountants, and therefore, CPAs often command higher fees due to their specialized qualifications and expertise.
How Much Does it Cost to Hire a CPA? Most Important Factors
There is surely not a one-size-fits-all cost of hiring a CPA. For one, there are many companies providing CPA services. Furthermore, factors like the scope of service, experience, and location are key factors that determine the cost of hiring a certified public accountant. Understanding these factors can help prospective clients budget appropriately and select a CPA who best fits their financial and operational needs.
Experience and Credentials
The experience and credentials of CPAs are major factors that determine how much you will pay for their services. Typically, accountants raise their rates as they gain more experience and clients. This is why vastly experienced CPAs command a relatively higher fee than CPAs with limited experience.
For instance, a CPA with years of experience and specialized certifications in areas like forensic accounting will generally have higher rates than those just starting their careers.
Similarly, a CPA’s credentials could potentially influence the cost of hiring. CPAs tend to charge more than regular accountants for their services. Apart from the CPA designation, CPAs with advanced degrees like MBA or Master’s in Accounting are paid more and are often in high demand.
Scope of Services and Business Size
The specific tasks you need a certified public accountant to help with is another factor that influences the cost of hiring one. For instance, you will spend significantly less hiring a CPA to handle basic tax preparations than hiring one for comprehensive financial planning.
The size of a business that needs the services of a CPA also has a bearing on how much it costs to secure the services of a CPA. Larger businesses will typically require more work than smaller ones. The difference in transaction volume, the complexity of financial operations, and the need for comprehensive financial reporting and audits contribute to higher costs for larger businesses.
Geographical Location
As with most services and professions, the geographical location affects the cost of hiring professionals. You can expect to pay significantly more to hire a CPA in urban centers with high costs of living than in rural areas. This means you will likely spend more hiring a CPA in financial hubs like New York City or San Francisco than in Sanford, Maine.
Season
While this isn’t often talked about, the cost of hiring CPAs is often higher during the tax season than during other periods of the year. The reason for this isn’t far-fetched. The services of accountants with expertise in tax preparation are highly sought after during the tax season, which is usually between January 1 and April 15.
According to the IRS, small business owners often underpay estimated taxes or fail to properly separate business expenses. These errors can result in a penalty or trigger an audit. Businesses hoping to avoid such errors are usually on the lookout for accounting professionals who can help them file their taxes properly. This additional demand contributes to the surge in rates at this time of the year.
How Much Does it Cost to Hire a CPA? Averages
When hiring a CPA, it’s good to have a fair idea of the average cost. There are a few things to keep in mind here.
Hourly Rates vs. Fixed Fees
A CPA can either charge a fixed fee or charge by the hour. The hourly rates for CPAs generally range between $30 and $126, with most falling between $30 and $60 per hour for standard services. With more experienced professionals and complex tasks, the hourly rate ranges between $200 and $400+.
Fixed fees can either be monthly payments or flat-fee payments for one-off projects like auditing or yearly tax preparation. The fixed fee charged ranges between $150 for basic services like bookkeeping to $1500 for more complex services.
Choosing between hourly rates and fixed fees can be crucial for small businesses. For example, startups often find fixed fees more manageable early on, as it helps to keep tight budgets in check. In contrast, established businesses with more complex needs might prefer hourly rates to ensure all their requirements are thoroughly met.
Cost Breakdown for Different Services
The scope of services is a major determinant of the cost of hiring a CPA. Below is a cost breakdown of different services you might require from a CPA:
Tax Preparation
- Simple Individual Tax Returns: $150 to $500
- Complex Individual Tax Returns (with business income, multiple investments): $500 to $1,800+
- Small Business Tax Returns: $500 to $2,000
Bookkeeping Services
- Monthly Bookkeeping: $200 to $1,000 per month, depending on transaction volume and service level
- Annual Bookkeeping: $2,400 to $12,000+
Financial Statement Preparation
- Compilations: $500 to $3,000
- Reviews: $1,500 to $5,000
- Audits: $2,000 to $10,000+
Payroll Services
- Monthly Payroll Services: $70 to $500 per pay cycle, depending on the number of employees and complexity
Financial Consulting
- Hourly Consulting Rates: $150 to $400+ per hour
- Project-Based Consulting: $1,000 to $10,000+, depending on the project scope and complexity
New Business Setup
- Initial Setup (including registration and accounting system setup): $500 to $1,500+
Audit Services
- Small to Medium Businesses: $2,000 to $10,000+
- Large Corporations: $10,000 to $50,000+
Advisory Services
- Strategic Financial Planning: $1,000 to $5,000 per project
- Ongoing Advisory Services: $2,000 to $10,000+ per year
Forensic Accounting
- Forensic Analysis: $150 to $500 per hour
- Comprehensive Forensic Audits: $5,000 to $20,000+, depending on complexity
How Much Does it Cost to Hire a CPA? Should I Hire a Virtual CPA?
A virtual CPA is a veritable alternative to hiring traditional CPAs. Hiring this type of certified public accountant comes with several benefits. Here are some of the benefits:
Cost Savings
The most obvious benefit of using the services of a virtual CPA is the potential cost savings. Does this mean their services are sub-par? The answer is no. The relatively lower cost of hiring a virtual CPA is down to the overall lower overhead cost.
Virtual CPAs often work from home, in shared workspaces, or in smaller offices. This eliminates the need for large expensive office buildings. In addition, their business model also means they can save on utilities, office supplies, and commuting expenses. They often pass on these savings to clients, providing the same high-quality services at reduced costs.
Scalability
Another unique advantage of virtual CPAs is the ease of scaling, irrespective of the direction. When businesses grow and expand, their accounting needs also increase. During slow periods, these needs tend to drop. Whether scaling up or down, virtual CPAs can easily match up to these needs without needing to pay retainer fees.
Another upside is that you don’t need to worry about hiring or firing staff members or finding additional resources when you need them. In essence, virtual CPAs offer a more agile and responsive service model compared to traditional CPAs.
Convenience and Flexibility
As a business owner, you most likely have multiple commitments. Fixing multiple physical meetings with your CPA might not be convenient. With a virtual CPA, there is the added convenience of remote consultation. Clients can hold meetings with virtual CPAs and share information via conferencing, phone calls, or emails. This convenience allows for more frequent communication and reduces the need for traveling.
Also, virtual CPAs offer more flexible hours, including evenings and weekends, to accommodate clients’ diverse schedules. This flexibility ensures that clients can get the assistance they need without any significant disruption to their daily routines.
Access to Expertise
Geographic limitations no longer restrict clients when they choose a virtual CPA. The emergence of virtual accounting means clients and CPAs, separated by distance, can connect more easily and collaborate.
Subsequently, clients have access to a larger pool of talented and experienced CPAs who have expertise in different areas of accounting. This expanded talent pool means clients receive tailored advice and services aligned with their unique accounting needs.
Comparing Traditional CPA Firms with Virtual CPA Services
Traditional CPA firms and virtual CPA services are essentially two sides of the same coin — the goal is to offer accounting services albeit with different methods of delivery. Here is how they stack up to each other in comparison.
How Much Does it Cost to Hire a CPA? Comparisons
Virtual CPA services are relatively more cost-effective than consulting with a traditional CPA firm. With low overhead costs, many virtual CPA services are able to offer flexible pricing models. They offer pay-as-you-go or subscription-based plans, which can be more economical for small businesses or individuals with straightforward accounting needs.
Service Comparison
Both traditional and virtual CPA firms offer a wide range of accounting services. However, the way these services are delivered differs in a few ways.
Traditional CPA Firms:
- In-Person Consultations: Traditional CPA firms typically offer face-to-face meetings and consultations. This can be beneficial for clients who prefer personal interaction.
- Local Expertise: Deep knowledge of local tax laws and regulations. This is particularly advantageous for businesses operating in specific regions.
- Full-Service Packages: They may offer comprehensive packages that may include auditing, tax preparation, financial planning, and more.
Virtual CPA Services:
- Remote Accessibility: Virtual CPA services are delivered remotely. This means clients can access their CPAs from anywhere. This is convenient for businesses with remote operations or individuals who travel frequently.
- Advanced Technology: The concept of virtual accounting is built on technology. It is unsurprising that virtual certified public accountants leverage advanced tech to streamline processes and reduce the time required for tasks.
- Specialized Expertise: Many virtual CPAs specialize in specific industries or types of businesses.
Security and Confidentiality
A common worry with virtual CPA services is the issue of security and confidentiality of information shared. Since information is shared electronically, there is a concern that sensitive financial data may be vulnerable to cyberattacks, unauthorized access, or data breaches. Here are some ways virtual CPA firms ensure data protection:
- Encryption: Data is encrypted in transit and at rest using advanced encryption standards to prevent unauthorized access.
- Secure Portals: To make sure sensitive information is safely transferred, virtual CPA firms use secure client portals for document exchange.
- Two-Factor Authentication: Two-factor authentication for accessing accounts and sensitive data adds an extra layer of security.
- Regular Audits and Compliance: Many virtual CPA firms undergo regular security audits. They also comply with industry standards and regulations, such as GDPR and HIPAA, to ensure data protection.
The confidentiality of information shared should be an important consideration when hiring CPAs, whether traditional or virtual. For virtual CPAs, always ask about their security protocols and data protection measures before proceeding.
How Much Does it Cost to Hire a CPA? It Depends
Several factors influence the cost of hiring a CPA. A CPA’s credentials and geographical location, as well as the season, are some major factors that determine how much it will cost to secure the services of a CPA. Fortunately, the availability of virtual CPAs means you can cut down on your expenses as they often offer the same quality of service at a relatively lower cost.
You can go one better by hiring a bookkeeping assistant from Wing to make your CPA’s workload even lighter and save on CPA expenses. Keeping your financial documents organized can significantly lower the time your CPA needs to prepare your tax returns and financial statements. From tracking expenses to following up on past dues and managing entry into different accounting software, Wing Bookkeeping Assistant does it all.
Ready to step into a world of easy bookkeeping? Get in touch today to know more.
Aya is Wing Assistant’s blog manager. When she’s not wrangling content briefs, editing article drafts and handling on-page SEO, she is crafting messages for Wing’s other communication materials. Aya writes about SaaS startups, marketing for startups, search engine optimization, and pop culture.
