This year millions of Americans will seek an accountants’ help in their tax return preparations; others will do taxes themselves filling out forms or using tax preparation software like TurboTax or H&R Block at Home. The question arises, why some people do it themselves while others have the returns prepared for them? Below is a list of some benefits of having the taxes prepared one way or another.
Reasons to use TurboTax:
- Cost – the cost of preparing your tax return is already determined and lower than using a CPA; total cost of having a tax return prepared by a CPA may not be determined until the work is finished and will depend on the complexity of your return
- Insights – preparing a tax return by yourself helps you gain greater insight into your taxes; occasional bumps on the road might be an opportunity to learn about tax system in greater detail
- Privacy – You do not want to share your personal information with anybody except the Uncle Sam
- Automation – you can import lots of required information from financial institutions; TurboTax can also import W-2 from(s) from many participating institutions and automatically fill out necessary fields
Reasons to use a CPA:
- Time Savings – You are too busy to get it done by yourself.
- Complexity – If your tax return is very tortuous and you feel that a CPA will be better suited to handle your interests.
- Peace of mind – Having your taxes prepared by a tax professional makes you at ease knowing you didn’t make any errors preparing the returns or that deductions taken are legitimate and won’t trigger investigation/audit.
- Support – You can ask questions about different items of your financial live, seek advice, and be more knowledgeable in the future even if you don’t plan to prepare tax returns by yourself.
Even though I mentioned time as one of the reasons to have a CPA work on your tax returns, TurboTax gives you flexibility on preparing taxes. Assuming you don’t postpone the process until the last moment, you can prepare the return whenever you have time. Whether it’s one hour one day or two hours some other time, you can save your work at anytime and get back to it later. Additional benefit of using a tax preparation software is that by using it the next year, the software will auto populate common fields, such as name, social security number, date of birth, etc., and will ask questions about categories that could have changed. Although there will still be quite a little work to do, it can save you some time next time around.
Tax season can get hectic and sometimes you get precisely what you asked for: your taxes prepared. Nevertheless tax software and accountants can offer valid advice. Good accountants will go a step further and analyze your information while preparing taxes and make suggestions on how to save in the future or optimize your resources. Although this might be too much to ask an accountant during the tax season, if you’ve worked with someone for a while and that person knows your personal and financial life, getting an advice may be easier. For the record, TurboTax Life Events Expert lets you try different scenarios and displays how major changes in your life would affect your taxes.
So what is a better option, TurboTax or a CPA?
Going back to the original question of using TurboTax or a CPA the answer may lie in complexity of tax return. For uncomplicated tax return, hiring an accountant might not yield substantially different results as deductions and credits may be limited. Using TurboTax would be a better option because there are fewer, if any, grey areas and any of the questions can be resolved over the phone or the answers can be found on the website. More complex tax returns may be more adequate for an accountant to handle; he/she will know how to best handle intricacies of your financial life. In case of questions, he/she will most likely reach out to you for clarifications.
In the end, the best way to answer “TurboTax vs an accountant” may be supplied by you but it takes some experimenting. If you used an accountant in the past, try TurboTax; if you used a tax preparation software, give human a chance. Only by analyzing and comparing the experiences you can decide what works best for you. This will give you a chance to compare experiences that are both tangible and intangible and allow making the right decision in the future. Hopefully you will understand which option you prefer and why.