Doing your taxes yourself vs. w/ a CPA: a test run

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durazno

Doing your taxes yourself vs. w/ a CPA: a test run

Post by durazno »

I have been paying a local CPA $200/yr for almost a decade now to do my taxes. My tax situation is relatively simple (1 job, a portfolio of mutual funds, Roth contributions, some carryover losses from previous years in taxable mutual funds, some interest on taxable accounts such as MMA, savings accounts, etc.). I always felt that my CPA was likely to complete my taxes in a way that was more advantageous than if I did them myself. But I've decided to try doing my taxes myself this year.

As a practice run, is it possible to do a mock trial of TurboTax for my last year's taxes, to see if I end up with the same numbers as my CPA did?

Which TurboTax option do I really need for my situation?

Iced Tea
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Rainier
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Rainier »

Good choice, a monkey can figure out turbo tax and it works just as we'll as a CPA if not better.

CPA is a good idea if your time is worth more than they charge.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by livesoft »

Start with old TurboTax Basic for 2011. If you think you need more, the program will ask if you want to upgrade. Always say No first and ask back in this thread if it is necessary for the upgrade. We'll be watching here for your success.

I see that TT Deluxe 2011 is available for under $20 and that TaxAct 2011 is available for $0.00.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Dale_G »

Just think about the next 10 years at $200 a pop.

The first time you use TurboTax (or other) it might be a bit intimidating, but if you think saving a couple of grand over the next decade is worthwhile, the effort will be worth it.

The big advantage of doing your own (simple) tax return is that you will learn more about the tax code - and likely reduce the chance of financial missteps in the coming decades.

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rotorhead
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by rotorhead »

icedtea, here is link to a thread with similar question from last year.

http://www.bogleheads.org/forum/viewtop ... =2&t=83502

Doing your own taxes is not difficult to do, especially with the software that is available these days. I've used Quicken's TurboTax, and H & R Block's Tax Cut. They are both pretty good. I think I prefer Tax Cut now. Takes a little getting used to, but you'll be able to figure it out with a little trial and error. The big question is, "How much is your time worth?" I do my own taxes just to prove it can be done, as much as any other reason. Many people look at those IRS forms, and the instructions; and their eyes glaze over, and they convince themselves it's too complicated. It's really not that hard.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Grt2bOutdoors »

Turbo Tax Deluxe - will run about $79 with 1 state included. Might take you a couple of hours the first time, but after that it gets much easier and using the interview step by step questions will give you a feel for the tax code. Save yourself at least $125 a year.
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Steelersfan
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Steelersfan »

This isn't a promotion for Tax Act, but I've used it for the last four years after doing my returns by hand for 30+ years.

Any of the major tax return software provider's standard edition will suffice for your needs.

You can do a 2011 return with Tax Act for $13.95.

http://www.taxact.com/products/all_previous.asp
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BL
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by BL »

I downloaded a Tax Act 2011 today for free from Amazon.com. I used it this evening for the first time to verify last years and found it somewhat confusing, but it would go much better the second time around. (Finally found the actual pages of completed forms to get a clearer picture of my data. I also printed them to get a better look at them.) I used the basic one which was no problem for Roth conversion, QCD, long and short term capital loss & gain, SS taxes on self employment, and a couple other extra forms. Perhaps there is more guidance with more expensive software. Had to refuse to upgrade several times.
Might try Basic Turbo Tax next time, maybe online at Vanguard.
I also recommend getting the free booklets from IRS and actually working through the entire forms by hand to get a better understanding of taxes and where the numbers transfer to as they are calculated one place and then go elsewhere as well. It helped that I knew what the results should be.
(I am familiar with the software used in TCE/VITA volunteer tax preparation.)
Last edited by BL on Sat Jan 05, 2013 7:53 am, edited 2 times in total.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Puakinekine »

I tried Turbo Tax today (free from Vanguard) after years of using Tax Act. I think I will go back to Tax Act, as I am more familiar with it, and Turbo Tax does not seem to be any better. Why TT costs 3 times the price of TA, I don't quite understand.
Topic Author
durazno

Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by durazno »

Thanks everyone. I forgot to mention two other things. I'll have to file a NY state return as well. I also contributed to my after tax 401k throughout 2012 and did 3 in-service withdrawals, rolling the money to my Roth. I know I need to pay tax on the cap gains. Should be pretty simple.

I'll start looking into doing this myself. It's about time.

Iced Tea (OP)
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Hexdump
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Hexdump »

One caution about doing your own taxes.

When I am about to begin I always warn my wife to remember how sensitive I get at tax preparation time. I get to be very prickly and can be hard to live with. :D
buckstar
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by buckstar »

If all your CPA does is prepare your taxes, then $200/yr might not be worth it for a simple return. I pay my CPA $550 a year, but I consider it payment for tax advice throughout the year rather than tax preparation. My return on that investment is well over 500%.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Boglenaut »

icedtea wrote:I have been paying a local CPA $200/yr for almost a decade now to do my taxes. My tax situation is relatively simple (1 job, a portfolio of mutual funds, Roth contributions, some carryover losses from previous years in taxable mutual funds, some interest on taxable accounts such as MMA, savings accounts, etc.). I always felt that my CPA was likely to complete my taxes in a way that was more advantageous than if I did them myself. But I've decided to try doing my taxes myself this year.
15 years ago my CPA tax preparer recommended a change in strategy that saved me much more than she charged every year since then.

By the way, my last CPA changed fields...what's a good way to find a new one for this year?
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mildred66
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by mildred66 »

+1 on Tax Act, which you can do online without needing software. It also saves key info from previous return (they all do) so the next year makes things much faster. It even made three state returns pretty painless :)

Some comments talked about CPAs giving good general tax advice. Do those who use CPAs find that they provide tax mitigation insights that we wouldn't know otherwise? I've considered trying a CPA just for that, even though I've done my own taxes for over a decade.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by dbr »

mildred66 wrote:+1 on Tax Act, which you can do online without needing software. It also saves key info from previous return (they all do) so the next year makes things much faster. It even made three state returns pretty painless :)

Some comments talked about CPAs giving good general tax advice. Do those who use CPAs find that they provide tax mitigation insights that we wouldn't know otherwise? I've considered trying a CPA just for that, even though I've done my own taxes for over a decade.
I have had a CPA point out legitimate tax deductions that I might have overlooked. That was in a new situation affecting a different person. So, yes, I think it can be helpful to have a second look at a tax situation from time to time. The value exceeded the cost of paying the CPA on a one time basis, but would not have exceeded the cost of continuing to use the CPA indefinitely. The mistake you can make in following the interview process in tax software is that you can think you know the answer to the question when in fact you don't.

I had a tax situation involving employees that I wish I had brought to a CPA sooner than I did though all was straightened out in the end.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by beyou »

I hear all the time, people switch CPAs and the new one finds "mistakes" from the old one.
Sorry but unless your taxes were more complex than described, I would do exactly what you plan,
use last year as a trial to convince yourself you can do this.

Also a good exercise to be more involved, to better understand the tax implications of your financial
decisions, which can be driven home while walking through these software packages, if you read
and think as you go.
Postmon
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Postmon »

I used to do my taxes myself but I found that having my CPA's signature at the bottom of the tax forms helps me sleep better at night.
Default User BR
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Default User BR »

Postmon wrote:I used to do my taxes myself but I found that having my CPA's signature at the bottom of the tax forms helps me sleep better at night.
Why? You know your signature is there too, and that you are responsible for everything in the return, right?


Brian
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Sidney »

Default User BR wrote:
Postmon wrote:I used to do my taxes myself but I found that having my CPA's signature at the bottom of the tax forms helps me sleep better at night.
Why? You know your signature is there too, and that you are responsible for everything in the return, right?


Brian
The letter from the IRS will be addressed to you. You should never rely on the signature of the CPA for comfort, even if you use one.
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DiscoBunny1979
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by DiscoBunny1979 »

I don't use any software - I do everything by hand, the old fashioned way - except for one detail. I use the online fill in the blank forms provided over the Internet at the IRS.gov website. I have never used a CPA for my taxes and the reason is quite simple. If I've made a mistake, and I have in the past, the IRS has always caught it, and then sent me a note that the refund was change to "x" or that I need to pay something more. It's not a big deal to me to communicate with the IRS.

Another reason I fill out the forms is because I have a Domestic Partnership in California. I don't believe any online system has yet to deal with Gay Marriage issues or Domestic Partnership issues so that those that have those relationships can easily divide their 'income' appropriately as the IRS wants income reported split down the middle. For instance compensation for Medical Insurance Premiums are treated as "income" to the Partner that obtained the benefit form work, but if that compensation is reported on a W2 in box 1, it's split income to both partners, even if only one Partner's name is on the W2. A copy of such income has to be sent in with both 'individual' tax returns to the IRS as Partners can't file as "Joint".

Finally, when I send in my taxes, I have to include a copy of how the taxes were reported at the state level to 'verify' our joint income. There is no option I'm aware of that will allow us to send our State taxes along with the Federal through an online tax service. I have not really checked on turbo tax - but for the cost of any software, I'd rather do the research myself and know exactly how our taxes are being reported. The grunt work allows me to see the details and not some computer program helping us make assumptions.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Postmon »

Default User BR wrote:
Postmon wrote:I used to do my taxes myself but I found that having my CPA's signature at the bottom of the tax forms helps me sleep better at night.
Why? You know your signature is there too, and that you are responsible for everything in the return, right?
As I got older and life got more complicated, I just decided to outsource to make sure all my i's were dotted and t's were crossed.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by gkaplan »

'Who makes sure all the CPA's i's or dotted and all the t's are crossed?
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by DiscoBunny1979 »

Postmon wrote:
Default User BR wrote:
Postmon wrote:I used to do my taxes myself but I found that having my CPA's signature at the bottom of the tax forms helps me sleep better at night.
Why? You know your signature is there too, and that you are responsible for everything in the return, right?
As I got older and life got more complicated, I just decided to outsource to make sure all my i's were dotted and t's were crossed.
-----------

Another reason I do the taxes myself is because I am responsible for the tax return, not the CPA and no one else. While the CPA might refund my money if the tax return was done wrong, he won't spend time in jail for anything that is determined to be fraudulent - I will.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by livesoft »

My income is not high enough to worry about jail time for a mistake on my tax returns.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Epsilon Delta »

livesoft wrote:My income is not high enough to worry about jail time for a mistake on my tax returns.
The bar for jail time is rather higher than "mistakes".
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by masteraleph »

Grt2bOutdoors wrote:Turbo Tax Deluxe - will run about $79 with 1 state included. Might take you a couple of hours the first time, but after that it gets much easier and using the interview step by step questions will give you a feel for the tax code. Save yourself at least $125 a year.
Amazon currently has it for $39.99, plus a $20 e-file fee for state only (state e-file fee not applicable in NY).
Topic Author
durazno

Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by durazno »

livesoft wrote:Start with old TurboTax Basic for 2011. If you think you need more, the program will ask if you want to upgrade. Always say No first and ask back in this thread if it is necessary for the upgrade. We'll be watching here for your success.

I see that TT Deluxe 2011 is available for under $20 and that TaxAct 2011 is available for $0.00.
OP here. I finally started working on my taxes in Turbotax. First time up to bat. So far so good but I have a few questions.

- Turbotax says I need to upgrade to file the sale of a stock. Is this the case or is there a workaround? I received a 1099B for the stock sale. $105.75 sale price, no fed income tax withheld. The reason I sold the stock was because the company merged with another company and shareholders were paid out for their shares of the old stock.

- After I enter a fund's dividend info from 1099-DIV including the foreign tax paid, Turbotax asks me this:
"You entered $128.74 of foreign taxes paid. Now enter the portion of the $2,407.73 dividends and distributions that was from a foreign country." Do find enter the Foreign Income $ from the Foreign Tax Paid form provided by Vanguard? Mine shows $2367.05

I also have to specify if the foreign dividends are from a mutual fund/regulated investment company or other source. I assume the dividends are from a mutual fund company (ie. Vanguard) correct?

- My 2012 W-2 says DD $5252.52 in box 12c. Turbotax says it's referring to a health plan. I don't pay even close to this amount for my health insurance. My 2011 W-2 from the same employer had nothing in 12c. Does this amount impact my tax liability?

I read on Vanguard that certain customers get discounts on Turbotax. According to https://personal.vanguard.com/us/insigh ... i/turbotax I only get a break if I need Deluxe. My taxes consist of a W-2, some interest income, dividends, one stock sale and three in-service withdrawals of aftertax 401k monies. I dont have any carryover losses. Standard deduction applies to me. I'd be surprised if I need Deluxe...

Note: I have to file NY state taxes as well.

Thanks,
Iced Tea
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by pshonore »

icedtea wrote:
livesoft wrote:Start with old TurboTax Basic for 2011. If you think you need more, the program will ask if you want to upgrade. Always say No first and ask back in this thread if it is necessary for the upgrade. We'll be watching here for your success.

I see that TT Deluxe 2011 is available for under $20 and that TaxAct 2011 is available for $0.00.
OP here. I finally started working on my taxes in Turbotax. First time up to bat. So far so good but I have a few questions.

- Turbotax says I need to upgrade to file the sale of a stock. Is this the case or is there a workaround? I received a 1099B for the stock sale. $105.75 sale price, no fed income tax withheld. The reason I sold the stock was because the company merged with another company and shareholders were paid out for their shares of the old stock.
All versions of TT handle stock sales - no need to upgrade

- My 2012 W-2 says DD $5252.52 in box 12c. Turbotax says it's referring to a health plan. I don't pay even close to this amount for my health insurance. My 2011 W-2 from the same employer had nothing in 12c. Does this amount impact my tax liability?
That is for your information and has no impact on your return
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Alan S. »

The choice is not limited to a CPA vrs self prep. There is a large middle ground here. There are the mass market preparers such as HR BLock and often overlooked are local accountants and tax preparers who will give you more attention than CPAs or HR Block at a price far lower than a CPA and perhaps not much more than HR Block. Hiring a CPA to do a simple return can be a mismatch, because most of them do very few simple returns and are rather bored with them.

After a few years most people have a pretty good idea what types of tax filings they can handle and when it gets over their heads. Another major factor is that some people love preparing their own returns and others hate it. Those that like it invariably do a better job than those that don't because they generally know more and spend more time to get it right.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by livesoft »

icedtea, here is this year's NYTimes annotated tax return article: http://www.nytimes.com/interactive/2013 ... n-doc.html which will help get the neurons firing.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Duckie »

icedtea wrote:After I enter a fund's dividend info from 1099-DIV including the foreign tax paid, Turbotax asks me this:
"You entered $128.74 of foreign taxes paid. Now enter the portion of the $2,407.73 dividends and distributions that was from a foreign country." Do find enter the Foreign Income $ from the Foreign Tax Paid form provided by Vanguard? Mine shows $2367.05
Yes, for that line use the amount from Box 2 of the Foreign Tax Paid Reporting Information form. However, if your foreign taxes paid are actually only $128.74 and this is not a test, you don't even need to fill out Form 1116. That amount would go directly onto line 47 of Form 1040. But maybe TT will do that for you automatically.
I also have to specify if the foreign dividends are from a mutual fund/regulated investment company or other source. I assume the dividends are from a mutual fund company (ie. Vanguard) correct?
Yes. If you were filling out Form 1116 by hand when it asks for the foreign country you would put "RIC" for Regulated Investment Company.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (taxes).
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by gvsucavie03 »

You don't need turbo tax trial runs... just an instruction book, pencil, paper, calculator, your 2011 tax documents and time.

If your situation hasn't changed much since last year, use what your CPA did on your 2011 1040 return (they should have provided you with a copy of it) and line it up with your 2012 information and just make sure you cover each line on the forms and schedules you've been able to use before. The "What's new" at the beginning of the instruction book will inform you of any significant changes to the tax code from the previous year.

The first time will involve a LOT of reading and jumping through the enormous web of publications, forms and instructions. :shock: Also, if any of the credits/deductions jump out at you that you have not claimed before, do a quick read-through to see if you actually do qualify... I just discovered last night that I actually did qualify for a Retirement contribution credit since 2008 :oops: That was my mistake, not the CPA's since I got married the first year I did my own taxes and filed a joint return.

Your CPA should report what you have given them... if Turbo Tax were to find more, then that was likely something you had not originally reported. If not, then you definitely are better off not using that CPA in the future :wink:

Good luck... it's way easier the 2nd/3rd/4th time you do your own taxes.....
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Tabulator »

Does TurboTax figure out eligibility for earned income tax credit? And is the IRS less likely to audit someone who uses a CPA?
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Peter Foley »

The DD category on the W-2 is new this year. Employers report how much they paid for an employee's health insurance. It did not affect my taxes. It may affect some very high income tax payers or tax payers which very very generous health care plans. I recall hearing talk about this but I don't know if it was passed, or if passed, when it goes into effect.

My expereince with TT is that Duluxe handles everything most people need - Premier provide more advice and guidance. If you read the back cover of the box Turbo tax Premier offers "additional help", "guidance", "simplified entry" over Deluxe and Basic.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by gvsucavie03 »

Tabulator wrote:Does TurboTax figure out eligibility for earned income tax credit?
This is easy to figure out, since "earned income" for most people is line 7 on the 1040 - wages, tips, etc. There is a worksheet to go through to see what qualifies as earned income for you and tables to see what your credit amount is. I'm pretty certain all tax prep software can figure EIC since so many people get it. We got it when I first got married and had a baby in the same tax year on new teacher salary.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Alexandria »

To OP - good luck. As a tax preparer, I think a lot of people don't need the assistance (or pay for expertise they don't need).

I think for many people a "once every few years" review or comparison might be more cost effective. If your tax preparer is not saving you time and stress and dollars, then is no doubt a waste of money. I've personally been surprised at times when savvier clients left (good for them) and came crawling back with error riddled tax returns. So, it's sometimes easier to mess up than you'd realize. But a "once every few year" review would catch that, and if nothing is ever found you know you are doing okay on your own.
DiscoBunny1979 wrote: I have never used a CPA for my taxes and the reason is quite simple. If I've made a mistake, and I have in the past, the IRS has always caught it, and then sent me a note that the refund was change to "x" or that I need to pay something more. It's not a big deal to me to communicate with the IRS.
Be extremely careful with IRS refunds and notices. The IRS is severely under-staffed and have progressively gotten worse the past couple of years as they hire more inexperienced, low wage workers. I spend a pretty good chunk of my time responding to *incorrect* tax notices. It's been particularly bad the past 2-3 years. I can't tell you how many times the IRS have issued a refund and then a year or two later requested the money back and assessed interest and penalties. This is really easy to miss if you aren't paying attention. {Of course *we* write them back and tell them to remove the penalties and interest for *their* errors}. I'd say something like 90% of the IRS notices we get are dead wrong. {The other 10% is client miscommunication - mismatched 1099s and tax payments}.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by ohiost90 »

Epsilon Delta wrote:
livesoft wrote:My income is not high enough to worry about jail time for a mistake on my tax returns.
The bar for jail time is rather higher than "mistakes".
exactly. The IRS thought I had not declared ~10k in income for tax yr 2010. All they wanted was the money. I suppose if I ignored them long enough, jail time could have been an issue.
Sending them a letter of explanation was enough to satifisfy them.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Default User BR »

ohiost90 wrote:The IRS thought I had not declared ~10k in income for tax yr 2010. All they wanted was the money. I suppose if I ignored them long enough, jail time could have been an issue.
Not really. What would follow would be seizure of your various accounts. Remember that 401(k)s and the like are NOT protected from the IRS.


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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by travellight »

Appreciate the post from a tax preparer as well, Alexandria.
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by Alto Astral »

+1 for TaxACT. I've been using it for over 3 years now. The free version of TurboTax did not support ESPP for me. You mentioned mutual funds, so the free version of TurboTax may not support that.
I've done all my taxes by myself for over a decade now. I think of going to a CPA sometimes, but then I tell myself that my case is simple: 2 incomes, married filing jointly, no kids, ESPP, no stock/funds. I don't believe the CPA can help us save much. I say to myself that I can save the time and money that I would spend making the trip to the CPA. Doing it myself takes a couple of hours tops on a weekend - so I don't mind. I tell my wife that doing our taxes is why she keeps me around ;)
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ualdriver
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Re: Doing your taxes yourself vs. w/ a CPA: a test run

Post by ualdriver »

icedtea wrote:I have been paying a local CPA $200/yr for almost a decade now to do my taxes. My tax situation is relatively simple (1 job, a portfolio of mutual funds, Roth contributions, some carryover losses from previous years in taxable mutual funds, some interest on taxable accounts such as MMA, savings accounts, etc.). I always felt that my CPA was likely to complete my taxes in a way that was more advantageous than if I did them myself. But I've decided to try doing my taxes myself this year.

As a practice run, is it possible to do a mock trial of TurboTax for my last year's taxes, to see if I end up with the same numbers as my CPA did?

Which TurboTax option do I really need for my situation?

Iced Tea
Just as an FYI for you and others that use TurboTax or simply want to try doing their taxes on their own.......H&R Block is doing a deal where if you do your own taxes on TurboTax then file your return, H&R Block will look at your filed TurboTax return for free to make sure that you didn't make any mistakes. I think it's part of the current advertisement battles going on between the two entities. Anyway, the "catch" is that if H&R finds an error on your return, they'll charge you $99 for the amended returns (state and FED). But if they don't find an error, they give you your stuff back and send you on your way at no cost.

So if you're wanting to try to do your taxes on your own, which I think is a great idea, and you want a tax preparer to check your return for free, give it a try. You just drop all of your stuff off (TurboTax return, W2s, 1099s, etc.), fill out a short questionnaire, then wait for them to call you back when they're done looking at it. I bet the other "big box" tax return preparers (Liberty, Jackson Hewitt) would probably even match the deal if you asked.
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