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business tax return

Business Tax Return Preparation

Posted Wednesday, July 8, 2020

We offer a basic fee range of $800 to $1,000 for your business tax return preparation, which encompasses partnership tax returns (Form 1065) and corporation tax returns (Form 1120 and 1120S) including the Section 199A calculation and deduction. The range might seem broad, but it depends largely on the quality of your accounting records, how organized you are, the past accuracy of your balance sheet and how much clean up is required.

Yes! This fee could increase depending on your specific world. If so, you’ll be in a special group… the 10% group of WCG business owners. In other words, 90% of our business entity tax returns fit into this $800 to $1,000 range. We’ll talk more about this in a bit… but first, let’s take a step back.

Basic Types of Small Business Tax Returns

Before we get too far along, there are some basics to get out of the way. You might already know all this stuff but there are others who don’t so please bear with us as we run through some small business tax preparation scenarios-

Entity Tax Return Form
Trade Names, DBAs
Sole Props
Schedule C, Individual Tax Return. 1040
Single Member LLC Schedule C, Individual Tax Return. 1040
Multi-Member LLC
Husband and Wife
Community Property State– Schedule C, Jointly Filed Individual Tax Return. 1040
Common Law State– Partnership Tax Return. The Revenue Code is clear on this, yet most tax professionals and attorneys mess it up. It’s hard to enforce. 1065
Multi-Member LLC Partnership Tax Return. 1065
C Corp or PC C Corporation Tax Return 1120
S Corp Election S corporations do not exist. Rather an underlying entity, such as an LLC or C Corp, elects to be taxed as an S Corp. Therefore a corporation tax return is filed. 1120S

The rest of this page is written for the small business owner who is beyond the sole proprietorship or disregarded single-member LLC, and needs a partnership (Form 1065) or corporate (Forms 1120 or 1120S) tax return. If you want more information on single-member LLC tax return preparation, typical fees and how it all works, please click on the button below-

You’re still here! Great… let’s talk about each of these business entity tax returns in turn starting with Partnerhips who file Form 1065.

Partnership Tax Preparation (Form 1065)

As alluded to earlier, if you have more than one member (owner) in your limited liability company then you are now a fancy multi-member LLC. Yes, this includes your spouse unless you are in a community property state (WA, ID, CA, NV, AZ, TX, LA and WI). Partnership tax returns are seemingly either very straightforward or quite complex… sure, there are some middle of the road ones, but in our experience this is a good generalization.
corporation tax return

Straightforward

  1. You and your brother-in-law own a rental. Straightforward.
  2. You and your spouse operate a dog wash. Straightforward.

Complex

  1. You and your brother-in-law own several rentals in various states. Getting more complex…
  2. You have a multi-entity arrangement where the partnership pays out a fee for service to other S corporations such as financial advisors, insurance agents, medical groups, etc. Not super complex, but time-consuming.
  3. You and your spouse operate as an Amazon retailer with sales in all 50 states plus DC. Revenue apportionment… lovely.
  4. You bring in a partner. You kick out a partner. You do both. Capital accounts need adjustments, short-year calculations and all kinds of other allocation issues. Fun!
  5. You have 10 other partners with various arrangements, revenue splits, member interests, allocations and other craziness. For example, member 1 receives a guaranteed payment of $100,000 before the other nine members, provided that the net operating income is over $500,000, and that working capital at the end of the year before required distributions for tax payments and after forecasted debt service is $350,000. Huh?! Oh boy, here we go… buckle up!

Where does this leave us? We have attempted to articulate business entity tax return complexity in the form of dollars. In terms of Colorado, we would say green squares, blue circles and black diamonds.

Operating Partnership Fee Structure

An operating partnership is contrasted with a holding company partnership, and includes a business that provides services or sells goods. A holding company partnership is typically a business that owns real estate, either single-family homes or commercial. In commercial settings commonly the holding company is leasing the property to the operating company.

Base Partnership Fee $800 to $1,000
More Than Two Partners / Members $150 to $200 for each additional partner (discounts available)
More Than One State, Backup Withholdings $200 to $250 for each additional state
Has Employees $250 to $500 depending on accounting records
Changes in Ownership $250 to $500 depending on level of craziness
Foreign Interests, Connections $500 to $750 depending on the required forms
Nutty Operating Agreement Calcs Depends, but example #4 above would be about $300

Don’t freak out and break off your pencil trying to add all this up. This is only a guideline, and frankly we are aiming high here. For example, an operating partnership with 5 partners conducting business in 3 states is looking at $1,650 to $1,900ish using the table above. We might be able to prepare the tax returns for less; just like snowflakes, each business is unique.

Holding Company Partnership Fee Structure

As mentioned earlier, a holding company partnership is generally a business that owns real estate which usually has fewer transactions, and therefore is less time consuming.

Base Partnership Fee $800 to $1,000
More Than Two Partners / Members $150 to $200 for each additional partner (discounts available)
More Than Two Properties $200 to $250 for each additional property

We have attempted to take time expectations and assign a numeric fee structure. This is an impossible task. Kindly keep in mind that crazy things like partnership account adjustments, adding or removing partners, manual capital account reconciliations, rebuilding partner basis information, asset dispositions (sale of a rental or equipment), backup withholdings calculations, entity shutdowns, odd-looking balance sheet entries, several moving parts, etc. can all factor in. Let’s not forget the equity partner versus economic partner arrangements and the mental gymnastics that might ensue from those types of deals.

The additional fees for each partner is very generic, and we leave a lot of room for discounts. Once you start hitting 5 to 6 partners, the incremental time for each additional partner is lower and lower. It’s like getting tile work at your house… the first tile labor involves unloading, preparation, mixing of the mortar, etc. and is very expensive. The labor for the next tile is way less.

The best way to solve the “what’s my fee gonna be?” conundrum is to provide last year’s tax returns for review and quotation. Again, our fees above are meant to reflect generalities.

Corporation Tax Return Preparation (Form 1120 and 1120S)

Corporate tax return preparation can be more straightforward than partnership tax returns. The rules of engagement are more rigid. Partnerships are virtually limitless when it comes to who gets what, splits, allocations, etc. which is why they are an ideal entity arrangement when there are multiple parties with wildly different interests, participation and objectives.

Corporation Tax Return Fee Structure

C corporations including professional corporations, and any entity taxed as an S corporation can expect the following-

Base Corporate Tax Prep Fee $800 to $1,000
More Than Two Shareholders (assuming S Corp) $100 to $150 for each additional shareholder (discounts available)
More Than One State $200 to $250 for each additional state
Has Employees $250 to $500 depending on accounting records
Changes in Ownership $250 to $500 depending on level of craziness
Foreign Interests, Connections $500 to $1,000 depending on the required forms (5471, 5472, etc.)

We mentioned that corporation tax return preparation can be more straightforward than partnership tax returns. But! For our foreign owners of C corporations, additional time is necessary for possible back-up withholdings, Form 5472, Form 8233, W-8 BEN and tax treaties, among other issues that need special handling. In these situations our tax preparation fee will be a minimum of $1,500 to $1,800 for any C corporation owned by foreign investors or owners. This gets tricky really fast.

Similar to partnerships (see above), we offer a discount for several shareholders since after the first handful, the incremental time is low. And! There’s more… shareholder allocations of net operating income and any separate items (such as Section 179 depreciation, capital gains, etc.) is much more straightforward and the nutty calculations from exotic deal structures doesn’t exist. In contrast, partnerships and multi-member LLCs might be simple, or they might be very complicated from a deal structure and allocation perspective.

Composite Tax Returns

What the heck is a composite tax return? According to The Tax Adviser, “a composite return is an individual return filed by the passthrough entity that reports the state income of all the nonresident owners or, in some cases, the electing members, as one group. Filing the composite return can also relieve the passthrough entity of the withholding requirement that many states impose on passthrough entities with nonresident owners. The state gets its money while the owners’ personal filing obligations are reduced.”

Sounds cool, right? Well… maybe! There are situations where this makes sense, and there are clearly situations where it does not. When it works, it works really well.

If you are operating a pass-thru entity such as a partnership filing Form 1065 or an S corporation filing Form 1120S, and you have multiple owners in multiple states, we should chat.

business tax return

August and November Financial Tune-Ups

For those clients who have a tax-only engagement with us, we offer a lot more than just a business tax return. Tax returns are boring. Tax planning including projections and end of year tax moves is way more valuable to you than 100 pages of gobbly-goo in some dust-catching PDF aimed at IRS compliance. Wow, that is a long sentence… anyways, in August we offer a tax planning tune-up and later on in November we offer an end of year tax consultation. These are complimentary consultations. Sure, you’re paying for it in some fashion with your business tax return preparation fees above but then again, this is a valuable service that most tax professionals don’t offer. Click the buttons below for more information. Riveting!

One Hot Mess

As professionals, our pride and ethics will not let us submit a tax return that is in all intents and purposes one hot mess. More often than we like, we inherit another accountant’s previous tax and accounting work, and some basics on S corp taxes or partnership taxes were overlooked. Let’s not forget-

  • basic disorganization,
  • advanced disorganization,
  • disguised disorganization, and
  • misrepresented organization which can all create one hot mess.

In these situations, we’ll advise you on the best course of action, the fees and the risks involved. Most problems involve the balance sheet and specifically equity accounts, which are rarely important until it is time to sell, close your doors and / or get a loan. You run a clean operation, let us make sure your books and business tax returns reflect the same pride you have in your business.

Business Tax Return Preparation

As mentioned above, most partnership and corporation tax returns can be prepared between $800 and $1,000. Having said that, if you maintain your own financial records or accounting books, our past experience has suggested that an extra 3-5 hours will be required to properly prepare your business tax return. Specifically most errors center on general balance sheet issues, retained earnings and payroll. And these areas of your corporation’s financial records are critical in terms of accuracy.

individual tax return preparation

Business Tax Return Review

All partnership and corporation tax returns are reviewed with you in-person, over the phone or video conferencing with GotoMeeting (which we did long before this COVID nonsense… yeah, we were cool before cool was cool). While a lot of our interaction might be electronic, we prefer to handle business tax returns more traditionally. In our experience, reviewing a business tax return together provides you with some education on how a business tax return comes together, allows you to ask valuable questions and ultimately creates a better tax return. After tax return preparation, we will schedule a 30-40 minute meeting with you. Exciting! This truly helps everyone understand each other better, and makes for an accurate and complete tax return.

Additional Fees

Small businesses is a primary core competency for us. Of course we will prepare the owners’ individual tax returns as well, but the majority of our consultation and tax preparation work is focused on businesses. We are your small business CPAs! Just like Farmers’, we know a thing or two because we’ve seen a thing or two. Oh, stop rolling your eyes- it’s a fun slogan and their jingle is catchy too. Geico still takes the cake on funny commercials. We digress…

WCG is in the business of developing lasting relationships and not money grabs. If we run into a buzz-saw we will stop, advise you of the additional work that is needed and provide a fee range that everyone can live with.

We also have a short list of additional fees that might be incurred depending on your tax situation. We really hate to be ticky tack with these things; however, there are certain situations that require a ton of extra time and resources. The vast majority of our clients do not have additional fees beyond the fee ranges above since we try to maintain a long-term perspective on client relationships. Please visit our fee info page for more information-

In other unicorn-type cases, we have also reduced our tax preparation fee to $400 to $600 for extremely simple corporate tax returns or for “no activity” filings. Please contact us if you think this might be your situation. Yes, we believe in unicorns (above a 9 hot and below 5 crazy)!

Financial Statements

Many CPAs will prepare a partnership or corporation tax return without a balance sheet– for certain situations a balance sheet is not required by the IRS. However, we feel that it is sound tax preparation practice to create this financial document in conjunction with your tax return regardless.

Partnership and S Corporation tax returns also must track shareholder basis for future sales or loss deductions. Most tax corporate tax accountants don’t spend the time to record this information, and when you go to sell your business, capital gains becomes a big mystery. No shortcuts at WCG!

A small business can have a funny way of becoming bigger,and replicating poor accounting practices as you grow can create a much larger problem later- we prefer to lay the ground work today for an easier growth transition and exit strategy planning. This is to your advantage.

Value Proposition

WCG (formerly Watson CPA Group) are tax and business consultants, not just number crunchers. Anyone can balance a checkbook. Anyone can print a paycheck. Anyone can put the right number in the right blanks. But we take a consultative approach to your corporate and partnership tax preparation. You can always find someone to do it for less- of course. However consider the solid back-end support which you will get with WCG (formerly Watson CPA Group) that other tax preparation companies or small business CPAs might not provide. Read more about our Value Proposition here.

We are your business tax return preparation experts!