Tax software or CPA for filling taxes

[MRHARDROCKCAFE]

Good morning all. I am looking for tax preperation advice. I am thinking of swithing from my CPA and doing everything online. I have never prepared my own tax returns. I have never used tax online software and it looks very useful today. I am a goverment employee and I plan to retire in the next few years. For the past 11 years I have had a home based small business & own several rental properties in diffrient states. I have built a good realationship with my CPA and asked her questions from time to time and have had no problems. With all the great information provided for free online, i have seem to have less of a need for this service. I have looked at the software options and by the time I add up all the extras (home business, out of state rentals, ECT.....) to haddle my needs, it still looks like i will still be spending over $300.00. I curently pay over $600.00 now to get my taxes completed. I basicly track all my documents and fill in the information sheet (5 to 6 hours), and email it to her. There is a few follow up emails to finish up and I am done!! Is it worth the few hundred saved to go to onlne? I always know i have a backup in case of any problems. Should i try it for one year? How would by CPA feel if cancel and i end up going back next year?

Thank you,

Dave

 

[Onward]

I'm a firm believer that if you own a business and/or rental real estate, a good tax preparer (preferably CPA, tax attny, or enrolled agent) will save you far, far more each year than he or she charges you.

 

[gerntz]

We have a small rental LLC business. I do our own taxes. Used to use CPA. Then one year I did our taxes with TT & got the same overall & category results as the CPA. After that - like 4 years ago - I've been going our own at $59 instead of $700. And mailing in a state hard copy saves another $15.

 

[Sunset]

OP - I don't know why you think it will cost you $300 to do your taxes yourself.

I use TaxCut by H&R block, for a first time user, I'd go with the Premier version, but not the business version (no employees). Cost would be $75 (plus about $20 to efile state)
https://www.hrblock.com/tax-software/

Later once you are confident, you can go with a lower priced version as they have all the forms, but less help.

I prefer the download software type, so I keep the software for years, in case any change is needed, example Amendment.

Right now you are doing basically all the work (5-6 hours) , and your CPA is filling in the form.

I believe once you understand what the CPA is doing, you will notice it does not change a lot year to year, and they would really only possibly save you money when you do some large action like selling your rentals.

I think you should buy the tax software, and do it, see how it goes, are the numbers close to how it worked last year ?

You could still use the CPA, and then compare, did the CPA save you money or did you waste the the extra cost.

 

[Octogirl]

When we first bought our rental property, we used a CPA. Then one year I did our taxes with guidance on depreciation, etc as done by CPA and tax software.

Also, my DS is now a CPA and if I have questions, I ask him.

CPA was charging us $800

 

[RE2Boys]

You will be spending many hours entering in the pertinent data from previous years tax returns in order to complete this year's return, particularly the depreciation schedules for capital assets for you home business, if any, and for each rental. You will also need to prepare multiple state income tax returns, each state may or may not have credits/deductions that differ from federal tax treatment.

Having worked in a CPA office for 15 years as a tax preparer, I would plan on several hours entering (and checking for accuracy) the historical data into the tax software. And I'm already familiar with the software before even starting on the current year. The learning curve will take significant time. However, once completed, you could have significant savings in future years. Unless you enjoy learning software, tax law and tax terminology, the effort may overwhelming.

 

[RunningBum]

One option is to try it yourself AND have your CPA do it this year. This way you compare what they come up with against your software entry. It will also let you see if it's more work than you want to do.

 

[cathy63]

OP - I don't know why you think it will cost you $300 to do your taxes yourself.

I use TaxCut by H&R block, for a first time user, I'd go with the Premier version, but not the business version (no employees). Cost would be $75 (plus about $20 to efile state)
https://www.hrblock.com/tax-software/

Plus $59 for each additional state where he has a rental property that requires a tax return. If he has 4 of those, he's in the $300 range.

You will be spending many hours entering in the pertinent data from previous years tax returns in order to complete this year's return, particularly the depreciation schedules for capital assets for you home business, if any, and for each rental. You will also need to prepare multiple state income tax returns, each state may or may not have credits/deductions that differ from federal tax treatment.

Having worked in a CPA office for 15 years as a tax preparer, I would plan on several hours entering (and checking for accuracy) the historical data into the tax software. And I'm already familiar with the software before even starting on the current year. The learning curve will take significant time. However, once completed, you could have significant savings in future years. Unless you enjoy learning software, tax law and tax terminology, the effort may overwhelming.

This. Having multiple rental properties in different states is a complex tax situation and it will take time to find all the data and get it entered correctly (hopefully your CPA gave you a good complete package with last year's returns and all the supporting data). Maybe you have the time to do this right now with the pandemic shutdowns, and you do get three extra months to file your returns, so this could be a good year to go ahead and do it.

 

[Souschef]

The nice thing about TurboTax, which I use, is that it carries forward the data from the previous year, so you do not have to reenter all the data.

 

[Sunset]

Plus $59 for each additional state where he has a rental property that requires a tax return. If he has 4 of those, he's in the $300 range.

This. Having multiple rental properties in different states is a complex tax situation and it will take time to find all the data and get it entered correctly (hopefully your CPA gave you a good complete package with last year's returns and all the supporting data). Maybe you have the time to do this right now with the pandemic shutdowns, and you do get three extra months to file your returns, so this could be a good year to go ahead and do it.

Thanks, I did miss the rentals in several states part... what a pain..

 

[pb4uski]

....a home based small business & own several rental properties in diffrient states....

In your situation, with several Schedule Es in different states, I would stay with the CPA... $600 sounds like a pretty good deal.

 

[leftymd]

From a Tax-Aide Volunteer

I have been an aarp Tax-Aide Counselor for 9+ years and still use a cpa to file our taxes. I normally compute our taxes on the aarp Tax Slayer software and compare those results w/ cpa's results. More often than not, I find small discrepancies that add up to $200-$300 savings on the cpa numbers over the numbers that I generated on our software.

Our taxes are somewhat complicated as they include rental real estate, a few LP's, and tax-free in-state and out-of-state investments. Biggest discrepancies I find involve rental home depreciation, repairs vs improvements, and muni bond discounts when called. Capital Gains, dividends, and other interest income are not an issue.

 

[Jerry1]

One option is to try it yourself AND have your CPA do it this year. This way you compare what they come up with against your software entry. It will also let you see if it's more work than you want to do.

This is a good idea if you’re really interested in doing this yourself, but

In your situation, with several Schedule Es in different states, I would stay with the CPA... $600 sounds like a pretty good deal.

This is what I would do.

Don’t forget, you’d also be giving up the relationship that allows you to call someone you trust with questions.

 

[Scuba]

Every year, I use my CPA to help me with tax planning questions and this advice has been very helpful. Unlike DIY investing vs a financial advisor, DIY taxes vs a CPA is a relatively minor savings and for me, not worth giving up the advice.

 

[38Chevy454]

I think one of the big questions, even before the financial cost vs time, is whether OP has a good understanding of the tax laws and rules. The software can assist in making the calculations, but results are only as good as the data that is input. In old computer terms, garbage in garbage out.


It is good that OP keeps track of the expenses and and income, and submits a nice consolidated list to the CPA. So that indicates some knowledge and understanding of the required information. The issue for OP to consider is what to do with the data as far as the software.


Agree with the idea to do one year alongside the CPA and compare. That is a great way to learn.


In addition I agree that multiple states and a CPA that is only $600 seems like a pretty good deal for expertise and ability to get advice or questions answered.

 

[Rianne]

I'm jealous of the posters here who do their own taxes. We've always gone to a CPA, paranoia I guess. This year we got tired of paying $400 for a data entry person inputting our numbers on a form and having the CPA sign it. He probably barely looks at it. The issue for us is DH has at home consulting gig and he uses home expenses to lower our taxes. A portion of just about everything we do contributes to lower taxes. We have to figure out how to do that part.

 

[Lienlord]

I'm a firm believer that if you own a business and/or rental real estate, a good tax preparer (preferably CPA, tax attny, or enrolled agent) will save you far, far more each year than he or she charges you.

+1
I pull everything together from my W2 job, DW's business, our real estate holdings revenues/expenses and multiple LP K1's. I meet my CPA and we spend about 2-3 hours going over it and she creates my return as we go.
She knows I like to push the envelope, so she keeps me on the right side of the line! She's also an enrolled agent and previously an IRS auditor, so her knowledge is extensive. She has represented me for a few questions that have come back on rental property expenses and K1 revenue.
Her fee is $600 and well worth it! I hope she stays healthy!

 

[Stormy Kromer]

My CPA charges about $500 to prepare my return. I have a business sale, rental property and some other things that add to the number of forms I need to file.


I would never hire me to file my return for $500.

 

[ATX78701]

I’m a CPA. I no longer practice but at one time worked with two of the Big8 firms. There are so many intricacies and exceptions in the Code and Regs that based on the facts mentioned by OP, then a CPA is worth the cost mentioned.

I respect the desire to do the returns yourself. The software available is great for simpler returns and everyone , IMO, should know in general what their returns represent. However having also worked in the tax software industry, I can guarantee that the software can be programmed for many situations but not for all situations - especially as tax law continues to change on a regular basis both at the federal level and the state levels.

Will you catch any error in the software? Hopefully...but the phrase ¨you don't know what you don't know¨ is appropriate.

I second the idea to do a parallel...let the CPA do the return and then do it with software to see if you can get to the same answer.

Remember as well that the CPA is signing the returns as paid preparer so they have skin in the game on the accuracy of the return and can be prepared to assist on audits. Doing it yourself takes away that line of defense.

 

[target2019]

Good morning all. I am looking for tax preperation advice. I am thinking of swithing from my CPA and doing everything online. I have never prepared my own tax returns. I have never used tax online software and it looks very useful today. I am a goverment employee and I plan to retire in the next few years. For the past 11 years I have had a home based small business & own several rental properties in diffrient states. I have built a good realationship with my CPA and asked her questions from time to time and have had no problems. With all the great information provided for free online, i have seem to have less of a need for this service. I have looked at the software options and by the time I add up all the extras (home business, out of state rentals, ECT.....) to haddle my needs, it still looks like i will still be spending over $300.00. I curently pay over $600.00 now to get my taxes completed. I basicly track all my documents and fill in the information sheet (5 to 6 hours), and email it to her. There is a few follow up emails to finish up and I am done!! Is it worth the few hundred saved to go to onlne? I always know i have a backup in case of any problems. Should i try it for one year? How would by CPA feel if cancel and i end up going back next year?

You haven't mentioned how many states to file, so everyone is guessing and throwing out answers. So will I...

Each tax business has continuing costs. When there are employees, for example, the business may be paying staff extra to weather this storm.

Many here prepare their own taxes and have for many years. So we are reading about tax changes throughout the year, and are aware of what will happen in Jan-Apr of the following year. And there is an advantage to building upon previous years' experience.

The unknown for OP is the hours they will spend as a tax preparation newb. I'm not gonna venture a guess. I think there will be problems with self-preparation in this case. Do you have the discipline to go back over each and every entry to find mistakes?

My first and last guess is that OP should keep paying $600. It sounds like the income is there.

If you really want to do this, do it in parallel this year, and compare results to what the pro says is correct. Maybe you will find that the CPA company has made mistakes.

 

[Helen]

Will you catch any error in the software? Hopefully...but the phrase ¨you don't know what you don't know¨ is appropriate.

There are things you need to catch that technically aren't errors as well. My brother and I both sold a lot of stock in the last quarter of 2018. In TurboTax you have to manually enter your income and payments by quarter otherwise you can get hit with a penalty and interest for not paying enough taxes up front. TurboTax doesn't prompt you about this either, it assumes everything is equal by quarter,

 

[MRHARDROCKCAFE]

Thank you all for your input!!! I appreciate your time and effort. You folks are good. We have four properties in four different states. I really like the idea of always having someone to work with and to push to make the return better for us. I need to keep in contact with my CPA more throughout the year. I also like the idea of me spending a little extra one year to compare the returns and learn more. You are right keeping myself educated and to keep learning. I was listening to people that don't own any properties and don't have a small home based business.

 

[brett]

We were very fortunate to have an excellent CPA for the years that counted. Great tax advice, excellent forward tax planning. Her fee was a fraction of the tax dollars that she helped us to avoid or postpone through care full planning.

Now, in retirement, it is all set up and I now do our taxes using a package.

I am a huge believer in using the advice of professionals. From our perspective it is not about the fee. It is about the savings and avoiding potential costly errors. Of course....you have to engage the right person. Legal, accounting, or whatever.

 

[MRHARDROCKCAFE]

Hello. After reading this and talking with others, it looks like anyone can do tax returns & accounting with software. Yourself, bookkeeper to a CPA. It is all about the knowledge and the amount of time we want to spend learning and keeping up to date on tax laws. So the new thing is a financial planner that will work with you through the year and keep you up to date. I am now looking at the cost of these people. Looks like to be in the $1 to $10k rang.

 

[Sunset]

Hello. After reading this and talking with others, it looks like anyone can do tax returns & accounting with software. Yourself, bookkeeper to a CPA. It is all about the knowledge and the amount of time we want to spend learning and keeping up to date on tax laws. So the new thing is a financial planner that will work with you through the year and keep you up to date. I am now looking at the cost of these people. Looks like to be in the $1 to $10k rang.

Ouch....

Have you not done your tax return yourself, while your CPA does the return and compare the two and learn what if anything you missed or your CPA missed ?

Now you want a FP to keep you up to date ? Hire one that charges by the hour.

I think you are simply throwing your money away, but hey if you are extremely rich, go ahead, hire staff.

All this stuff is not really complex, and by doing it you will learn the how, why, what.

I have to do taxes for a foreign country, USA taxes, FINCEN reporting, I have rentals, investments, and self employment, etc..

Nobody will care about my money more than me. Doing all this stuff makes me understand and be better at what I do to pay less taxes or better investments.

Lastly, you are legally responsible for whatever your expert puts down on the tax return. That is why you sign it.