It seems like on every income tax post I write I explain why I use a CPA to do my taxes. So I thought I'd do one post listing my reasons and then refer to that post in future articles instead of saying the same thing over and over again.
That said, here are the reasons I use a CPA to do my income taxes (rather than do them myself):
- They save me more than what I pay simply because they know more about the tax law than I do. They stay up-to-date on all of the tax law changes and know all the tax breaks that apply to my situation.
- It saves me 30-40 hours worth of work. Even if my time was only worth $10 per hour (it's worth a lot more), it would still be worth it.
- My taxes are complicated and have a few legal considerations that need to be followed closely. I feel better having a professional looking over the information. There is a "peace of mind" factor that the author discusses above.
- My income is high enough to justify the cost.
- If there is an audit, and audits are on the increase, they'll go with me and defend the return. And as you may know, I have a couple audit-related issues to be careful about.
- They file electronically for me, sending the return to my checking account, so I get the fastest tax refund possible.
- They keep me away from common tax filing mistakes that could either cost me a penalty or lose time in getting back my refund.
If you think working with a tax pro may be in your best interest, be sure to read 3 Keys to Choosing the Best Tax Pro and Need Help this Tax Season?
If your tax return doesn't have a lot of major twists and turns, I recommend you check out what H&R Block has to offer: H&R Block. Do it yourself or have us do it. It's never been easier.
I used to use H&R Block. I loved the assurance they provided. However, it was getting costly, and I didn't have anything too complicated about my taxes (e.g. I have never itemized). So, last year, I used TurboTax Online, and it was great. It asked us all the questions that the accountant from H&R Block asked, and it allowed us to play with our education expenses (is it better for us to use the Lifetime Learning Credit or to take them as above the line deductions, etc). I will be using it again this year, as I have not itemized this year either (even with $4K in medical expenses and over $5K in mortgage interest). I am coming up short of beating the $10K standard deduction. Next year, I will pay a little of $1K more in mortgage interest, and the standard deduction will probably go up a little, as well, so, unless I get some more things that I can itemize (and I am sure my medical will be lower as I have better insurance than last year, and I have an FSA), I will not be itemizing for 2006. If I ever get motivated and purchase a rental property, that may happen. I had hoped to do that this summer, but that may have to wait until next summer.
Posted by: Dus10 | January 24, 2006 at 03:52 PM
I've been reading your blog for a while. Funny that I found this site while searching for moose tracks. You give me another reason to look into H&R block as a potential investments. I am a self doer, manual filer..LOL..even tho I do use free online tools to make sure I am doing it right. I usually plan and alter my withholdings, I do not expect much of a return usually.
Posted by: Geomatryx | January 24, 2006 at 08:11 PM
I've been reading your blog for a while. Funny that I found this site while searching for moose tracks. You give me another reason to look into H&R block as a potential investments. I am a self doer, manual filer..LOL..even tho I do use free online tools to make sure I am doing it right. I usually plan and alter my withholdings, I do not expect much of a return usually.
Posted by: Geomatryx | January 24, 2006 at 08:11 PM
Is that an H&R Block ad on your page?
I hate to be cynical but smells fishy !!!
Posted by: San Diego guy | January 24, 2007 at 07:11 PM
1. Yes, you are cynical. ;-)
2. Yes, that's an H&R Block ad.
3. No, I don't use them to do my taxes -- never said I did. I use a CPA at a local firm.
Posted by: FMF | January 25, 2007 at 08:51 AM
It takes me less than 15 minutes to do my state and federal tax returns each year. This isn't rocket science...sheesh!
Posted by: Terry | March 17, 2007 at 08:41 PM
What do you pay for the CPA?
Posted by: LivingAlmostLarge | March 21, 2007 at 10:28 PM
I would like to know how much a CPA usually costs too since I'm thinking of using one next year when I have a house. Please let us know!
Posted by: MyOwnMillions | April 09, 2007 at 01:37 PM
Mine cost about $600 a year.
Posted by: FMF | April 11, 2007 at 02:48 PM
If all your income is listed on forms W-2, you don't own a home, you're single, have no taxable investments, have no dependents and no significant education or medical expenses, then web-based H&R Block or Turbotax is probably the most cost-effective way to go.
But if your financial situation is a little more complicated, you're likely to be better off using a CPA. I think of mine as sort of like a personal trainer: without him, I would probably be lazy and not bother itemizing even though I should.
Mine costs about $300 a year.
Posted by: Matt | April 26, 2007 at 10:04 AM
Actually, even if you own a house, have various deductions, and perhaps even do a stock transaction or two .... the current major tax software packages provide ample knowledge for doing taxes yourself.
I used T'Tax for many years before switching to Tax Cut. I then moved to an accountant for the last 4 years due to an LLC and owning rental investments. But, now I am going back to software since I sold all my RE investments.
I can appreciate some of you having complex situations, but after using the accountant I found I spent 1/2 my previous effort just organizing the data for him and he still charged $400. For that I will be happy to spend a weekend watching football and doing taxes.
At the end of the day, it's probably just a personal preference.
Posted by: David | January 14, 2009 at 07:12 PM
Hi i have use H&R block before and each year the price
goes up but i will like find out more about Turbotax Software do you have to purchase and how much do have
to pay to get it.Last year i have a accountant do our taxes we still ran into some issues with the IRs
Posted by: erica Darmstadt | February 12, 2009 at 09:22 PM
I have a masters degree in accounting, but have never done any tax compliance for clients. I know enough to know that I don't know enough.
Had I used a CPA for my 2007 taxes I could have saved several thousand dollars. This year I employed one and it's made all the difference. TurboTax and other tax software don't cut it when there are complexities. They'll ask you questions in their interview fashion, but you don't necessarily know what the implications to those answers are -- your CPA does (or should).
Posted by: Jesse | March 04, 2009 at 11:02 AM
I've used TurboTax for many years. It works great for me. I don't have any major tax situations. I would recommend that if you are going to H&R Block or another similar storefront tax preparer that you try TurboTax first. There is an on-line version that you can try out before making the purchase. If you don't like it then you could go back to your paid preparer.
However with this said TurboTax has a section where users may ask questions while you do you taxes. The questions are real time and open to response to any TurboTax user. You may have to wait a day or two to get a response or you may get a response in a few minutes. It just depends on the question and the time of day. (Some people are in bed at 2AM in the morning.) I have responded to several to these questions (ok 150). My observation is that several of these people should go to a professional tax preparer.
Also Tax Cut (the other tax software) is owned by H&R Block so if you are a H&R Block customer you could try Tax Cut and if you get over your head you could take your file and tax records into H&R Block and have them fix it. Of course they will charge you.
And one of the questions I answered on TurboTax Live Community that H&R Block is giving an additional $2,000 tax credit to home buyers “I heard that HR Block is giving an additional $2000 credit to home buyers is that true?” (Nan41 on 2/9/09 at 9:46 PM)
I’m sure my friends at H&R Block love this one. The answer is no.
Posted by: Garry | March 17, 2009 at 01:49 AM
Please tell me if there are any tricks to finding a good accountant. Doesn't seem right to just go to the Yellow Pages and take the first person to come up under "CPA". Thanks.
Posted by: line | March 17, 2009 at 08:02 PM
Line --
Ask successful friends/family who they use to do their taxes. Call that person, ask for references, and call the references.
Posted by: FMF | March 18, 2009 at 07:47 AM
Comparison shop like everything else. The best price is not always the lowest! I like to use a CPA because, quite simply, they save me more than they cost me.
Posted by: Chris Phone | June 21, 2009 at 01:02 PM
I know that a lot of people swear by CPAs for preparing their taxes. But the one and ONLY professional that has been tested by the IRS for their knowledge about taxes is NOT a CPA, or Tax Attorney. It is an Enrolled Agent. CPAs are tested on Accounting. Granted most study taxes too, but to get their credentials, Enrolled Agents take a test on taxes. They then undergo a background check, are finger printed and are required to take contiuning education, including ethics, each year. For more information, check them out at the National Association of Enrolled Agents at www.naea.org.
Posted by: Ron Winkler | July 10, 2009 at 08:01 AM
My CPA is also my financial advisor and has been for over 10 years. I can't imagine navigating through the complicated paperwork that he has me sign. I tried TurboTax once, and, I won't do it again. I'd rather pay someone who I trust that can guide me to my goals. It's not cheap but I think of how costly the mistakes could be and realize that it's definitely worth the money.
Posted by: Kim_Mango | November 07, 2009 at 02:39 PM
I am a CPA and I have my own tax practice. I often help clients on financial issues that they can't easily get elsewhere like reducing insurance costs, financial planning issues, the tax implications of a short sale or foreclosure. In addition, I do their tax returns. I am not saying that everybody should use a CPA, but everyone should consider it.
Posted by: Chandler Arizona CPA | November 20, 2009 at 10:21 PM
As always, you get what you pay for. If you want to skimp and be cheap on tax fees then you might not get the best refund. I think we would all pay a couple hundred bucks more if we had an experienced preparer who could save us a couple grand.
Posted by: DC | November 22, 2009 at 01:20 PM
A neighbor of mine has used a CPA that specializes in Taxes and has gotten large refunds for the last few years (tax refund around $10K - married w/ 2 kids). I've used TurboTax or TaxCut and received reasonable refunds each year (income $60K, refund around $3K, married w/ 1 kid). My neighbor's wife has no income, so that may be part of it, but they don't make tons more money than we do, and their mortgage is smaller due to buying the house as a foreclosure.
I'm considering having this expert look over this years documents, but am wary about how he works it to get these refunds that he's expecting and also the high cost of $1k for him to do the filing. It sounds shady, but taxes is all this CPA does.
Any suggestions?
Posted by: Lance Schueneman | January 08, 2010 at 10:19 AM
Lance --
How about an initial meeting with the CPA to see if he could help you? Most won't charge a new customer interested in an informational meeting. After meeting him, you'd be in a better position to make a decision on what to do.
Posted by: FMF | January 08, 2010 at 10:46 AM
Doesn't hurt to at least ask for a free consultation. Many will give them outside of tax season. A good CPA is well worth, if you have a complicated return (or just a lot of questions).
Posted by: TL | February 14, 2010 at 07:04 PM
I would use a CPA over H&R Block anyday. Many people don't realize that CPAs are often comparable in price, but obviously are there year round. Good luck.
Posted by: DC | February 18, 2010 at 11:10 PM
Whatever you do...don't use H&R Block. They are over-priced compared to most CPAs.
Posted by: Chandler Arizona CPA | March 29, 2010 at 09:16 PM
I use a CPA for my taxes.
She is also an enrolled agent, a former Revenue agent and she does it for free because she is my sister.
Posted by: not given | March 31, 2010 at 12:49 PM
People always confuses themselves with the amount of tax refunds. Those are your own money. A large tax refund means you have overpaid too much to start with. I have used t tax for many years and they work fine. It is a little buggy this year for it sometimes freezes up and you would lose any data not saved. Also one complaint I have with t tax is that they change the format every year and it takes a few more minutes to get used to it every year. Wish they stick with the same format from year to year.
Posted by: grace | April 03, 2010 at 01:27 AM
True...it isn't always the CPA that gets the refund for you. You may just have too high of a withholding. Be careful and make sure that you understand your own tax situation.
Posted by: AD | April 09, 2010 at 09:35 PM
I retain a CPA as well. I have owned rental real estate and have a legal overseas retirement account which makes my 1040 complicated especially with depreciation and the various forms involving the Treasury Dept. A good accountant is money well spent (and is tax deductable on Schedule A in the next year). :D
Posted by: Racutis | January 02, 2011 at 11:25 PM
If you really want to know which tax preparation mode is best for YOU, do all three ... ONCE.
When it’s tax time, buy TurboTax, and do your return; then go to H&R Block and let them do it; finally, go to a CPA and have it done. Now you have the data to compare: Ease of use, accuracy, timing, sweat equity required, etc. Make your choice and stick with it unless or until you have a major life change. Done.
Posted by: Big Dave | November 23, 2011 at 03:25 PM