Doing your own taxes

[OAG]

I have always done mine myself, even was a tax preparer for several years, after "graduating" from the H&R course.

Recently I have been using the Tax Act program which is free including free e-filing. Took all of about a hour to do the federal and state returns last Sunday morning. Ohio has a couple of ways to do it on-line. Tax Act people acknowledged the return via e-mail in about a hour, a few hours later I received a second e-mail from them saying the IRS had accepted my return. Next indication with be the deposit to my MMSA which I expect to happen in the next few days.

 

[samclem]

I had a CPA do my taxes when I first started working. I had some investment property and was afraid of the issues involved. After a few years I started doing them myself, and have always been really glad I did. It's not just saving a few hundred bucks on the tax preparation--by doing them myself I got a much better appreciation of how I could save money on taxes. That's where the real savings are.
For example, every year hundreds of thousands of families make the decision to buy rather than rent a home because they have heard that the mortgage interest is tax deductible. That's true, and it also doesn't give you any benefit unless your itemized deductions exceed the standard deduction. For many Americans, the standard deduction is the better deal. But, they bring their receipts in a shoebox to an accountant, he figures things out and they get their refund (probably based on the standard deduction), and they never learn that their mortgage interest isn't lowering their taxes and that they'd be better off renting.
There are lots of things about the tax code that are best learned by stepping through the calculations or the questions posed by the software. In fact, I think the tax software packages are probably more educational than filling out the forms by hand (since it's easy to lose the big picture when carrying derived figures from box to box).
I have always used TaxCut, but might try Tax Act this year.

 

[Gumby]

I have always done my own taxes. Tax Cut since 1999 and by hand before that. Even though I now prepare my return electronically, I still file by mail.

 

[free4now]

It's not just saving a few hundred bucks on the tax preparation--by doing them myself I got a much better appreciation of how I could save money on taxes. That's where the real savings are.

Bingo. The real advantage of doing your taxes yourself is that it forces you to become intimately involved in understanding your taxes. You notice which deductions are disallowed, capped, or phased out and why.

There's also an ethical issue for me... many people seem to use tax preparers for "plausible deniability" to insulate themselves from the effects of cheating (intentionally or not) on their taxes. I like knowing that I'm responsible for getting it right myself.

 

[OAG]

Regardless if one uses a "preparer" or do them yourself YOU are responsible. Try "I don't know, my preparer did the taxes for me" at an IRS audit and you will find out pretty quickly how responsible the "preparer" is. IMHO I think monitoring and keeping up with stocks, mutual funds, etc., would be much harder than doing one's PERSONAL taxes.

 

[Maurice]

Moral: Perhaps you should alternate -- one year with CPA, a few years without.

This is good advice. I was historically a DIY tax person, except for a few years where my situation was too complex (overseas assignments, partnership in a multinational firm, etc) and my old firm handled it for me and paid for the preparation.

Last year was the first year I went to a CPA - the idea was, as Al suggests, see if there's anything he knows that I don't, thinking that I can always incorporate his ideas myself in the future.

I was so pleased with the result, however, I'll probably let him continue.

 

[2B]

I've just finished roughing out my FIL's taxes using TaxCut. He'll owe about $42,000.

It isn't pretty at first glance but he has a massive capital gain from selling his house that his wife and he purchased the land for in 1953. This little lot way out in the country turned into one of the most desireable Houston suburbs. The house has already been bulldozed and a McMansion is rising in its place.

TaxCut walked me through the house sale and the $500,000 exclusion. It has clear instructions for his medical deductions (Alzheimer's and nursing care are 100% deductible). The software also ran through the AMT impact (none) and calculated the penalty for underpayment (none).

It was so simple with a plain vanilla return that I can't imagine paying more than the $15 I paid for TaxCut.

 

[Moemg]

I went to a Cpa several times and they never brought up the fact that my husband's contribution to his retirement was deductible . When I used turbo tax and tax act it pops right up and calculates it for me saving me several thousand dollars . That was enogh to convince me to do it myself.

 

[Tandemlovers]

I started doing our taxes using my father's Turbo Tax program 'way back in 1990, soon after I married and discovered that my husband was paying an accounting firm $450 for the convenience (he was renting at the time and had no investments or property to track!!!). Like many here, I grew up watching my father do his year after year, and started doing my own as soon as I began working.
I have continued to use Turbo Tax since, and though our return is somewhat more complicated, like others who have posted, I've gathered considerable knowledge and understanding of our situation over the years.
Now I am looking a little ahead to the 2010 IRA and Roth IRA issues before us, and am considering getting some advice regarding whether we can take advantage of the rollover provisions. I am worried I may miss something, or simply do not have a thorough enough understanding of what's to come.

 

[Maurice]

I think one also needs to take into account how complex your taxes are and how much $$ we're talking. I'll pay more than a quarter of a million dollars in taxes this year. If a professional can reduce that even by 75 bps he's earned his money.

 

[Ronstar]

I have used a CPA for the last 20 years. I'll probably do them myself when I fully retire, but now they seem a little too complex for me to handle.

 

[Lagniappe]

This is good advice. I was historically a DIY tax person, except for a few years where my situation was too complex (overseas assignments, partnership in a multinational firm, etc) and my old firm handled it for me and paid for the preparation.

Last year was the first year I went to a CPA - the idea was, as Al suggests, see if there's anything he knows that I don't, thinking that I can always incorporate his ideas myself in the future.

I was so pleased with the result, however, I'll probably let him continue.

I had the opposite experience. I've always done my own taxes using turbotax. Last year I decided to use a tax preparer to make sure I wasn't missing anything. At the same time, I did them in Turbotax. I ended up paying $650 for someone to copy my Turbotax return into their own software package and print it out again. This year I'm back to doing it myself.

 

[BUM]

I used a cpa to do my complex business taxes and he "threw in my personal return". Years later as I got closer to FIRE I started DIY again.

Now I can get them done for free at the local senior center... but I'll still do the final version myself. A common theme on the board is "No one cares more about my money (and deductable expenses) than I do."

 

[StJohnsWood]

I do my own. There are only so many rows on the 1040. With the IRS web page its pretty easy.

One year I went to a pro. But before going I did our taxes. The returns were the same. Haven't been back to a pro since.

 

[retire@40]

I do my own. There are only so many rows on the 1040. With the IRS web page its pretty easy.

One year I went to a pro. But before going I did our taxes. The returns were the same. Haven't been back to a pro since.

Plugging numbers into a tax return may give you the same results whether you do it yourself or if you go with a CPA.

However, depending on how much time you spend keeping up with the tax laws and how much desire or capacity you have in understanding them, sometimes you may not be getting the full benefit the tax laws allow. IOW, it's not what you know, it's what you may not know.