Do CPAs Charge for a Child's Tax Return if the Income is Minor?

Many parents wonder if they will be charged by CPAs or EAs when their child, especially a young one, needs to file a tax return, particularly due to an UTMA account. The answer often involves a combination of factors, including the complexity of the return, the agreement with the CPA, and the extent of services provided.

Understanding the Charge for a Child's Return

The decision to charge for a child's tax return primarily depends on the CPA or EA's agreement with the parents and the nature of the return itself. A child who needs to file a tax return because of UTMA (Uniform Transfers to Minors Act) account income is a common scenario where charges may arise. However, many CPAs and EAs offer this service as a courtesy, especially if they are working with the parents on their returns.

When a CPA May Charge: When the CPA or EA is preparing the child's return exclusively, they will charge for the time, paper, electronic filing, and opportunity costs. The charge may be reasonable, reflecting the time and resources invested. For example, some CPAs may charge a minimal fee if the return is small, considering the time and materials required.

When a CPA May Not Charge: Many CPAs and EAs will prepare and file the child's return at no or a very minimal cost as a courtesy if the parents' returns are already being prepared by the same firm. This practice shows that CPAs value strong client relationships and are willing to provide additional services within their existing agreement.

Special Cases and Inherited Income

In unique situations, such as if the child had inherited a sum of money and was under a UTMA account, the CPA might bill the child directly. This is because the income declared by the child should be their responsibility. However, it's rare for CPAs to bill the parent in these circumstances.

For instance, when my children had an inheritance, their returns were prepared by a CPA, and the charges were invoiced to the children themselves. The parents did not have to bear the cost in this case.

Earned Income and Parental Involvement

Some of my clients pay for the tax returns of their 20-something children, who are gainfully employed. In such cases, the return preparation is included in the parent’s overall tax preparation services, and the cost is reflected in the parent's bill.

Conclusion: CPAs believe their time and effort have value, and they should be compensated for preparing a child's tax return, especially if the return is not part of an existing agreement. Parents should be aware of the cost implications if the child is not part of an existing agreement with the CPA or EA. The best practice is to clearly discuss these costs and services with the CPA or EA before starting the process to avoid any surprises.

In summary, while CPAs will often charge for a child's tax return, especially if it's small and not part of an existing agreement, many are willing to prepare the return as a courtesy, reflecting the importance of strong client relationships in the tax preparation world.