Spending $650 for a fairly straightforward tax return sounds quite high to me. Tax preparers use a variety of pricing strategies. Some charge by the form, more complex tax forms being priced higher than simpler tax forms. Other preparers charge by the hour, so the longer it takes to prepare a return, the more you will pay. Other firms write up an invoice for a fixed price, based on their estimates of how complex the return will be. All these methods come down to one thing, really. The more complicated your tax return, the higher your fee will be.
Personally, I think the fairest method is an hourly rate. That's because an experienced tax preparer should be proficient in all the essential tax forms, and should be working efficiently to keep your invoice as low as possible.
Based on my experience and conversations I've had with accountants around the country, rates tend to range from $150 to $200 per hour. This range includes some of the most popular tax accountants in America.
H and R Block, the popular nationwide tax prep company, charged an average of $151 per tax return in 2005. Prices vary by location, complexity of the return, and how busy an office is. This figure comes from H&R Block's Fact Facts web page. Considering that it takes an hour or so to have your return prepared at Block, this fee seems in line with fees for independent tax accountants. Jackson Hewitt charged an average of $157 per tax return in 2005, according to their 2005 annual shareholder report (PDF document, 100 pages, information found on page 6). Liberty Tax does not disclose average fees, nor could that figure be calculated using their publicly available financial reports.
A tax prep fee of $650 could be justifiable if the return took over four hours to prepare, or if the return was extraordinarily complex. I recently spent well over four hours on a single tax return last week, but the client had a lot going on.
So, if you haven't filed your return, you can and should ask to speak with the manager of the firm. Ask them why the fee is so high. Most firms have a policy that they will not charge you if you leave without filing the return. If you are displeased with the level of service you received and feel the fee is not representive of the level of quality you received, I would take your business somewhere else.
Finally, it is illegal and unethical for tax preparers to based their fee on a percentage of your refund. The law for this is found in Treasury Circular 230 (PDF document, 60 pages, the prohibition on percentage-of-refund fees is found on page 50). If your tax preparer is a CPA, Enrolled Agent, or tax attorney, they are bound by these rules. You can file complaints against tax preparers by contacting the IRS' Office of Professional Responsibility at (202) 622-2207. CPAs can also be reported to their state Board of Accountancy, and attorneys can be reported to their state bar association. You can also contact your local Better Business Bureau to register your complaint.
I'm not saying that your fee is unethical. All I am saying is that based on the information you provided, it seems you might have been overcharged. Find out how they calculated your fee and why they think your return was particularly complex.