Free Ebook.


Enter your email address:

Delivered by FeedBurner

« The Value of a Stay-at-Home Spouse | Main | Help a Reader: Credit Score »

April 23, 2008

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

I use a CTA (Certified Tax Accountant) instead of a CPA, but I agree with FMF; having someone else do your taxes is a stress relief, protection against an audit and (at least for me) invariably means I'll get a larger return. I wouldn't go so far as recommending any "big box tax service" as I find establishing a relationship with an independent more desirable.

I see these stories every year and every year I wonder how accurate they are. This past year was my 5th year using Turbo Tax for my taxes. Each of these 5 years I end up spending most of the time reviewing the data, convinced that I've missed something! I tell myself, "How can I be done with my taxes in 4 hours? Isn't this supposed to take me the entire weekend?"

I wonder what the breakdown is by method of tax prep as well as the form(s) being filed.

Still, I aspire to one day have multiple streams of income and require a CPA (or CTA) like the "big guys"! :)


One thing I like about doing my own (using software, I'm not recommending paper-filing), is that I can see what happens when I play with the numbers a little bit. So I know for future reference how much certain deductions really help me, etc. I guess if you use a good CPA/CTA, they'll probably tell you how to lower taxes, but I feel better about it when I see if for myself.

Also, I always do a little preview at the end of January when I have most of the information I need so I have an idea of how good/bad the news will be in April.

I spent maybe 2 hours and about $30 on TurboTax. I can understand people either spending more time, if they do it themselves, or more money, if they pay someone to do it, but how is it that the averages for both are so much higher?

Wait, what? If you did your own taxes how would it have cost $207? Isn't that the average for everyone who did or did not use a professional?

I've been doing our taxes for several years and I never spend more than 3, possibly 4 hours, tops, on them, at least not since the advent of Turbo Tax.

Granted we have relatively simples taxes, but still, how can we be so far off the average?

I think you've got some outliers dragging up both averages here. Most people will either spend a small amount of time and a large amount of money (by using a CPA) or a large amount of time and a small amount of money (by doing it themselves).

A given individual should be below the mean for at least one of these measures - and people with simple returns should be below the mean for both. A few people will spend a ton of time on their complicated returns, forcing the average time spent up. And a few (different) people will spend a ton of money paying a CPA to do their complicated returns, forcing the average amount spent up. I'd be surprised if there are many people who spend several hundred dollars AND three full workdays doing their taxes, unless they are really disorganized and need that much time to collect documentation to give to the accountant.

I'll never pay someone $700 to do my taxes for me when I can do them myself. My taxes are moderately complicated but I know my business and I know my other income streams and all the potential deductions for each. Not only do I want to throw money at someone to do something I can do for myself with practically the same liklihood of getting audited, but I truly believe that I care more about maxing out my deductions than they would - I am the one that has a vested interest in it, not the CPA.

Does your CPA charge you a flat rate for the year or is it per hour? I feel that my CPA killed me last year (I did start an S Corp but it was a lot of money).

Wait a minute. We are supposed to take financial advice from someone who thinks that filing his own taxes would cost $207 in real dollars?

I spent a total of 10 hours for both federal and state. Nothing particularly complex, but not too simple either - 1040, itemized deductions, interest and stock dividends; capital gains, capital gain distributions, non-deductible IRA. Ended up not owing AMT, but had to do the form to figure it out as it was close. I used TurboTax. I also hit deduction limitation, but TurboTax took care of the worksheet.

Why it took so long: I sold 300 shares of ESPP stock, so most of the time was taken by 1) finding my ESPP statements 2) figuring out which shares I sold, adding up small groups of shares with fractions, accounting for 2 splits 3) adding numbers to get the base price. A CPA wouldn't help me to find the ESPP statements from past years; he might help me do the math, but I'd probably want to double check it. I also misplaced some of my ESPP statements and spent some time searching, couldn't remember the amount of NY State property tax rebate; had to go to the web and find it. Again, I'd have to provide this information to the CPA.

So, with all this problems, it still took me less than half of the amount of the article.

I've been doing my taxes forever, the first year I used TurboTax was when I sold the place I was renting out as I kept getting different numbers when adding up numbers on various worksheets. Before that, even when I was renting out and had to do schedule E and figure out depreciation I did it using a calculator. And it never took me 26.5 hours.

Oh and I don't understand where $200 number came from. TurboTax is $30. At first I thought you are counting time as money, but then I noticed that you are counting time separately. So where does someone doing his or her own taxes spend $200?

Maybe if I had a business I'd hire an accountant. But without a business, I don't see much reason for it.

As to audit - whether your accountant does it or you do it, you are still responsible. So it is important to understand your tax forms regardless who does it. I can explain and document every single number. I'd imagine anyone who does his or her own taxes can do the same.

Luke --

By the hour, but it takes about the same time each year, so essentially it's a fixed amount.

moremore - maybe the time you currently spend doing taxes could earn you more than the $700 or so you might spend for a good CPA. Not to mention there is no possible way you can keep up with all the tax law changes when you have a business to run.

I could change the oil on the car myself, but by the time I go get the oil from the auto parts store, buy the jacks to lift my car and physically do the oil change, how long and how much have I spent? It's worth spending the $25 or whatever to me to save that time and possibility of screwing up my car.

Even though I don't need an accountant (at this time) I do think the $700 FMF spends is entirely reasonable and probably pays itself back.

If I ran a business or had some financial complexities I'd definitely look into it.

I would love to see a flat tax incorporated into our government. I doubt we will ever see it for one simple reason: the government likes to control behavior with the tax code. Just think how many people would invest in defaulted mortgages, despite the risk, if the government exempted tax from the interest or gains. Despite the high probability of loss, many folks would do this for a tax break.

As far as using a CPA, I would look to use an Enrolled Agent (EA). I have found these folks to be a bit cheaper than CPAs, but they have as much tax knowledge as a CPA. The CPA designation focuses on auditing along with tax policy. The EA designation is all about taxes and is run by the IRS itself.

The comments to this entry are closed.

Start a Blog


Disclaimer


  • Any information shared on Free Money Finance does not constitute financial advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. All posts are © 2005-2012, Free Money Finance.

Stats