By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.
For a 2025 return, the IRS estimates that the average out-of-pocket cost to prepare a federal Form 1040 is about $290, including software and paid preparer fees. Filers with no business schedules average about $160, while filers who attach Schedule C, E or F average about $610 (Instructions for Form 1040 (2025), taxpayer burden table). For a dual-income household with RSUs, ESPP shares, fund K-1s and kids’ accounts, those averages are a floor, not a quote: the fee follows the number of forms and how much reconciliation the preparer has to do.
This guide explains what actually drives the fee for a high-earning W-2 family in California or Washington, what one typical return contains, and why the cheapest return can turn out to be the most expensive one.
Why the IRS averages understate the cost for equity-compensated families
The IRS figures are national averages across every filing method, including people who file free with simple W-2 returns. The IRS itself notes that most taxpayers have lower than average burden and that preparation fees vary widely with the tax situation, the software or professional used, and location.
Two details matter for this reader. First, the IRS counts you as a “business” filer if you attach Schedule C, E or F. A single K-1 from a venture or real estate fund, or one rental property, lands on Schedule E, so many W-2 households with no business at all are in the higher-cost group. Second, the averages say nothing about equity compensation, which is where most of the preparer’s time goes on these returns.
What drives the fee on a return with RSUs, ESPP and kids
Preparers price by complexity, whether they quote a fixed fee or bill by the hour. These are the items that typically add work on a $750k to $3M household return:
| Item on your return | Form involved | Why it adds preparer time |
|---|---|---|
| RSU and ESPP share sales | Form 8949, Schedule D | The broker’s Form 1099-B often shows a basis that leaves out the income already taxed on your W-2. The preparer must correct it lot by lot using code B (Form 8949 instructions). |
| ISO exercises you held past year end | Form 3921, Form 6251 | The spread can trigger alternative minimum tax. For 2026 the joint AMT exemption is $140,200 and begins phasing out above $1,000,000 of AMT income. |
| Fund or partnership K-1s | Schedule E | K-1s are due by the partnership’s return date, March 15 for calendar-year partnerships, and later if the fund extends. Late K-1s usually mean filing an extension. |
| 529 superfunding | Form 709 | Electing to spread up to $95,000 per child per parent over five years (2026) requires a gift tax return. |
| Children’s investment income (UTMA) | Form 8615 or Form 8814 | For 2026, a child’s unearned income over $2,700 is taxed at the parents’ rate. |
| Dependent care FSA | Form 2441 | Required to report the benefit, which is $7,500 per household for 2026 if your plan adopted the higher limit. |
| Under-withheld bonus or RSU income | Form 2210, estimated payments | Federal supplemental withholding is often a flat 22% for 2026 (37% on supplemental wages above $1M), well below a 35% or 37% bracket, so the preparer often has to calculate penalties and set up next year’s estimates. |
| State returns | CA Form 540 or WA capital gains return | California taxes all gains as ordinary income. Washington has no wage income tax in 2026 but taxes long-term capital gains at 7%, and 9.9% above $1,000,000 of taxable gains. |
A move between California and Washington during the year adds a part-year resident return and an allocation of RSU income across the vesting period, which is one of the more time-consuming jobs a preparer takes on.
Worked example: what a $900,000 California household’s return contains
Assumptions: married filing jointly, two children ages 4 and 8, $900,000 of W-2 income including $300,000 of RSU vests at a large Bay Area employer, a 2026 return.
- Two W-2s, one with RSU income and ESPP disqualifying-disposition income added in.
- Form 8949 with about 40 RSU and ESPP lots sold during the year, each needing a basis adjustment.
- Two K-1s from venture funds, one arriving in late summer after the fund extended.
- Form 709 for a $95,000 superfunded 529 contribution for the younger child.
- Form 2441 for the dependent care FSA, and Form 2210 because withholding on RSUs ran at 22%.
- California Form 540, plus a federal extension because of the late K-1.
That is a federal “business” filer by the IRS definition, with an extension, a gift tax return and a state return. Ask any preparer to quote this package from your prior-year return rather than from a description, and ask what the quote includes: the extension, estimated payment vouchers, the state return, and answering IRS or FTB notices next year.
The real cost of a cheap return: missing RSU basis
The fee is rarely the biggest number. The most common and expensive error on these returns is reporting RSU sales with the basis the broker printed instead of the correct basis. Your basis in RSU shares includes the value already taxed as wages at vest (IRS Pub. 525). If that adjustment is missed, the same income is taxed twice.
Example, using the household above: they sold $200,000 of shares shortly after vest, so the true gain is close to zero. The return reports a $200,000 short-term gain instead.
- Federal: their taxable income of about $850,000 is already above the 2026 37% bracket threshold of $768,700, so $200,000 × 37% = $74,000.
- Net Investment Income Tax: $200,000 × 3.8% = $7,600.
- California (2025 rate schedule, since 2026 brackets are not yet published): moving taxable income from $850,000 to $1,050,000 adds about $22,700, including the 1% Behavioral Health Services Tax on income over $1,000,000.
Total overpayment: about $104,300. A Washington family with the same sale would overpay the $81,600 federal amount; Washington’s capital gains tax applies to long-term gains only. An amended return can recover the money within the refund window (see what it costs to amend a tax return), but only if someone notices.
Software, CPA, or a planner who coordinates the preparer
The decision is not really about price. It is about who catches errors like the one above and who plans before December 31, when the decisions that move your tax bill are still open.
- Software: lowest cost. Workable only if you are confident correcting RSU and ESPP basis yourself and you have no AMT, K-1 or gift tax filings.
- CPA or enrolled agent preparing the return: the IRS lists CPAs, enrolled agents and attorneys as credentialed preparers. Anyone with a PTIN can legally prepare returns for pay, so check credentials in the IRS directory of preparers.
- Preparer plus year-round planning: preparation records what already happened. Planning decides RSU sales, ISO exercise timing, estimated payments and 529 funding during the year. Many families pay for both, with one person coordinating.
At Age Five Family Office™, tax work for families sits under our tax management service, coordinated with equity compensation and benefits decisions in retirement and employee benefits.
Common mistakes when hiring a preparer
- Choosing on fee alone, then paying for the RSU basis error in tax.
- Sending documents in March and expecting a fixed quote, when K-1 timing (see when K-1s arrive) makes an extension likely.
- Not asking whether notices, amended returns and estimated payments are included or billed separately.
- Assuming the preparer is planning. Most preparers only see your finances once a year.
- Expecting to deduct the fee. W-2 households cannot deduct tax preparation fees on the federal return; miscellaneous itemized deductions are no longer allowed (IRS Pub. 529).
What to document for your family
Write down who prepares your return, where the prior-year returns and RSU basis records live, which brokerage holds each grant’s shares, and why you chose this preparer. If one parent handles taxes, the other should be able to pick up the file in a week, not a season. Later, the same record shows your children how you made the decision, not only what you paid. Conversations fade. Documentation compounds.
Frequently asked questions
Is a CPA worth it if my employer’s plan reports everything?
Employer reporting covers the W-2 side. The 1099-B from the plan broker is where errors usually sit, because basis may exclude income already taxed at vest. If you sell RSU or ESPP shares, hold ISOs or receive K-1s, a credentialed preparer can be worth the fee by getting basis and AMT right the first time.
Why does my preparer want to file an extension every year?
Partnerships must deliver K-1s by their own return due date, March 15 for calendar-year funds, and many funds extend, so K-1s can arrive after April 15. An extension gives more time to file, not to pay, so your preparer will usually estimate the balance and have you pay it with the extension.
Does the fee change if we live in Washington instead of California?
Usually it is lower, because there is no wage income tax return for 2026. A Washington capital gains return is still required if you owe Washington capital gains tax, which generally means taxable long-term gains above the annual standard deduction (WA Department of Revenue). From 2028, Washington’s new 9.9% income tax applies to households with adjusted gross income over $1 million, which will add a state return for many high earners.
Next step: before you request quotes, pull your last return and count the forms in the table above. That list is what a preparer will price. This article is general education, and the right choice depends on your family’s full picture.
Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.
Connect on LinkedIn → · About KevinThis is part of how we approach Investment & Risk Management for high-income W-2 families at Bright Advisers.
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