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Ask the Readers: Should I Prepare My Own Taxes or Go to an Accountant? Print
Friday, 18th January 2008 (by J.D.)This article is about Ask the Readers, Choices, Taxes
Earlier this month, I mentioned that I haven’t prepared my own taxes since 2001. I pay somebody else to do them. I did them on my own for fourteen years before they became too much for me to handle. This comment prompted several GRS readers to write for advice about finding a good accountant. Here’s an amalgamation of recent questions:
I’ve never looked into having an accountant prepare my return — what’s reasonable to pay someone to do your taxes? Is it best/easiest to go with the Big Guys like H&R Block, or to find somebody independent? How exactly do you find a good accountant? Also, does anyone know if the tax software out there is any good?
I’ve never used software to prepare my taxes, so I can’t vouch for its accuracy or its ease-of-use. Some people love it.
Last spring, Matt Haughey at Fortuitous wrote about how to pick an accountant for your online business. Though the article is aimed specifically at entrepreneurs, his advice is applicable to everyone who is searching for help. His conclusion? Software and elbow grease are a killer combination:
After doing my taxes online for eight years, and going through six accountants in the past four years, I’ve come to a few conclusions:
- TurboTax Online is pretty dang good and can get you 80% of the way. All but the best accountants I’ve worked with didn’t do any better than me using TurboTax on my own.
- If you have time to do research and read up on tax info, TurboTax and your knowledge is probably equal to most accountants. This is a big “if”, but if you have the time and you won’t be satisfied unless you handle it yourself, a few books and a lot of reading at The Motley Fool can get you pretty close to the best advice you’ll find in the wild.
Then again, if you’re dealing with thousands of dollars and you’re busy, it’s best to try out an expert instead.
The more complicated your taxes are, the more likely it is you need a tax professional. Though I did my own taxes for a long time, I gave up in frustration soon after starting my own business. I have a friend who is an excellent CPA, and am pleased to pay him to do the work for me now.
From my experience — and this may not be true for everyone — having an accountant prepare my taxes has paid for itself. Though I’m a smart guy and follow directions well, there are things I miss when I do them on my myself.
My advice? First try to do your taxes on your own. If you find it’s too difficult, or if you feel like you’re making mistakes, seek out a local preparer. (But give yourself plenty of time! Don’t wait until April 1st to begin looking.)
What’s your experience? Have you found tax preparation software to be effective? What about online options? Do you prepare your own taxes? If so, can you recommend any books? If you use an accountant, how did you find her?
January 18th, 2008 at 5:19 am
Two very good sites for tax information are as follows:
http://www.fairmark.com/
http://www.taxalmanac.org/
Additionally, both sites offer Q&A forums. Over the years, I have asked several fairly complex tax questions on these sites that were very specific in nature. (e.g. “I did ABC, then XYZ — what exactly do I report on this form?” or “Can I deduct X if Y is true?” etc.) Each time I received (free!) answers to my questions from tax professionals.
Although I link to these sites from my blog, I have no affiliation with them. I’m just a happy customer who learned a lot and saved a lot of time/money by using them!
January 18th, 2008 at 5:26 am
I have used TurboTax for 3 years now and I love it. Ironically I started using it just after I took one of those H&R Block classes to be a tax preparer. When it came time to do our own taxes my wife suggested TurboTax because she had used it before. To my suprise it was easier, faster, and more fun than I thought taxes could ever be. We even had losses/gains from a business we owned that had to be figured in. So I definitely agree that you can usually do just as well on your own (and even better sometimes) with good software.
January 18th, 2008 at 5:27 am
Just a reminder: for those who don’t have a lot of income (I believe the cutoff is something like $54,000 AGI), you can prepare your federal tax return for free using the IRS’s Free File program. Check it out at: http://www.irs.gov/efile/article/0,,id=118986,00.html
January 18th, 2008 at 5:47 am
I did our taxes for a number of years and found turbo tax to be easy and useful. Having said that though, I started paying a CPA to do them when I started running my own freelance business. I still use him to do my taxes now even though the business is no longer active. We own 1/4 of a house in another state that is rented out and I am just more comfortable having a CPA do out taxes with that little complication. If that house ever sells though then our taxes become quite straight forward again and I am sure I will start doing them myself at that point.
January 18th, 2008 at 5:53 am
I’m a believer that time is NOT money. Time is only money if it is taking you away directly from income-generating activities.
Help with tax preparation, on the other hand, is a luxury that I would be exceedingly happy to pay for — as a frill, as an elective expense, whatever. Time IS sanity. Time IS frustration saved. If I pay money to go out and have some beers for fun, I’d be happy to pay money to save myself the anguish of doing taxes.
My tax situation has been complicated from the start because I file in both Canada and the US. But, at this point, my situation otherwise is relatively straightforward. I am going to take a stab at it myself, but I will start very early so that if something goes awry, there is time to compensate.
January 18th, 2008 at 5:57 am
My situation is similar to honeybee in that I have to file both in Canada and the US. However, I still do my taxes myself, using TurboTax and QuickTax.
I went to an accountant for four years while my situation was complicated (moving, getting married, having a kid), but now that it’s settled, I have a sense of how to do the taxes. I also pay a lesser rate to have the accountant “cross-check” my numbers (costs about 1/3 of the full price).
Another piece of advice I received; go back to the accountant every few years to do the full returns, or go back when something major changes (getting married, buying a house, investment income, starting a business). But if your situation is similar to your previous year, I’ve found the tax software is pretty good.
-jim
January 18th, 2008 at 5:58 am
Hey J.D.,
thank you for your article. I was wondering about this myself. My main question is: “Is it paying off?”. While I still think that I am able to do my taxes by myself (and a lot of help from books, software and the net) I still believe that a professional will propably do a better job (as in greater tax return). Now, I am wondering whether the cost of an accountant is greater, equal or less the increase in my tax refund? I haven’t found any answers yet, but decided to do the following:
1. Use a software product to determine the tax refund I might get when I’m doing my taxes by myself (plus the software to ease things up a little)
2. Seek professional help. Some accountants offer service by the hour. I plan to see an accountant and show him my tax statement in order to determine not if, but how much better he/she could do.
Since I’ve been a student until last year, I never needed to do my taxes before. So I’m still experimenting with the ‘best’ way to do it. I’ld be happy to learn from your experience.
About using tax software… I decided to try it and I’m pretty satisfied so far. Imho the $20 are well spend (and tax-deductable). Though software might not find the best individual solution for your tax problem, it offers advice and makes it easy to come up with some solution.
Note: Since I’m not living in the US, some of the comment might not be applicable to your situation…
January 18th, 2008 at 6:07 am
I’ve been using TurboTax for a couple of years now, and I’m satisfied enough with it. The best part is that it saves all my information from the year before, so I don’t have to try as hard to keep track of that stuff. It takes less than two hours to do my taxes with TurboTax, which is worth quite a bit in and of itself. (It can actually import my W2 information from my employer’s payroll administrator! I just need to double-check the figures against the hard copy.) And the speed at which you get your refund is pretty remarkable.
That said, I’m sure that a tax professional could probably get me a better refund, or a lower payment, because about a a fifth of my income is self-employment income and I know I’m not deducting everything I could be. When it gets to the point where I’m earning much more from self-employment, investments, and the like, I will probably go with a professional.
January 18th, 2008 at 6:13 am
I pretty much gave up on doing my taxes a several years back once I got out of college and starting to make ‘decent’ money. Then after getting married and having investments, 401k, house, IRA’s, life insurance. Now there is AMT to consider……blarg!!
I have no problem paying someone else to do all that work for me. Besides I did not really like doing/worrying about that junk to begin with.
January 18th, 2008 at 6:16 am
I just saw a Turbo Tax commercial where you enter in the things/events that occurred within the past year (i.e. got married) and it points you to all the correct forms.
I was wondering if there was something out there that did the same thing but told you whether or not it’s a good idea (feasible) to do your own taxes or if you should hire ab accountant.
January 18th, 2008 at 6:18 am
It depends on your income level.
0-$100,000 - You can do it yourself or hire a competent CPA to do it for you. You might save a few bucks by going with the CPA, but probably not too much. You don’t have enough income for a few percent savings to be that significant, compared to the fees you will pay.
$100,000-$300,000 - Finding a more aggressive (and expensive) CPA becomes important. Look for someone that not only knows the tax law, but knows how to bend it in your favor. You can start saving substantially more money, and as your income increases, it becomes more and more worth it.
$300,000-$1 million - The next step is to get a tax attorney to build an overall tax strategy that you can pass to your aggressive CPA. You’ll have to pay $350 an hour or more, but a few additional percentage point savings on your taxes can quickly make it worth it.
$1 million-$10 million - Put together an entire tax team that strategically “breaks” the law. You’ll probably have one CPA to do the taxes, another CPA to audit, a tax attorney for strategy and a final review, and a litigator to defend you against the IRS. This is how big corporations pay only 8% or less per year in taxes.
Note: I’m not a tax expert. I’m just a guy that’s been through every level on that change and back again.
January 18th, 2008 at 6:22 am
I’ve been using turbotax online for a couple years and am very happy with it.
It handled a year of half work in VA and half in OR very well (which is some sort of special case).
Also another employee at the big(gest) company in Washington County Oregon who had very similar earning as me took his to an accountant. I ended up getting a couple K back, he ended up paying 600! Obviously YMMV but I think one thing to take from it is that software is repeatable, it does the same (maybe sub optimal) thing over and over. Whereas people make mistakes and finding one who doesn’t make many (or any) mistakes might be difficult, stressful or impossible altogether.
January 18th, 2008 at 6:27 am
If you are in a similar tax situation year in - year out, I would suggest using a software package like TurboTax. The software is pretty easy to use if you have any computer literacy. Perhaps you could even see if you could run your forms through someone else’s copy of the software to see if the numbers “look right” and are withing a few bucks of what your CPA does.
That being said, I believe that you should go to an accountant if there is something major going on in your life (death, marriage, etc.) A few years ago, I had to deal with inheriting money through an estate and preparing taxes for deceased family members. I bought and used the TurboTax software and it was more than happy to load up the income (and tax) side of the ledger. The deductions weren’t so easy. Going to the CPA cost me about $300, but I also saved about $1500 in taxes overall.
But from year to year, I know my sources of income and my big sources of tax deductions. (Mortgage interest, tax deductions, etc) so a $40 software package will do it for me.
January 18th, 2008 at 6:28 am
do not do your own taxes if you have a business. an accountant will think of things that you do not, and save enough to trump their cost.
do not use H&R block or the like, they are hacks. look at the statistics on errors made by them, it is huge. I have not used software, but with a business it is not recommended.
use an accountant from a reputable firm.
January 18th, 2008 at 6:50 am
I’ve been a beta tester for Turbotax for a few years so I’ve used it for some time now and I like it a lot.
But my accountant beats turbotax every single time. He saves me the additional cost of going to him (vs. turbotax) and then some each year. And he’s very conservative too.
The human element is important with taxes sometimes: Some friends of ours born outside the U.S. have used turbotax but never realized they could deduct their (significant) charitable contributions.
January 18th, 2008 at 6:53 am
Not all accountants or CPAs are equal. If you have potentially complicated tax returns, hire a CPA who is also an Enrolled Agent (EA)–they have passed a much harder exam than the CPA exam.
I used turbotax for many years and was happy, but with things like real estate transactions, stock market gains and losses, stock options of different types, etc., it makes sense to go with a professional.
No matter how slowly you get rich, you will eventually reach a point where it is worth paying the right professional–ours has always found more savings than the professional fee (sometimes A LOT more!).
Keep your costs down by gathering up all the data at once and not sitting around chatting about your vacation or your dog–these professionals are charging for their TIME, and they know what it is worth.
January 18th, 2008 at 7:02 am
I have done my own taxes for the past 4 years using Taxact online for free. I started this after going to H&R Block and that was a total rip off. The guy used the same software they sell and took 10 minutes to do it; final cost $120. I don’t have any investment besides 401k so I’m not so complicated. Only thing I had over the years is college payments and loan and I file for learning credits. This year though I’m not sure what to do. I spent a lot of my money on medical expenses that equal more than 10% of my income. I don’t know how to itemize and whether I can still claim learning credits. I don’t know if turbo tax could help with that or should I get a CPA and how to find a reliable one.
January 18th, 2008 at 7:03 am
I’ve always done my own taxes. I went to an accountant once, and he had me owing money to the IRS! With little income and three children, that was ridiculous!
I’m curious, though, as to what kinds of things you miss. I certainly don’t think I’m missing anything, but perhaps you know something I don’t. It’s possible.
January 18th, 2008 at 7:07 am
I’ve used TaxCut from H&R Block for 10 years or more and it has always worked out great. What I really like is the import feature where it pulls information from your bank, or MS Money, or Quicken as well as your return from last year. Talk about saving time!
January 18th, 2008 at 7:08 am
I prepared my own returns for years (years ago). One innocent mistake decimated any savings I may have enjoyed in not hiring a professional.
The IRS was very understanding, and it was agreed that my error was caused by an oversight. But despite the technology available to the IRS, they somehow waited five years to inquire about my error. In those five years, interest and penalties accrued. They waived the penalties, but I was faced with the tax hit plus interest (which wasn’t fun).
Unless you’re an employee that gets a paycheck with no other financial issues in your life, you need to find someone good. I suspect most readers of this site have more going on in their financial lives than a paycheck.
JAY
MotivatedPerformance.com
January 18th, 2008 at 7:08 am
I would highly suggest not going to H&R Block. I have found they charge CPA pricing when they are certainly not.
I interviewed two CPAs and went with the one that matched what we needed best. I read articles on how to find one and questions to ask. The biggie - if I call you for a quick question - do you charge me? I also made it quite clear I need pricing up front before they do the work.
Why did I get a CPA? Because I used Turbo Tax for a few years. One year we got laid off. I found through a coworker at my next job that Microsoft Money found that in NC, severance pay was tax free. Turbo Tax did not find this. We had to do an adjustment.
The next year we moved to TX. Turbo Tax couldn’t handle figuring out my owed NC taxes for the partial year! What was I paying for?
The next year to cover some expenses we sold some stocks. These stocks were purchased for my husband by his grandmother in the 80’s. Needless to say, it was mess. The CPA cleared up the mess, found the cost basis for the future and even saved us some money because our cost basis was wrong from the year prior.
He is worth the money. I organize things for him and sum totals for large items (like medical bills). This saves me money and time for him. Work with them on what they need to save you money, and ensure they respect that you do not have an unlimited budget for their work. They are bean counters - if they are good, they will understand.
My accountant works out of his home.
January 18th, 2008 at 7:22 am
My job includes the services of a financial planning firm as a fringe benefit. I have their tax team prepare my taxes every year. So, I get my taxes done professionally for free! It’s great. Doing my own taxes used to be easy, but now I’d rather trust an expert to handle it.
January 18th, 2008 at 7:40 am
I prefer to have someone else to do my taxes. I think that way I get an impartial look at my accounts. I have been using H&R and I have been happy so far with what they do. They are expensive but I have peace of mind.
January 18th, 2008 at 7:41 am
That sounds like a great company perk, Tom.
January 18th, 2008 at 7:41 am
Luckily my taxes are still pretty straight forward. I predict this will be changing in the year to come. So, until such time, I prepare my own taxes.
January 18th, 2008 at 7:45 am
H& R blocks are just temporary employees using the h & r block tax software. Don’t waste your time there.
I do my own taxes, with the software, but I don’t own a house, and I can usually only take the standard deduction.
January 18th, 2008 at 7:47 am
I have been using Turbo Tax for 7 years and it has been great. I started my own business 2 years ago and also do contract work, so I was a little concerned about how that would all work out. I bought the Turbo Tax Home & Business and it was great. It takes a little time to input everything, but the program asks questions every step of the way. It also has an Audit Check program which looks over your return to make sure there are no outlandish numbers that are going to throw up red flags. I highly recommend it.
January 18th, 2008 at 7:50 am
“despite the technology available to the IRS, they somehow waited five years to inquire about my error”
Statute of limitations on (non-fraudulent) incorrect tax returns is three years! What in the world did you do?
I earn in the (low) six figures, but since I’m single, I rent, and my only investment is in my 401(k) (the rest of the money is going towards debt repayment), I still use TaxCut. If I had more complicated investments or property, I would probably go to a CPA.
January 18th, 2008 at 7:59 am
I’m young so doing my taxes takes literally 15 minutes for me and I get a decent amount of money back. I use the IRS free services offered through their website since I meet the income criteria. I did use H&R block for 1 year and would never recommend it to anyone as their fees do not reflect the quality of their service. H&R Block and a few others, train their tax-preparers months prior to tax season. I would say most of their employees are seasonal whom include people who have never really done taxes but are looking for a job/extra income and take their classes in order to get hired. I would advise if looking for a tax-preparer to go to accounting firms who are reputable for their services, might cost an extra buck, but as someone said, it pays itself off.
January 18th, 2008 at 8:00 am
I’m a big fan of Turbo Tax - it’s pretty intuitive, and my taxes (several W2s a year plus investment income) usually don’t take more than an afternoon. Once I’m done with that, I usually do my friends’ returns in exchange for dinner or a nice bottle of wine.
Heads up, though - Turbo Tax usually only lets you file state returns for one state, so if you’ve got W2’s from businesses in different states (a common issue for college students who work in one state during the school year and another during the summers). You’ll actually need two separate installations of Turbo Tax to handle two sets of state returns.
January 18th, 2008 at 8:07 am
@Jnetty (comment 17)
Depending on your situation, you should still be able to claim tax benefits for your education. If you are only in your first or second year of school, enrolled at least half time, and pursuing a degree, the HOPE credit is available for up to $1,650 (reduced if income is greater than $47,000, and nothing if income is over $57,000) and is the better of the two credits if you have education expenses of less than $8,250. Otherwise there is the lifetime learning credit which is worth up to $2,000 per return (not person!) which is figured as 20% of the first $10,000 spent on QUALIFIED education expenses. If you are no longer enrolled in school (for the 2006 tax year) you will only be able to claim student loan interest since both these credits require you to be a student in the year claimed.
Also, you can itemize your medical expenses that are over 7.5% of your AGI. Though unless you have significant other itemized deductions your itemized deductions may end up less than your standard deduction ($5,350 for individual).
———
I’ve done my own taxes and also work part-time with H&R. I’ve seen no difference between what I do by pen and paper myself and what I get using the in-shop H&R Block software (this is a lot different than Tax Cut which is also an H&R Block product). Now having said that, it depends on who you see at Block, some of the “Tax Pros” they have are really good, and others are pretty poor. The benefit of H&R Block is the guarantee that they will pay any penalties or interest due to their mistakes, and for $30 extra, they will pay any extra tax too.
The tax code changes a lot year to year, doing your own taxes means keeping up with changes that affect you, or lots of additional research on the IRS site (my preferred refernce since any errors in translation into normal speak are due to me). This may make it worth while to hire a professional, that and any guarantee that they may provide.
January 18th, 2008 at 8:10 am
An interesting point that I didn’t see brought up in the comments:
TurboTax makes a “Pro” version that is sold at much higher prices to certain people who “qualify” - essentially meaning that there are a large number of “professional” tax people that are preparing your taxes using a slightly upgraded version of the software that you can use yourself.
I happen to know 3 people who are CPAs who use the “pro” software during tax season to prepare their client’s taxes.
In other words - TurboTax (if used correctly) does just as good a job of preparing your taxes as your average CPA. The problems come when you’re not prepared to work with the program effectively or if you try to short-cut or enter inaccurate information.
January 18th, 2008 at 8:13 am
IMHO, if your return is fairly simple:
1040, Schedule A, B, D child care, other straight forward verifiable income or expenses, then do your taxes yourself. Most tax software is accurate, cheap and easy to understand.
If, like myself, you have self-employed income and rental properties, I’d recommend a tax preparer. Find someone who can represent you if you’re audited like an enrolled agent. My guy prices himself to be competitive with H&R block and has software to handle state and local returns as well.
For me, I file 1040 long form, schedule A, B C (three business entities), D, home office expenses + plus state and 4 local city return (rental properties + business expenses); (I feel I have a “audit me” sign on my back) just thinking about the paperwork gives me a headache. My guy does all this for around $300 and can/will represent me if I’m audited.
If your business interest are bigger than mine and have employees, I’d recommend hiring an accountant preferably a CPA with expertise in small business returns.
January 18th, 2008 at 8:20 am
Full disclosure: I am a tax preparer.
I believe that only the simplest of tax returns (for example, a W-2 and bank interest) should be attempted by hand. Anything more and you run the risk of missing deductions and credits. Even with the simplest of returns, an uninformed preparer could miss out on the child tax credit, the Hope and Lifetime Learning credits, the retirement savings contributions credit, and the earned income credit. Tax returns are not easy if you don’t have a lot of familiarity with them.
H&R Block and Jackson Hewitt and the other national tax prep services do a nice job, but the fees are very high. A married couple who are homeowners with one child with 2 W-2s, some mortgage interest and real estate taxes, and charitable contributions can expect to pay $250-300 to have their return done. Not to mention on the back end, they try to sell you very very expensive audit protection, refund anticipation loans, and other services.
For the married couple’s return I mentioned above I would charge about $200 to my clients. I would recommend finding a good local preparer who will be cheaper and will pay more attention to YOU than the national chains.
And for those who think $200 is a lot of money to have your tax return done, missing deductions and credits can be much more costly. I’ve taken over clients’ returns who have self-prepared in the past and been able to amend the previous three years and get them back $6,000 or more in credits they had missed.
I hope this helps, and please feel free to email me with any questions.
January 18th, 2008 at 8:20 am
This is perfect timing — we have always done our own personal taxes, and just this year we are going to have a CPA do them. We had a business which we had gotten tax help for, but it turns out he made an expensive error that we could only partially fix (past 3 years). And I found this out when I finally started doing the business taxes myself.
Then why are we using a CPA this year? Well, when we closed our business, we used a different CPA because of all the complexities (C corp vs S corp switchovers, etc.). He saved us a significant amount of money because of really understanding the tax implications of our situation. So, this year, he’s doing our household taxes.
But… so am I. This year I will still buy TurboTax and run the numbers myself, and see if he comes up with anything that I wouldn’t have found. If it is worthwhile, then we will return the next year.
To save money, it helps to have all your records (non-cash contributions, charitable miles, capital gains, etc.) all organized. That minimizes the tax preparers time figuring out what is what. And I would go with an independent (perhaps working out of their house) type of CPA, not H&R Block.
January 18th, 2008 at 8:30 am
As a tax preparer working for a CPA firm, I LOVE this topic. My advice is:
- If you have a straightforward return (W2, investment or bank interest/dividends, home ownership or renter), do your taxes yourself. Use whatever software you are comfortable with.
- If you work from your home, sell any real property or investments, work as a consultant paid via 1099, etc… find yourself a CPA. That person will know what you can and can’t deduct (work out of your home? did you know that you *might* be able to deduct part of your utility bills, mortgage, and home owners or renters insurance?)
- If you usually have a straightforward return, but run into something more complex (high medical bills, bankruptcy or foreclosure, dependent in college, inheritence, etc), use a CPA.
I would strongly recommend NOT using places like H&R block or Jackson Hewitt. First, their employees are simply trained on the software, NOT on tax law. Second, last year one of the major tax prep firms faced charges of fraud, creating a nightmare for taxpayers that used their services. Third, IF they mishandle your return, causing an audit or notice to be generated, you’re on your own. Good luck finding your H&R Block preparer in July.
Finally, I think the best way to find a CPA is to ask people you trust. Family and friends are our greatest source of referrals, and if they are referring a professional, it’s because they have been satisfied with the service they’ve received. Some important things to ask:
- Do they offer a free consulation? A professional should be willing to meet with you, look over your most recent tax return, and give you a general idea of what the current year’s tax return prep will cost.
- Will they charge you for phone calls? The idea at our firm is that we’d MUCH rather a client contact us with a question in June, getting GOOD advice on how to handle something that will impact their tax return, rather than have to “clean up a mess” come year end.
Some things to remember:
- Most firms can’t give you an exact prep fee until the return is completed. When I quote, I give the potential new client a range, with the understanding that the quote is based on the information they provide me with at that time. If things are looking to fall beyond that range, a quick phone call to get the client’s approval only takes a few moments. If they fall under the range… I just get to surprise them with a smaller bill.
- If you go to a large firm, prepare to pay a large fee. The firm I work for has 1 CPA and 1 tax preparer. Our bills are at least a third less than many of our competitors. Why? Less overhead.
- You are trusting this person with your finances, be sure you trust them. Have a few consultations until you find someone that you are comfortable with.
- Do NOT wait until April to find a professional. Even if you don’t yet have all the information you’ll need to prepare your 07 return, you can still make phone calls and set up consultations. Have your 06 return ready, and start the search.
January 18th, 2008 at 8:38 am
“Even with the simplest of returns, an uninformed preparer could miss out on the child tax credit, the Hope and Lifetime Learning credits, the retirement savings contributions credit, and the earned income credit.”
Yeah no kidding. The one time that I took my taxes to a professional, she neglected to tell me that if I recharacterized a few hundred dollars of my IRA contributions from Roth to Traditional I could have squeaked under the income threshold and taken a $400 retirement savings credit.
Unfortunately I didn’t notice myself until I could not do that. So much for the $$ I spent on her.
Personally, I am willing to read and calculate and take my time to get my taxes right. I have sometimes double-checked with software, but in my experience the software also overlooks easy stuff. Maybe I’m just a purist, but I really do it by hand.
January 18th, 2008 at 8:47 am
I agree with Beth above. I think that whether you do your own taxes or use a CPA is a factor of how difficult of a return you need to file. In the past, when I was in business for myself, I had the same CPA that did my business return also do my personal return. This way I had one guy to defend me if I was audited or questioned by the IRS. Now that things are simpler, I do my own return using online software. The mainstream tax software is really amazing today especially combined with e-file.
January 18th, 2008 at 8:52 am
I’ve found TurboTax to be good when your return is time-consuming rather than complicated. For example, my husband and I get over ten W-2s each year due to the nature of our careers. It isn’t hard to figure out what to do, it just takes forever, so having the program automatically input last year’s data to start with is such a relief.
January 18th, 2008 at 8:59 am
I do them myself using ufile.ca. Very good service!
January 18th, 2008 at 9:08 am
I’ve been going to my tax preparer for years, and she knows us well, which allows her to ask more relevant questions. I used to do my own taxes, but when they started getting complicated (mid-year moves to another state, then a move overseas while we rented out our house), I went to a professional. I did actually try some tax software and compared its results with what I got from the professional. It wasn’t pretty. There were forms that she used that the software didn’t even seem to have available. I couldn’t get the software to give me numbers anywhere near hers, and she is very conservative. The peace of mind is worth any potential savings from software.
January 18th, 2008 at 9:08 am
I’m a firm believer that saving your sanity is worth paying for. My taxes are only slightly complicated and I’m a smart girl. I “could” do them myself, but I’d rather have a root canal then do my own taxes. I’ll pay someone else to do the work. I’ll save money in other areas (like doing my own housework and yardwork).
January 18th, 2008 at 9:39 am
I normally do my own taxes with the website TAXSLAYER.COM. Their program is easy to navigate, plus it’s free for members of the military. I only opt for a local accountant if my tax year was especially complicated. I don’t go for the big names like H&R Block. I look for businesses that have been around for several years and that have minimal negative feedback.
January 18th, 2008 at 9:47 am
I am a Luddite. I do my taxes with pencil and paper. Then again, I worked for H & R Block for two tax seasons. In their defense, their preparers are trained “the hard way” with the pencil and paper forms, it’s not just data entry. Part of the skill in preparing taxes is knowing WHICH numbers to put in, which software may or may not be able to do for you. On the other hand, H & R is expensive. The vast majority of people I did taxes for did not really need professional help. And by all means, stay well away from anybody’s “value added” products like refund loans and the like.
January 18th, 2008 at 9:52 am
How to find a good accountant? Ask around. I asked the owner of my son’s preschool and she gave me a great referral. I think it’s similar to finding a good auto mechanic or handyman for repairs around the house.
January 18th, 2008 at 10:24 am
I e-filed last year by going through NC’s Dept of Revenue. They actually recommended a few sites (including Turbo Tax) with some information about which you should choose depending on your situation.
Simple and easy to use. I thoroughly recommend it.
January 18th, 2008 at 10:41 am
I suppose it’s like anything else. If it’s worth the $200-400 to hand your taxes off to someone else for the reasons discussed above and you HATE doing them, do it.
I kind of enjoy doing our taxes. I try to stay on top of the changes to tax laws that will affect us, I am willing to read the tax regulations and research topics I don’t understand. Doing the taxes myself gives me a solid understanding of how our income, expenses, donations, investments, retirement savings, etc. affect our tax burden, so that we can plan for the following year. I use TurboTax, and haven’t had any problems with it for our standard, grown up (house, kids, investment income, job income) situation.
On the other hand, someone else is currently cleaning my house, because we both hate doing that, even though I’m smart enough to figure out how to clean a bathroom.
Just to throw in a wrinkle — we just bought our first duplex income property, which we’ll owner-occupy. I bought TurboTax Premier for this year, which is supposed to cover the real-estate stuff, so I’ll play around with those forms and wizards once I get our real taxes done for this year. DH is agitating to hire an accountant, but even if we do, I’ll still likely run our own taxes with TT and see what works better.
January 18th, 2008 at 10:59 am
I agree you should go to a pro if you have a more complex situation. I would just add, it depends on the pro.
As a freelancer, getting someone who knows your field (or at least can get your job title right) is important. I used my dad’s CPA and since we’re in completely different professions it was WORSE than doing it myself. He didn’t understand what I did or what my real expenses were. I found a CPA who dealt with freelancers in my profession. For under $500 a year, I’ve saved/got back thousands.
As with anything (doctors, jobs, spouses), it’s not just getting someone who’s got the title, it’s getting the right one. Which unfortunately can be a difficult search - but worth it.
January 18th, 2008 at 11:11 am
I was actually just looking into tax preparation classes as a 2nd seasonal job. My cousin (a social worker) just started doing it. Basically, you do have to go through a class on tax preparation that timewise (I couldn’t say about quality) is roughly equivalent to one college semester class. Any Joe Schmoe can do it though, you don’t even have to have a high school diploma! So I would go to a CPA rather than H&R Block or Jackson Hewitt.
Now for the software. First of all, my husband and I have owed every year since we got married due to the marriage penalty. For several years we used Turbo Tax. A few years ago Turbo Tax said we owed about $2,000, common for us. So we paid. Then several months later we got a letter from the IRS saying we owed an additional $1,200. My husband checked and sure enough, we did owe the money - it was purely due to a bug in Turbo Tax that hadn’t correctly calculated it.
So after that we started using Tax Cut software. Cut to last summer, and we got a letter from the IRS that we owed $15,000! It turns out that the exact same thing happened to a friend of mine from work and several other people, so we weren’t the only idiots who made the same mistake. The short of it is that there was a separate schedule related to selling stock options that we should have filled out, but we didn’t know and the tax software didn’t help us know about that separate schedule. So we went to an accountant who charged us $150 per return to redo our 2005 and 2006 returns. She did mention a lot of things when I met with her that we can deduct that I didn’t know about it.
This year I am using Tax Cut because we did not sell any stock or do anything fancy. But I would say if you have anything at all beyond the basic entering your W-2s and claiming basically deductions, an accountant can save you money, time and aggravation.
January 18th, 2008 at 11:42 am
We pay an accountant to do ours because my husband has a consulting business, and he gives us a discount because we’ve been going for years and have referred another dozen customers.
Sidenote: If you are a State Farm customer and registered online (easy, free), they offer TurboTax free to their customers.
January 18th, 2008 at 12:09 pm
Greetings! The last time I did my own taxes — or tried to do them — was for the 2005 tax year. That was the first time my husband and I had a business, and although we’d lost a lot of money and didn’t net but $200 or so, it was still a pain to try and sift through receipts. After seven very painful, tear-filled hours, my brother suggested, “Uhm, why don’t you just use Turbo Tax?”
Hallelujah! I’d been in such a frustrating funk that I hadn’t even thought of it. I immediately downloaded the software, and within less than two hours had all my paperwork and completed forms printed out and ready to sign.
Now that we live in a state that levies an income tax (at the time we were in Texas, which doesn’t), I definitely don’t want to mess with doing my own. I’ve been very happy with Turbo Tax. We don’t own a home (yet), don’t qualify for any major deductions other than against my freelancing business last year, and have a combined gross income of less than $75k. So we’re pretty happy with the software program.
Cheers,
Marjorie
January 18th, 2008 at 12:57 pm
I’ve used both TaxCut and Turbo Tax the past 10 years or so and have never had a problem (I usually go with what is cheaper). The funny thing is, TaxCut is the same software an H&R Block rep would use when you walk in.
I’ve been doing Schedule C and D, IRA distributions, plus a variety of other forms with no problems at all. The software walks you through every step in a way even a newbie could understand. And if you look hard enough, you can usually get one of those programs for free.
January 18th, 2008 at 1:01 pm
I was recently received my CPA license and have been working as an accountant for about 4 years. With that said, I am an auditor and don’t specialize in taxes, in fact, I hate worrying about taxes. I know enough about them, but when it comes to doing my taxes, I use Turbo Tax. My rule is and what I have found from experience is that the software is great for basic taxes (most people) and it is easy and fast. But,if you have a complex tax structure as a result of investments or businesses and the such or have done anything significantly different from prior years that affects your income, I would definitely look into having someone else do them for you. That is where you tend to find hidden or hard to find deductions and/or areas where you may owe extra taxes that you are not aware of. My brother is also a CPA and has been using tax software for years. I would also recommend using some of the other tips to help out if you use software depending on your situation.
January 18th, 2008 at 1:07 pm
Wow, no idea H+R was so disliked. I’ve done my taxes with them via their website for two years and I have no complaints.
Then again, those two have been pretty simple returns.
January 18th, 2008 at 1:10 pm
I do my own taxes. When I started, it was easy because I could use the 1040EZ form. One by one I learned how to deal with self-employment, home ownership, and investing. Now my taxes are a bit complicated but not crazy (I’m in Jon Morrow’s bottom tier and probably always will be, I live and work in the same country, my self-employment was things like tutoring that didn’t require any business expenses other than gas, etc.)
As each form comes in, I pencil in the appropriate entries on one copy of the forms. At the end of January, I go through the whole form making sure I haven’t missed anything and making sure I don’t need to contact anyone who hadn’t sent me something I needed. Then I pull out a copy of an old return as another way to check that I didn’t miss anything. Then I check all my math. Then I copy it all in ink to the other form of the copy, check carefully for errors like sticking things in the wrong blanks, make a copy and then send it in.
I learned how just by reading the tax forms and (parts of) the instruction booklets. Each year I read the whole form line by line. Every deduction has a line for it somewhere! If I don’t know what something is, I look it up. If I need to fill in one of the lines, I look it up. It looks like a huge, depressing amount of reading, but you don’t have to read it all and if you just do it when you’re awake and you’re not in a rush, it generally makes perfect sense. (Well, I don’t always understand the why’s but I feel I do understand the how’s.)
If it says I need an additional form, I get it online. Only once I couldn’t figure something out, so I called the IRS for an answer. Unbelievably, they don’t guarantee they’ll give you the right answer, but at least you can take down a name and get someone in trouble if they mess up.
A friend of mine used to always get his taxes returned because the IRS had found an error, even when he was using the 1040EZ. And he’s not an idiot and he’s not afraid of math or bad at it, so I don’t really get that. But now that he uses Turbo Tax, this has never happened to him. Note: we live in a state with no income tax, so we don’t need any of the special or deluxe packages. However, in at least two stores this year, those were the ONLY things on the shelves and he had to ask someone to get the regular version from the back.
The great thing about doing your own taxes is that you keep seeing what counts as income and what kinds of things can be deducted. So, when there’s a change in your life, you’re more likely to pay attention to the relevant details. And you’re more likely to make the job easier when you know what matters: You’re more likely to save the important receipts and you can learn to sell your stocks in the same quantities you bought them in. Those kinds of actions should make things easier for your accountant, too, and thus cheaper for you.
I’d say try doing your own taxes. If you qualify for something other than the 1040, look over the 1040 anyway, which just has extra stuff on it, to see if you might be able to get a better bottom line. If you feel unsure when you’re done, then go to a professional. That’s what I’ll do if I get in over my head. (And I’ll use Jim’s hint of doing as much as I can myself, first, to keep the costs down). Then I will pay attention to how it’s done so that I can do it myself the next time.
January 18th, 2008 at 1:57 pm
I have a pretty low income, so I use taxfreedom.com to efile for free.
January 18th, 2008 at 1:59 pm
i did my own taxes from 2003-2006.
The IRS took them and sent me nice return checks.
Now 2007, I received a letter telling me I owe them $2000+ in back taxes, due before the end of March.
I believe I will start having someone else do my taxes for me starting this year.
January 18th, 2008 at 2:38 pm
When I was in college, my friends and I would get together the day taxes were due, buy a couple of bottles of wine, and race to see who could finish first (both the wine and the taxes). As this was usually around 11PM, the most sober person drove to the post office and handed off our merlot-stained returns to the cheerful federal employee. Now that I’m a little older, I find coffee and Turbo Tax work best.
January 18th, 2008 at 3:02 pm
I am a Revenue Agent with the IRS and have been for many years. Here is my advice - if you have a simple return ie Schedule A stuff - W-2 wages - use Turbo tax. If you have a Sch C Business, Sch E rentals - Capital Gains - use a CPA. Under NO circumstances would I recommend ever using H&R Block or the like. A novice with Turbo Tax and half a brain could do as well. I also recommend using a CPA that is recommended by a friend and ALWAYS double check their work to the best of your ability. Many CPA’s take what you tell them and slap it on the return - correct or not - they are not the ones responsible for an incorrect return - YOU ARE!
January 18th, 2008 at 3:41 pm
The fact that /I/ am responsible for what is on the return is why I am back to doing my own taxes
I used a CPA for a few years when I first bought a home & rented out the garage. But because I am responsible, I insisted on understanding everything that was going on. (I also caught a few errors on Schedule Ds over the years….)
One year I got to the point - as I was explaining /again/ how the employer’s nonqualified stock options worked taxwise vs the employer’s employee stock purchase plan - “I come in here, I explain how it all works, and I’m paying for this? Why?”
Generally I start with pencil and paper, then run it through TurboTax Online. Last year I blogged about it at http://jenk.livejournal.com/tag/taxes
January 18th, 2008 at 4:06 pm
I’ve always done my own taxes, including when I was renting out my condo and when I sold it. I’ve always read the instructions line by line, even if they appeared the same as the previous year, and when there was a reference to a publication, I found it and read it. When I was renting out and had to do schedule E, I made sure to read everything about residential rental property. Sure it took time to read all of it, and at one point I called the IRS to double check something I didn’t understand, but I only needed to do it once - when I started. Thereafter, I just followed the instructions to the relevant forms carefully and made sure that nothing changed year-to-year. When I sold my property was the first year I used TurboTax since I kept getting different results with a calculator — my capital gains raised my income to the point when I had to do a whole bunch of worksheets on both federal and NY State forms and I guess I kept entering the numbers wrong. Since then I use Turbo Tax and it works great.
Maybe if I had a business it’d be different, but when you work for a company it’s not that complicated. You just need to read everything carefully and not to assume anything.
Using a CPA doesn’t guarantee correctness, and some of them take a whole bunch of questionable deductions which can get you in trouble when audited. I prefer to understand every line and to be able to explain and justify every item in my return.
January 18th, 2008 at 4:22 pm
this will be my 5th year using turbotax..
my finances are as simple as they come..
January 18th, 2008 at 4:34 pm
I second the comment on using taxslayer.com. I found this sit e a few years ago and have used them every year since. It lets you file your federal tax return and the state return for like ten dollars.
January 18th, 2008 at 5:26 pm
I used to use TaxAct online, and I loved it. Last year, I did a preliminary return on TaxAct, and then went to H&R. I went to H&R because I started working for myself last year, and I wanted a professional to look everything over, just to be safe. In the end, what TaxAct figured I owed and what H&R figured I owed was exactly the same (though some of the deductions were slightly different). However, you can opt for a very small fee (if I remember correctly, it was $15 or less) for H&R to step up in case you’re audited. That way, they did your taxes and they handle all the headache and responsibility if you get audited.
Also, I recently sat down with an H&R representative, for upwards of 90 minutes, to get some questions answered (e.g. is it better financially if I LLC, HSAs, SEPs, reducing my tax bill) — and because I’d used them last year, I wasn’t charged for the consultation. I don’t know if that consultation would’ve been free otherwise.
January 18th, 2008 at 5:44 pm
I have a ridiculously complicated return, thanks to royalty income, freelance income, and all the ‘regular’ stuff like my regular salary, child care deductions, mortgage deductions, etc. On top of that, my husband is in the midst of a huge artistic project that’s receiving grants. We also span 3 states, due to employment and residences. I can not imagine trying to file by myself, and I actually dread the day that my accountant decides to step down.
January 18th, 2008 at 5:48 pm
I concur with IRS Guy. Do not go to the big chains like Block, Jackson Hewitt or Liberty. I worked at Jackson Hewitt for a couple years to earn some part time cash. I couldn’t believe the poor tax knowledge for the preparers, and many of them worked at JH for years before I did. I remember one preparer deducting ALL the mileage driven for a year with one small business owner, not just the miles for business purposes. Another told a client that he could only deduct $3,000 in capital gains losses no matter what the gains. The man had $20,000 in gains for the year and $12,000 in losses, but the preparer was saying he could only use $3,000 of the losses, not the $12,000 to offset the large gain. I embarrassed the preparer because I had to step in and help on that one.
January 18th, 2008 at 6:01 pm
Until last tax year, I prepared my own taxes. Life was simple–I earned money, had interest on a student loan and took the standard deduction. When I bought my house, there were itemized deductions and lots of other things. I used TurboTax, liked it and plan on using it this year.
My mother prepares taxes for the farm she and my dad own and uses TurboTax to do it. I know the paperwork is complex but she has filed taxes herself for over 30 years.
I would stay away from H&R Block based on their refund anticipation loan they push every year. However, I have a colleague who uses an independent accountant and she likes his service. I think it comes down to comfort level. If you want someone to prepare taxes, ask friends, neighbors and colleagues for suggestions.
January 18th, 2008 at 7:15 pm
I agree with Frugal, stay away from H&R Block. We used them twice and both times had the same result: they basically used a full blown version of TaxCut, lol……for $150.
A few years ago, I left a job and we got behind to Uncle Sam (and his cousin Vito, aka Capital One)….I tried to use another well known tax software and it had us like -$1900….not too bad….3 years later, we found out we were actually -$7300 or so + penalities and interest….took forever to get that one worked out (we just snowballed it this month and it was the -03 tax year). If your taxes are simple, then do them yourself and leave the creativity to a pro….I don’t use a Dentist to fix my appendix
Darrell
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http://angrydebtor.com
January 18th, 2008 at 8:18 pm
I have been lurking here for some time. Love your site.
I think it depends upon your income, how complex your life is, and how complex your business structure is.
I did my taxes for 15+ years; each year they got incrementally more complex. Used software (both Turbo Tax and TaxCut).
In year two of our business I decided to go to a CPA I had seen at a seminar. She saved me money in the current year and went back two years and saved me even more money (1040x).
In fact, she motivated me to go back to school for the needed accounting courses and take the CPA exam (I take part four of the exam in a few weeks).
Of course, I am doing my taxes again. A CPA can tell you a multitude of things that a program can not and provide advice based on discussions with you (timing of selling/buying stocks, planning for kids eduction, setting up retirement plans, business entity options, heath care planning, etc.).
I generally consider a good CPA worth every penny. However, if you are earning under $75,000 per year and/or your tax issues all relate to one home and a few stocks/mutual funds I would recommend you do them yourself. If you own a business a CPA is a must have. In fact, I strongly recommend one consult with a CPA before entering any business venture (and a lawyer also).
Rob
January 18th, 2008 at 9:07 pm
[...] Get Rich Slowly compares doing your own taxes vs using a professional. [...]
January 18th, 2008 at 9:20 pm
You can actually get your return prepared for free by IRS trained and certified volunteers. Most sites are open to people with any income, but they don’t typically do highly complex returns. I’ve been a volunteer and they use tax prep software to prevent errors.
See: http://www.irs.gov/individuals/article/0,,id=107626,00.html
January 19th, 2008 at 12:51 am
My taxes are still simple enough for me to do them myself. A few years ago Turbotax on the Web helped me estimate my figures, but I didn’t want to pay for the printout so I just got my numbers to match up with what they calculated. If it gets much worse I’ll have to figure out some new ways to do this…
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Ryan
http://uncommon-cents.net/
January 19th, 2008 at 2:44 am
How much does an accountant cost? I’m in a fairly low tax bracket (I made about $35k last year) but my income came from multiple sources. In 2006 I ended up owning a lot of money to the government (I used TurboTax Online) but I felt like I might have filled something out wrong. This year I’m thinking about getting an accountant, but I’m not sure if it would be worth it. Thoughts?
January 19th, 2008 at 5:27 am
I’ve used Turbo Tax for the last four years and it has worked great. Before that I hired an accountant, but when I looked at what they had done I realized that my particular return was not that complicated. And with Turbo Tax you really don’t need to know anything at all about doing your taxes, just be able to follow the program.
January 19th, 2008 at 6:19 am
I would never go to H&R Block. They are only well-capable with simple returns. If your return is simple, you can do it yourself.
I did my own taxes for years but then they became very involved and difficult, so I hired a CPA. After a couple of years, I, though my own research and study became aware that he had been doing part of my taxes incorrectly. He fixed that but it got to thinking that I knew at least as much as he did about MY taxes.
In any case, I moved to another state and, again, instead of doing them myself I hired a CPA. Again, after my taxes were completed, I went over them with a fine-tooth comb and found two errors. I pointed them out to him and he agreed and corrected them.
1) Since I knew enough to know how my taxes should be done; including finding CPA errors, I started doing them myself.
2) There is no point paying for returns that you will have to learn about/know enough to check for errors and omissions.
So, the next year I used TurboTax. Guess what? TurboTax made an error. Well, not an error, but the interview process left out a couple of things that I had to input manually. If I just followed the interview, etc. then I would cost myself about $420.
Now, I use a program like the free version of TaxAct or TaxCut or TurboTax to prepare the first version of my taxes. I let this be a way that I check my math, in advance, and cover all the basics. Then I print a copy of my taxes and go line-by-line, using a tax guide, to make sure of all the details. Once I make any changes necessary, I send off my taxes with confidence.
Short answer: Paying someone to do your taxes can be costly, in more ways than one. Since you’d better learn about the factors that apply to your taxes anyway, for purposes of double-checking your tax man, then you might as well do them yourself.
Note: Some people just hate it or just don’t get it. They should hire a CPA.
January 19th, 2008 at 7:02 am
I am an accountant, but not a tax accountant (I hate taxes!). For years I did my own, when my investments became too complicated (a few of master limited partnerships) I moved to Turbo Tax. I have simplified my investments but still use Turbo Tax for it convenience.
Best Wishes,
D4L
January 19th, 2008 at 8:02 am
I don’t think there’s any one answer to the “how much does an accountant cost?” question. I pay about $400/year, but as I said: I feel this is worth it. In Matt Haughey’s article I mentioned in the post, he tried several different accountants, and each charged something different (with a huge range between them). I think cost depends largely on how big the office is, where you live, and how complicated your taxes are. (Also: on how organized you are.)
January 20th, 2008 at 2:53 pm
i have a CPA and have use him since I bought my house 4 years ago. there was a hiccup the first year i used this independent firm for tax returns, but i got a different accountant and its been great since. he finds me ways to get money back that more than compensate for his services… things i didn’t think about when filing online with software.
i value the professional advice and backup i get by using them. if something were to be miscalculated, they back it up. for instance, the IRS sent me a letter stating i owed money from three years ago. i was freaked out. i called him up and asked to have a meeting. we dug up the backup we needed, wrote a letter and faxed the accompanying documentation. IRS sent a letter back thanking for the documentation stating they updated their records and closed the case.
i have copies of records at home and they stay on file with the CPA. i got advice that allowed me to get more out of my paychecks each month. i was overpaying taxes and got thousands back every year. it was great, but some months were kind of tight for me financially. he did some calculations that helped me add allowances so now i only get up to or under a thousand back each year (overpaying only slightly now)… but each month i get to use more of my hard earned money instead of waiting all year long. kinda cool. i would not have gotten this kind of advice from an HRBlock or TurboTax. i would have simply gotten a return.
now, having said all that… if your income is easy enough to do with only a 1040EZ form… you should be able to do taxes yourself… i believe this should be part of everyone’s economics class in high school (even though its not). once you get into more complex stuff however, you should consider professional advice. maybe if you get a CPA.. still do it on your own but see what you come up with versus what he/she does. if its the identical same thing, well you pay for the CPA for one year and learn something so you can go solo next year if you want. again, in my case, the CPA asked some questions I didn’t think to check into. i also like the peace of mind i get with the service.
by the way… a good place to look at some personal finance calculators and tax info can be found at: http://www.kiplinger.com/
January 20th, 2008 at 7:21 pm
[...] JD at Get Rich Slowly asks the question, “Should I prepare my own taxes or go to an accountant. [...]
January 22nd, 2008 at 8:11 am
I used to dread doing my taxes until 2 years ago. I signed up for HR block online and filled it out. Now they remember all my information and it takes less than an hour. Automaticly submits it to the IRS and I know how much I get back instantly.
January 22nd, 2008 at 4:04 pm
I did my own (and my husband’s) taxes for years, using the H&R Block software. It was confusing and took hours, not including time spent downloading updates to the software and so forth.
Last year I went to an accountant. For about double the price of the software plus an hour of my time (answering questions and signing documents) she did my taxes. She also reviewed my previous year’s taxes and found an error that might have cost me a bundle if I had let it go until an audit.
Oregon’s legislature made last-minute changes to the state taxes at the end of 2007; it will take the software programs a while (weeks? months?) to write updates incorporating those changes. In the meantime my accountant is already up to date and ready to file as soon as I have all my documents. I’ll keep using her instead of doing it myself.
January 23rd, 2008 at 6:01 am
[...] Should I Prepare My Own Taxes or Go to an Accountant? This year, I’m using an accountant. I have more side business income than I’ve ever had, along with a lot of potential deductions. (@ get rich slowly) [...]
January 23rd, 2008 at 4:05 pm
I’ve been doing my own taxes for years. In the beginning they were pretty simple, just W2s and student loan interest forms. While in college I did some computer consulting and ran into trouble finding a place to put that income using the online forms. My basic online research told me that I was supposed to be sending in coupons four times a year or some other nonsense. I ended up just putting down the amount I made for the year under “other income” on the form. I should have gone to a CPA *before* starting the so-called business. Since then I haven’t done side work so I am still doing my own taxes but I am always worried that something will come back to bite me.
January 25th, 2008 at 5:36 am
@merd:
“he did some calculations that helped me add allowances so now i only get up to or under a thousand back each year (overpaying only slightly now)… but each month i get to use more of my hard earned money instead of waiting all year long. kinda cool. i would not have gotten this kind of advice from an HRBlock or TurboTax. i would have simply gotten a return.”
Funny, I did the same thing with TurboTax last year.
Overall, I think our tax system is a sham. It’s a giant shell game that favors those with incomes large enough to hire entire tax teams (see Joe Morrow’s comment). And I’m surprised that after reading or skimming 83 comments, I find no one else sharing the same sentiment.
We have an entire industry - tax preparation (both services and software) - that has arisen to fill a need that was artificially created when the government made the tax system too complicated for a normal individual to handle. And yet, people just see this situation as normal. In fact, over time, individuals (including me) seem to become more and more devoted to the tax game — see almost every comment above.
January 26th, 2008 at 6:54 pm
Preparing the tax return is only half of the service a good preparer will provide. Anyone can prepare their own return and do a good job. The idea of having a real professional, not H&R, etc, is for them to look for the hidden deductions, but more so, to look for interplay within the family, and to suggest future tax savings. For example, the difference between the Roth IRA and a 529 plan; or to prepay the mortage or put some funds into another investment. The tax return is not just about the current taxes.
February 1st, 2008 at 5:39 am
[...] It’s getting close to nearly being almost tax season, or at least people are talking about it already. [...]
February 1st, 2008 at 8:33 am
I have always done my taxes (I’m 36). This year I will use a CPA. Why? I got married. I want to see how a professional will handle them. Maybe I will resume doing them again next year, we’ll see. Most importantly, I received a referral from someone who I have complete trust in. If I did not have this referral, I might have stuck with Turbo Tax.
February 18th, 2008 at 1:55 am
If you have a lot of time, you can get free tax publications from the IRS via their website http://www.irs.gov/formspubs/index.html Those booklets/PDFs tell you exactly what you need to do and what the IRS rules are.
February 18th, 2009 at 2:17 pm
Our library system offers FREE AARP Tax Assistance 2 days a week for several hours. It is not limited to seniors (or even those just in our borrowing area).
As a public librarian, this is an incredible service to our community. Never forget your library as a source…