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« The Love of Money | Main | Do You Calculate the Amount of Time You Work to Pay for Purchases? »

January 04, 2010

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24.2 hours seriously? I'd like to know what that involves. I'm a home owner, pay for my own healthcare, have multiple jobs (and so does my wife), donate to charities, have investments and bank accounts and knock my taxes out in a day max. Now mind you my wife keeps my paperwork organized throughout the year, all tax related documents have their own folders (healthcare receipts, donation slips, etc); at tax time I buy turbo tax, open my folders and enter my data. I'm Schedule C this year so that will add time this year but I don't think I'll come close to 52.2 hours.
Of course my father who files the short form taxes spends a few hours doing his with pen and paper.

This makes me very glad (again) that my job has perk giving me up to $400 tax prep for free. I believe that's about 2 hrs of a professional tax preparer's time. It's never taken more time than that.

I think the IRS data involves those people that print out the forms and use paper, like you noted.

I highly doubt anyone could spend 52.2 hours on TurboTax doing a single 1040.

I'd recommend doing your own taxes and learning as much as you can about the tax code. Use a paid preparer to learn some of the basic tricks but double check the filing yourself. If you are curious and can spend some time with Turbo Tax this will help.

I was using KPMG and then Ernst & Young to file my US taxes (very complicated because I work and pay taxes overseas and then have to file taxes in the US and can credit foreign taxes paid against my foreign income). To make a long story short both KPMG & Ernst & Young made errors that cost me a few thousand dollars. Fortunately I caught the errors and had them run a different calculation method and avoided that extra payment. This has to do with deciding whether or not to take the foreign income exclusion and also whether to married filing jointly or separately... anyway I've found to check all work yourself. Like the old saying goes, if you want something done right then you better do it (or at least verify it) yourself.

-Mike

We have used a tax preparer for the last 3 years and will probably continue to do so forever. My husband is considered a contract worker for sports officiating, so that adds to the headache. We also had a large business loss 3 years ago that we have been carrying over little by little.

So, I spend a couple of hours organizing all our stuff and hand it over. She does everything else and has checked out perfectly for the last 3 years. Even though it costs us about $300, I consider it $300 well spent.

It will cost us a little less than $200 after this year and I think we'll still pay it simply so we don't have to do it ourselves...it just is something I don't mind splurging on.

BUT, I do agree with Mike Hunt that you should always check the work when it's done.

I have used Turbo tax for the last 4 years. I think its great. It works good for me. However,my taxes are not too complicated. I also get a discount on Turbo tax through Fidelity every year. I agree with Mike though. No matter who does your taxes, you still need to check over and understand everything that is done.

I've prepared my own and other people's tax returns, so I've got some experience - but 24 or 52 hours??? We're missing something in that quote.

I agree with Mike Hunt - even if you have someone do your taxes it's still your responsibility to check the information. If you read all the fine print, you'll see that it really is your responsibility to do this. Why do you think you still have to sign it at the bottom???

I don't see what the big deal is about filing taxes. I use an excellent spreadsheet but before that I was using my own I created. Probably a headache if you have a small business but I file the full 1040 along with Sch's A, B, D, some misc form related to an ETF I own and another form because my wife is part of an LLC. Takes a few hours. In fact I did a rough guesstimate just using our last paychecks and tax data from our brokerage accounts in about an hour last week.

You can also use TurboTax for FREE on the web to double-check your work, you just can't print the forms. But no need to since everybody can e-file for FREE now at the IRS site. Why bother paying a CPA to do that for you???

I bet the time estimates include hunting for paperwork, phoning banks to track down receipts that were never sent, heading to the copy shop to make duplicates, etc etc. If you're reasonably organized (or a borderline-insane neat freak like me) I imagine you can cut that down pretty considerably.

IRS page on average preparation time and they break it down by tasks:
http://www.irs.gov/instructions/i1040a/ar03.html#d0e59500
They cite total time for individuals at 21.4 hours with a 1040 and businesses at about 32 hours. Most of the time is record keeping and planning. Of course these are averages so the numbers are skewed high by a few people that would spend more than average.

I started using a CPA since I got married. Our return is complicated enough that I think its warranted. We have 1040, schedule A, D, E with stock sales and rentals plus at least a couple more supplementary forms. I used to do my taxes on my own when I was single. I don't think it was that hard and I'd probably do it myself in the future if theres nothing especially complicated. I also do think people should understand their taxes because CPAs certainly DO make mistakes. Sometimes it is their error and sometimes its due to misunderstanding what you told em.

I use Turbo Tax but am considering getting a CPA this year. I am a partner in an LLC but get paid 1099, have rentals, and other forms. Anyway as things get complicated I'm worried of mistakes. I also need advice to see if I'm doing things to my best advantage.

For example, I'm considering buying a truck this year. Historically I write my miles off but am wondering if I could depreciate the truck or lease it and write off payments, etc. Since I only drive 6,000 miles a year depreciation may be better. A CPA may know that deducting mileage give you less breaks than if I depreciated the truck. Anyway, this is just an example of questions I think a CPA could help on. Of course what do other Sched C folk do?

On another note I'm a big fan of the Fair Tax www.fairtax.org ...adopting something like this would solve these issues.

We have done our own and used a tax preparer. It pained me to write the check to the accountant, but we had a fairly complicated return (a corporation, business losses, and several various real estate transactions) that made it worth the money. Once we got all of that behind us, we have gone back to just using TurboTax. I keep all of our tax receipts in a file as we get them throughout the year. We have a rental, but I have a spread sheet that details the costs and income throughout the year.

It's a pain, and I'm totally in agreement with texashaze- Fair Tax!

I have my own small business and will be doing my taxes myself. I doubt I'll spend a fraction of that time on my taxes. For one thing I keep good records throughout the year, it doesn't take me long to get all the information together and of course tax software cuts even more time.

I honestly don't understand how the average person could be spending that much time on their taxes. Of course until I saw the stats I didn't think millions of people would pay someone to do a 1040EZ form either but they do.

I have to say that even when we did our own taxes, we didn't spend 24 hours on them.

I spent 3-4 hours getting all the necessary paperwork and receipts together (we aren't very organized). My husband spent about 2 hours getting all his officiating paperwork together. We then spent 1-2 hours entering in the info on Turbo Tax and submitting it (usually because we forgot we needed a paper I had to go find).

So it took us less than 8 hours altogether and that was usually spread out over two or three days.

Oh hell yeah! I've saved thousands over the past few years having my accountant find goodies for me ;) That alone is worth the few hundred Ive spent, not to mention the times I was audited and passed those scary things to them as well! Lots of benefits in my opinion.

I think the IRS estimates of time may include reading the instructions for each form. That in itself can be time consuming and a cure for insomnia!

I'm a CPA and my favorite type of tax clients are those that have done their own returns in the past. They know their way around a 1040 and the difference between a deduction and a tax credit.

I had a lady ask for help last year. She had always done her own return and said, "Teach me how to fill out this Schedule C, so I can do it myself in the future." Fine with me, it was a simple Sch C. By the time I finished the return and was explaining everything I did, she was talking about seeing me next year! Ha, ha. I think she was buying peace of mind and more time back in her day. And recently her husband called me with a tax question about Roth IRAs, so I think I have a long term client now.

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