Who does your taxes?

[scrabbler1]

I have done my own taxes each year for the last 29 years since I began working in 1985. When I bought my first PC in 1995, I created a spreadsheet to help me do the math. I worked in the actuarial field for 23 years so I am good at math and spreadsheets. No TurboTax or H&R Block or a CPA for me, ever. I have only begun dabbling with the fillable pdf forms in the last year or so; with my crappy handwriting it will save me some trouble.


The things which made my returns tougher over the years were (1) when I began investing and had to complete Schedule D in the early 1990s, (2) When Congress changed the determination of investment income in 1997, (3) when I began working in New Jersey in 2001 and had to file a NJ non-resident return along with a NY Resident Credit form, and (4) in 2008 when I cashed out my company stock and got hit with the AMT along with lots of other little worksheets I used to ignore. Since 2009 (my first full year of ER) my taxes have gotten much easier to do.


I have made a few mistakes over the years on my returns, nothing big, surely not enough to get me to change to another method. I prepare returns for my ladyfriend and my best (male) friend, too and have done so for 10+ years.

 

[swakyaby]

Since the beginning of my professional career 18 years ago, I have relied on the services of a solo practice CPA to prepare tax returns for myself and DH. I was not familiar with tax laws and was self-employed, and the AMT section looked complicated to me. I went from self-employed to receiving W-2s, but that AMT section still looks complicated. I decided my CPA's expertise was well-worth the expense and peace of mind.

And, after 18 years, it's almost like visiting an old friend each year.

 

[HFWR]

I use the accounting firm Dewey, Cheatem, and Howe...

My taxes are pretty simple, so self-prepared via TT Online, filed electronically, and direct deposited.


Sent from my iCouch using Early Retirement Forum

 

[NW-Bound]

Ah, I forgot all about JK Lasser book until it was mentioned. And I now recall doing my taxes in pencil, then when I was sure, I went over the numbers in ink to finalize the return.

Without tax software, every time I forgot something and needed to add it, I had to erase and update all the numbers downstream. I hated it. I gladly paid for tax software ever since it was available. I used TurboTax, then TaxCut, and now TaxACT.

 

[ReadySkiDaddy]

Turbo Tax for about 6 years now! Even if you hire an accountant I recommend at least experimenting with Turbo Tax. You can enter hypothetical gains, losses, property tax deductions and see real time how it affects your taxes in a dollar amount. Do your own taxes in Turbo Tax and see if it matches up with Mr. Accountant then next year maybe you'll use Turbo Tax instead.

Turbo tax also allows you to ask tax questions for free. A CPA will answer for you!

Also if you think you are at high risk for an audit then you can pay for insurance with TurboTax.

 

[frayne]

I have always done my own taxes since about 1975. After I retired I did the H&R Block tax jig for fun and to keep up with the tax code. The last two years have worked for VITA doing taxes for low income and elderly. Unless you have something really weird going on you should be able to do your own using one of many fine tax software programs.

 

[jollystomper]

I have always done my own taxes, starting with forms until spreadsheet software became available, then spreadsheets, then bouncing among various tax software packages based on cost. I have settled on TaxAct for the last 5 years. I like math and have never had very complicated returns. Capital gains, non-cash charitable donations, AMT, and multiple states one year are the "worst" I have had to deal with.

We were audited once for charitable contributions, but that was just a matter of sending in copies of the receipts and that was quickly resolved.

My observation is that, while tax law should be a lot less complicated (wishful thinking), what gets a lot of folks is the discipline required to track tax information during the year and then organize it. With the software I enter in information as I receive it and then file the hardcopy appropriately, which makes it much less painful and gets my taxes completed by early February in most cases. When I actually file them depends on whether I am due a refund or have to make a payment.

 

[Alan]

Turbo Tax for about 6 years now! Even if you hire an accountant I recommend at least experimenting with Turbo Tax. You can enter hypothetical gains, losses, property tax deductions and see real time how it affects your taxes in a dollar amount. Do your own taxes in Turbo Tax and see if it matches up with Mr. Accountant then next year maybe you'll use Turbo Tax instead.

Turbo tax also allows you to ask tax questions for free. A CPA will answer for you!

Also if you think you are at high risk for an audit then you can pay for insurance with TurboTax.

I love this ability since I've been retired to really try out different scenarios during the year to determine the tax impact of selling funds, doing ROTH conversions etc. After downloading this year's tax software I ran a test with more accurate year end estimates based on figures ytd and found that I could still do a little more to fill up a tax bracket.

 

[target2019]

I have tremendous gratitude for all of the great advice and insight posted here, and I figured there may be no better place to post my question... who does your taxes?

I've been doing my own taxes and a few others for about ten years. I had a training class in the beginning, and lot of help from a family member who did taxes for a living.

Personally, I have hired an accountant for the past 20 years but only because my parents hired an accountant ever since I could remember. I know, it's not the most reasonable thing to do since all of our other financial endeavors are exclusively and confidently handled by me and DW. Our financial picture is not too complicated (I have w-2 income, no mortage, one rental income property, one Vanguard brokerage account, and DW does infrequent freelance 1099-based work) but I wonder if hiring a CPA to do our taxes is really necessary. My main concern has been to not miss any entries in our filings to potentially benefit us... or even worse, to make entries and deductions that may harm us in the long run (even though I am fairly conservative as I prefer a good night's sleep with low audit potential over taking aggressive chances with our tax filings). The secondary benefit was that my CPA was a great source of financial counseling that made the annual fees and meeting well worth it. However, he recently retired and my latest experience with a CPA was lackluster at best.

Your tax situation is complicated, but only the preparer can say for sure.

It sounds like you do the proper accounting already, and just need the assurance that you're putting the numbers into the proper boxes. Each software package has its own approach to this. I get really frustrated with TT, but am forcing myself to use it for two returns each year.

You can't replace the advisor with software. The user community is probably your best bet. Search the Q&A now to see the quality of help you'll get. You may have an obscure question, but just about every question has already been asked and answered. There are always a few questions asked here too, each year.

So.... is there any rationale to seek the services of a CPA or is the Quicken and TurboTax route sufficient for most filings of relatively simple scenarios? Are there any good resources that you use for doing your own taxes?

The answer for you depends on how much time you want to spend on this. I watched a preparer do returns similar to yours, and it always took him less than an hour. I was in awe. My guess is that it would take me 8-40x's that amount of time, and I would have to ask questions.

Here is a WAG about the time it will take an average newb to do the returns you mentioned -- at least 40 hours. Of course you're above average, and it won't take so long.


How much free time do you have, and what is your time worth?

I may be missing some information here that would help in answering my question so please feel free to ask, and I'll provide it. Thanks in advance!!

On the positive side you gain a lot of knowledge by doing your own taxes. I'm thinking you may net $500-1000 or so by doing it yourself. If you were paying more than that it becomes very worthwhile.

There are probably webinars and classes starting now, so you may want to look around.

 

[jerome len]

It all depends.

I use a CPA, my CPA goes to tax classes at least 8 weeks a year. My taxes are complicated but I would always use a CPA. Here's why: 1st, I want assurance that my taxes are correct, next, depreciation rules often change, as an example 2014 depreciation changed last week. And, if there is a mistake, I'm covered. Next reason is cost and time. Software costs money, my work would be a lot of time.....much more time than it takes my CPA. Then we look ahead to the next year and talk about what I could or should change to save on taxes next year. then, finally, we work on my will and estate plan each year.....making sure I'm doing the right thing for DW and kids based on net worth and income.

Now, I started by saying it all depends. You have to look at the cost and trust of a CPA. I never would use one of the "quicky" tax preparers that hang out at WallMart.....I'd get a good one, determine cost and trust than make your decision. Many on this blog do their own taxes and do them well.....others absolutely need and use a CPA. My advice? If in doubt, hire a good one. Good luck

 

[athena53]

In a complicated tax situation like you have, I wonder how you can be sure that the tax preparer or even a CPA is well-versed in tax laws in both State A and State B?

I am curious because such an expert would be expensive, and what he charges would be an incentive for me to learn the intricacies myself, particularly if I have to deal with it every year.

We paid him about $300 to look at the 2 returns (2012 Fed and 2103 State). What impressed me was the he zeroed in on key issues almost immediately. I asked what he'd charge to do returns of similar complexity and he said about $300.

I suspect he uses software to sort out State A/State B issues, too. Hopefully that won't be an issue after this year since I no longer have wages in State A. (It's possible that when we downsize we might move to State A but I doubt it.)

Having said that- I agree it might make sense to give it another try on my own. Following the directions (send State A return with the State B return), spending a few bucks for a second state return and double-checking brokerage downloads would be a good start.


I mentioned that I'd always done my taxes on my own but there were a couple of years when I dealt with the tax accountant my first husband had used for years. I agree that gathering information was most of the work. The second year, I gave him all the info early on and mentioned that we'd married the previous year. The bozo called 2 days before the return was due and needed a pretty big check; the way the state laws worked, the income of one of us was shoved completely into the highest marginal bracket. Oh, yeah, he needed a check for quarterly estimated taxes, too. That was the end of the CPA. I really felt he should have seen that coming instead of surprising us with it at the last minute. Money was tight at the time.

 

[eytonxav]

I've been a TurboTax user for many years. Unless I had a small business or something very unusual, I see no need for a CPA.

 

[Fishingmn]

I used to do them myself but I now hire it out.

Wife has regular W2 but I'm Realtor with business return and we have 11 rental properties with different depreciation schedules. I pay $190/year which seems really reasonable. If it was a lot more I'd probably do it myself. If I subtract out the cost of a TurboTax version that could handle all of that it's really pretty cheap.

I do the returns for my 2 kids in their 20's with free online tools.

edit - Just looked it up and the version of TurboTax I'd need costs $110 inc. the State return. Makes my $190 to the accountant even more of a no brainer. Just a sole proprietor working from his house so I know he's a lot less than going to a CPA firm.

 

[pb4uski]

.....No TurboTax or H&R Block or a CPA for me, ever. ...

Neanderthal.

 

[Car-Guy]

TurboTax since the late ~90's

 

[RockyMtn]

Done my own taxes since my first filing in 1974. If you have a little patience and keep good records it is really not that difficult. The advent of TT was certainly a god send as it came right about the time my taxes started to get a bit more complicated with rentals, LLC, K-1's, stock options, etc.

 

[SJ1_]

I have tremendous gratitude for all of the great advice and insight posted here, and I figured there may be no better place to post my question... who does your taxes?

Personally, I have hired an accountant for the past 20 years but only because my parents hired an accountant ever since I could remember. I know, it's not the most reasonable thing to do since all of our other financial endeavors are exclusively and confidently handled by me and DW. Our financial picture is not too complicated (I have w-2 income, no mortage, one rental income property, one Vanguard brokerage account, and DW does infrequent freelance 1099-based work) but I wonder if hiring a CPA to do our taxes is really necessary. My main concern has been to not miss any entries in our filings to potentially benefit us... or even worse, to make entries and deductions that may harm us in the long run (even though I am fairly conservative as I prefer a good night's sleep with low audit potential over taking aggressive chances with our tax filings). The secondary benefit was that my CPA was a great source of financial counseling that made the annual fees and meeting well worth it. However, he recently retired and my latest experience with a CPA was lackluster at best.

So.... is there any rationale to seek the services of a CPA or is the Quicken and TurboTax route sufficient for most filings of relatively simple scenarios? Are there any good resources that you use for doing your own taxes?

I may be missing some information here that would help in answering my question so please feel free to ask, and I'll provide it. Thanks in advance!!

I use Turbo Tax.

 

[athena53]

No TurboTax or H&R Block or a CPA for me, ever. I have only begun dabbling with the fillable pdf forms in the last year or so; with my crappy handwriting it will save me some trouble.

I tried to do that with Federal last year and gave up. Too darn many "mini-worksheets" where the number you put on the form is a function of your Adjusted Gross, your house number and the spot price of the Argentine peso. As I noted earlier, I find that aggravating. You've got more smarts/patience than I do.

 

[Hermit]

I use the accounting firm Dewey, Cheatem, and Howe...

I thought they were a law firm

I started using a CPA when our finances got more complicated. I would spend so much time reviewing and re-reviewing when using TT that it just got to the point where it was worth the $125 the account charged. That work pretty good for about 8 or 9 years. Then the lady who actually did our taxes left and the lady who took her place wasn't near as good or as friendly plus the price started going up. Then she made a horrible mistake (~$10,000) and when she corrected it, her submitted reason for refiling sounded like it was my fault. The next year I used a CPA in Colorado who was highly recommended by a broker friend. I am sure this CPA would charge me $200 for buying him a cup of coffee. I plan to have him do my taxes this year again as I move to a new state. Next year I will do my own.

 

[Jimbo125]

OK, for another point of view. I am a CPA and I do taxes.

Our minimum charge to do a return is $300. We have a minimum charge to discourage the really simple returns.

There are two reasons a person uses a CPA to do their taxes. 1) Complexity or 2) Convenience.

If it is a simple return, I tell them that if they want to do their own return and have one of our CPAs review it, they could cut their cost in half. Or, they could come in once every couple of years and I would prepare their return and review the previous ones for obvious errors.

A complex return is a different story. I have seen people make major mistakes in preparing their own complex returns.

Tax Professionals software is very expensive. We spend over $25,000 per year on the software but we prepare Business and Individual returns in all 50 States.

Simple return preparation is not something most CPAs want to build their business on. They would rather spend one hour discussing tax planning with a client rather than one hour preparing their simple return.

I would recommend that if you feel that you aren't comfortable doing your return, see a CPA. If you just have questions, schedule an appointment and discuss those questions, or as I like to suggest to clients, come in every couple of years (between April 16th and December 1st) and let me look at what you have done. It might be money better spent.

 

[sengsational]

I've used TaxCut (now HR Block at Home) since the late 80's. My returns have been pretty simple (W2, investments, rental property).

The way I figure it, by the time I organize all of the data that needs to go into the program, it only takes me an hour to type the stuff in...not worth hiring someone to do data entry.

But the only reason it's a "data entry" task is because the interviews that are built into these tax software programs make it somewhat idiot proof. It is possible or even likely that interview questions can be misinterpreted and incorrect data entered, though, so the idea to pay half price for a review might be a good bet every now and then. I've only done that once, though, when I had rental property.

 

[jkern]

I've always done my own taxes. I find it somewhat interesting and potentially challenging. During retirement, I've made it a hobby by volunteering for the VITA program (prepare free tax returns for low income people).

 

[freebird5825]

I have a very simple and consistent tax situation.

I used to do mine using TurboTax. I keep a folder labeled for the current tax year in my file cabinet. All year, I drop all tax related documents in there. Sometimes I even sort them within the folder, sometimes not.

Now that Mr B (degreed and experienced accountant) has started his own home based tax prep service, he does mine using TurboTax Pro. I tally all of the receipts in the folder, and hand him the handwritten summary sheet.

No charge.

 

[Tractor guy]

In the past, I've used both a professional preparer and Turbotax for both state and Federal returns. I'm now using turbotax only.

I've found that they take about the same amount of work and time. Both require that I gather all of my information together. The professional required that I fill all of the information in to his form. This was very similar and slightly more difficult than putting it into turbotax.

Re mistakes, my return is moderately complicated with investment income and a few dollars from working as a 1099 employee. However, it hasn't changed much in 3 years. I've caught data entry problems by comparing to the previous years (which is what my CPA did). I haven't been audited (yet) so I don't think I'm making any huge errors.

 

[Cat-tirement]

I've always done my own taxes, primarily because I always want to know exactly what's going on. It's also a good mental challenge, kind of like puzzle solving. I've used TurboTax for about 15 years or so, and before that it was paper forms, Pub 17, and sometimes the Lasser books.