My Best Piece of Tax Advice

The Money Blog Network is doing a group writing project today on the subject of "my best piece of tax advice." Mine is:

Hire a CPA (or other tax professional) to do your taxes for you.

This advice isn't for everyone, but works especially well if you:

• Think they can save you more money than you could by doing the taxes yourself.
• Would rather pay someone than take 30-40 hours to do your taxes.
• Have complicated taxes that need a professional opinion.
• Have a high enough income to justify the cost.
• Want a representative with you in case of an audit.
• Want to file electronically (yes, you can do this yourself too.)
• Want to avoid common tax filing mistakes.
• Like to have someone available throughout the year to ask about tax-related matters (my CPA doesn't charge me for simple questions throughout the year.)

If you need a bit more explanation on these, check out all the reasons I use a CPA to do my taxes.

Here are some of the other suggestions from the Money Blog Network:

• Consumerism Commentary: Is it Better to Receive a Tax Refund or Owe the IRS?
• Five Cent Nickel: The Value of Doing Your Own Taxes
• Free Money Finance: My Best Piece of Tax Advice
• Get Rich Slowly: Mr. Lawyer and Mr. Accountant Chat About Taxes
• Mighty Bargain Hunter: A tax tip from my pastor
• No Credit Needed: A Taxing Situation - My Biggest Financial Regret
• Wise Bread: Certainties: Death, Taxes, And Change

How about you? What's your best piece of tax advice?

Comments

[Matt]

I'm not nay-saying your advice, but I probably spent four hours researching (i.e. reading blogs I would have been reading anyway) and two hours filling out forms. Granted, I am single, worked for the same employer the whole year, didn't have enough side income to require reporting, and don't have a high income. For young people fresh out of college, their taxes are probably simple enough to do on your own. I know that some tax prep places will review up to ten years worth of returns and claim any deductions or credits you missed. So when I reach the "ten years in the work place" mark, I'll probably start using a CPA at that point, because I'll get to have my returns reviewed and because my financial situation will be more complicated then, with my business and family situation being different, mostly likely.

Then again, some young people might be able to piggyback on their parents' CPA. I ask my parents' CPA for general advice throughout the year at no charge.

[No Debt Plan]

I agree with Matt. 30-40 hours for taxes? Really? Ours took me an afternoon. TaxActOnline asked me all of the questions to get the correct deductions that I had read about from various blogs. Cost = $16.95.

Granted a CPA makes you feel better about doing them, but at what cost?

[Odnal]

How much does a CPA charge for a 'Typical' tax return? I'm so cheap I don't even use any tax software, just download all of the forms and instructions directly from IRS.gov it costs nothing.

[FMF]

Matt/No Debt Plan --

The IRS has some huge estimate on the time it takes to do an AVERAGE plan (something like 15-20 hours). If you have a complicated return like I do (side business, investments, out-of-the ordinary deductions, etc.), the time committed just to get the data together is significant.

Odnal --

Not sure what a "typical" return costs. Probably a few hundred dollars, but most CPAs don't do "typical" returns.

[kitty]

30-40 hours? This is ridiculous. Maybe if you own a business and have a really complicated return, but for everyone else there is no real reason to use a CPA. You still need to collect all the documents and this is a large part of this job.

Even when I was doing my taxes by hand with a calculator, I spent maybe Saturday afternoon for federal and Sunday afternoon for state. Occaisionally - when I started renting and when I sold my rental property it took a little bit longer initially: the first time I did schedule E, I had to read the instructions as well as a publication that described depreciation. When I sold the property I was renting, I read two additional publications - the one about residential rental property and the one about selling your home.

The year I sold my property was the first time I used Turbo Tax to double check my numbers (too many worksheets with the higher income, and I kept hitting the same key on a calculator twice and kept getting different results) I liked TurboTax and I've been using it since. With TurboTax it is a couple of hours for both federal and state.

I must be really cheap; at least I don't like to waste money. A few hundred dollars saved even for a weekend worth of work seems like a good deal.

[FMF]

Kitty --

Read my criteria/post.

[G.E. Miller]

IMHO, I respectfully disagree. There are tremendous advantages to doing your own taxes: saving money, increased responsibility in keeping records throughout the year, and most importantly, knowing your financial situation and possible tax deductions inside and out.

[The Finance Buff]

I agree with G.E. Miller. Doing your own taxes is not as hard as one thinks. Most importantly, you want to *understand* taxes no matter how you do it (CPA, software, paper and pencil). That'll be my best piece of tax advice -- understand the tax implications of your transactions.