What Tax Preparers Really Charge (WSJ)

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What Tax Preparers Really Charge (WSJ)

Postby lindisfarne » Thu Jan 24, 2013 3:35 pm

I've done my own taxes since I was 17. I've saved myself a lot of money through the years, apparently. I've looked once or twice at the cost of a tax preparer & been shocked every time.
The article mentions it takes time to read the regulations, but once you've figured them out one year (for personal tax returns; I'm sure business ones are more complicated), it goes faster (although you still always have to double-check). Still, doing it helps you have greater understanding of your options & the tax implications. With the internet, you can always check other sources to make sure you properly understood the regs. Many tax preparers understand less than I do (obviously, I'm not talking about CPAs).

According to the survey, the average cost to prepare an itemized Form 1040 with a Schedule A (for itemized deductions) and a state tax return is $246. The average rate for a return without itemized deductions is lower: $143.
$134 for Schedule D (gains and losses)


http://blogs.wsj.com/totalreturn/2013/0 ... ly-charge/
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Re: What Tax Preparers Really Charge (WSJ)

Postby ResNullius » Sat Jan 26, 2013 10:09 am

For me, $250 is money well spent to avoid doing state and federal tax returns. I know I could get tax software, but I like the idea of having a human being with a CPA doing my taxes, and $250 is the going rate around here for getting both state and federal returns done for someone who itemizes deductions.
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Re: What Tax Preparers Really Charge (WSJ)

Postby SSSS » Sat Jan 26, 2013 10:46 am

Federal + state with tax software shouldn't take more than an hour for most people (maybe 1.5 hours if you're using two services side-by-side to verify they match). Going through a CPA probably requires a lot more of your time, plus the expense. Doesn't really make sense to me. Less money and less time spent versus more money and more time spent.
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Re: What Tax Preparers Really Charge (WSJ)

Postby NAVigator » Sat Jan 26, 2013 11:16 am

For me the savings is in avoiding a human being on the other side of a desk that I have to explain my income, deductions, and tax details to. I have done my taxes myself using software for federal and manually for state and have saved costs and needless errors. I had no idea what preparers charge. Now I see that I have saved thousands of dollars over the years.

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Re: What Tax Preparers Really Charge (WSJ)

Postby mlipps » Sat Jan 26, 2013 11:27 am

Last year, my taxes were complicated as I had worked in Australia and paid a ridiculous amount of taxes there. I had to convert currencies, prepare the foreign tax credit form, etc. I always use H&R Block's software since it's free at my income level. Last year, due to the extra complication, I did them myself and then paid about $200 to have a CPA check them over. She sent me back a one sentence email that everything was perfect and she was impressed. Needless to say, I'll be doing them myself from now on...
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Re: What Tax Preparers Really Charge (WSJ)

Postby sscritic » Sat Jan 26, 2013 12:12 pm

SSSS wrote:Federal + state with tax software shouldn't take more than an hour for most people (maybe 1.5 hours if you're using two services side-by-side to verify they match).

I bet you work for the IRS in the department that gives you those estimates that it will take 30 minutes to fill out a form that actually takes a Ph.D. two hours to fill out.

I have spent over an hour just trying to get my tax software to download correctly from Vanguard.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Grt2bOutdoors » Sat Jan 26, 2013 12:19 pm

SSSS wrote:Federal + state with tax software shouldn't take more than an hour for most people (maybe 1.5 hours if you're using two services side-by-side to verify they match). Going through a CPA probably requires a lot more of your time, plus the expense. Doesn't really make sense to me. Less money and less time spent versus more money and more time spent.


You must be referring to the 47% who file the 1040-EZ form. :oops: Now take your 1.5 hours and multiply it by 8 to get to the average time it takes to enter data, complete the 1040 plus Sch. A,B,D,E,Form 8606, Form 4952, the AMT form and then the requisite state forms - and that is for someone who knows what they are doing.
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Re: What Tax Preparers Really Charge (WSJ)

Postby HueyLD » Sat Jan 26, 2013 12:21 pm

sscritic wrote:
SSSS wrote:Federal + state with tax software shouldn't take more than an hour for most people (maybe 1.5 hours if you're using two services side-by-side to verify they match).

I bet you work for the IRS in the department that gives you those estimates that it will take 30 minutes to fill out a form that actually takes a Ph.D. two hours to fill out.

I have spent over an hour just trying to get my tax software to download correctly from Vanguard.

Many taxpayers have a tendency to underestimate the complexity of their taxes and the amount of time and knowledge it takes to complete their tax returns.

Whenever someone starts a tax conversation by saying that it is very simple or it shouldn't take much time to do taxes, I always smile.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Toons » Sat Jan 26, 2013 12:28 pm

Tax Act 7.95 federal State 10.00 if you need it :happy
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Re: What Tax Preparers Really Charge (WSJ)

Postby SSSS » Sat Jan 26, 2013 12:35 pm

sscritic wrote:I have spent over an hour just trying to get my tax software to download correctly from Vanguard.


Grt2bOutdoors wrote:You must be referring to the 47% who file the 1040-EZ form. :oops: Now take your 1.5 hours and multiply it by 8 to get to the average time it takes to enter data, complete the 1040 plus Sch. A,B,D,E,Form 8606, Form 4952, the AMT form and then the requisite state forms - and that is for someone who knows what they are doing.


HueyLD wrote:Whenever someone starts a tax conversation by saying that it is very simple or it shouldn't take much time to do taxes, I always smile.


Sounds like the gauntlet has been thrown down.

I'm going to re-do this year's taxes (itemized 1040 with a big stack of 1099's) right now to prove it shouldn't take more than two hours.

Current time is 11:35 AM CST -- clock starts now.

Live updates:

11:40 - W2 forms completed

11:45 - 1099-INT and 1099-OID forms completed

11:51 - 1099-DIV, 1099-R, and 1099-B forms completed

11:57 - Itemized deductions complete

12:03 - Got as far as possible with the federal return. Since I've already done TaxAct and TurboTax, I'm doing this run in H&R Block, but it's unfortunately incomplete -- it's listing my 1099-R and 1099-B forms as 100% taxable because some IRS forms are not finished yet, thus the final numbers don't match up with TaxAct and TurboTax. I'll return when it's complete (says Feb 7) to finish and compare.

12:08 - Finished state return as far as possible (same issues with incomplete software as noted above). Will return when complete.

12:10 - Remembered I forgot to list last year's state tax refund as income (didn't receive a 1099-G but I'm being proactive). Corrected.

Time elapsed so far: 35 minutes. I will come back to this thread & resume the clock once H&R block is fully usable, then when complete will post screenshots comparing against TaxAct and TurboTax to prove accuracy. I'll be very surprised if I go over an hour. I'm probably going a little bit faster than when I did the return in TaxAct and TurboTax, but probably not much faster.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Peter Foley » Sat Jan 26, 2013 1:38 pm

Perhaps ignored in these calculation is that fact that you have to gather the documents and do some organization of materials prior to doing it yourself or handing it off to a tax preparer. Once you have used a software product, the second year data input is pretty fast if your situation has not changed much. I would guess that most tax preparers use software of some sort. Unless you have a special situation that requires research, $250 is a lot to spend for data entry and a little oversight.

I would recognize however, that some individuals just do not have the ability to prepare their own taxes. If you have to do them by hand and you are itemizing deductions or receiving SS, it is a difficult process.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Bob's not my name » Sat Jan 26, 2013 3:34 pm

I've always found -- across a pretty broad range of tax situations and states -- that 80% of the work is in the prep, which you have to do anyway. Also, I've always been surprised that even expensive tax preparers don't (can't) really advise you on what you can do to reduce your taxes; you have to prepare the returns yourself to recognize opportunities.

I've never calculated the hourly rate I make by doing my own taxes, but let's just say I fired our house cleaning service after I did the math on what my effective pre-tax wage would be for doing it myself.
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Re: What Tax Preparers Really Charge (WSJ)

Postby tj » Sat Jan 26, 2013 3:38 pm

Wow, people can get away with charging $250 to prepare basic tax forms!? Time to start moonlighting!


Why do people who don't have complex businesses use CPA's though? One would think that an Enrolled Agent, or even an RTRP, would be sufficient enough for the basic schedules and what not.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Alexandria » Sat Jan 26, 2013 8:15 pm

lindisfarne wrote: Many tax preparers understand less than I do (obviously, I'm not talking about CPAs).


I am a CPA who primarily does taxes. In general we should be saving our clients more than they pay us.
we charge far more than average but state taxes are complex here and clients have more complex tax situations.

It takes me about 5 minutes to file my taxes every year. Obviously there is far more thought and planning throughout the year - plus many hours spent keeping up to date - never ending changes.

Clients have a really bad habit of making big financial decisions and telling us next spring. If you want more advice you need to ask ahead of time. not much we can do after the fact.

I highlighted above quote because CPA designation has very little to do with taxes. What is far more important is a tax advisor with tax experience that is relevant to your situation. Nothing about cpa designation alone indicates tax expertise.
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Re: What Tax Preparers Really Charge (WSJ)

Postby dickenjb » Sat Jan 26, 2013 8:39 pm

I find the few hundred dollars a year I pay my CPA to be well worth it. She does my taxes, answers my questions during the year, and gives me peace of mind. Additionally it saves me the time I used to spend with Turbo Tax.
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Re: What Tax Preparers Really Charge (WSJ)

Postby lwfitzge » Sat Jan 26, 2013 9:02 pm

I could see how w simpler returns and today's software is easy and saves a lot doing it yourself. As a young professional and when life (and my returns) seemed simpler and money was not in abundance, I did it all myself. Once I got to more complicated returns, e.g., dealing w multiple corporates moves, multiple state forms in one year, stock/RSUs, home business/expenses, I just started to depend on someone else. Tax prep is not something I like doing and my CPA rate can't be far off from my own rate as a consultant. I also like the peace of mind...on less thing to worry about.
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Re: What Tax Preparers Really Charge (WSJ)

Postby madbrain » Sat Jan 26, 2013 11:29 pm

Try filling out both 1040 returns for 2 California registered domestic partners. The laws are incredibly unclear and complicated due to the income splitting that the IRS now requires. Some tax preparers charge upwards of $5000 for this type of return . It took us about a month last year to do it ourselves.
Turbo tax really is not much help at all as it doesn't even attempt to figure out how to split the income. That has to be done completely outside of TT, in spreadsheets. And you have to create 3 different TT files, and manually duplicate most of the forms.
I don't know of any tax software that can properly handle this type of situation.
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Re: What Tax Preparers Really Charge (WSJ)

Postby EmergDoc » Sat Jan 26, 2013 11:31 pm

It takes me a long time. Mostly because every year I have to learn a new schedule. This year it'll be the K-1. Last year was E. Year before was D and B. Year before that was C and SE. Year before that was A. Eventually I may have it figured out.
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Re: What Tax Preparers Really Charge (WSJ)

Postby TwentyFifty » Sun Jan 27, 2013 12:06 am

On a (semi) related note (admin, feel free to delete if too off topic. just a noob!):

Is it ever weird for you to to hand over W2s,1099-Div, 1099-Miscs, etc which your SSN emblazoned on them to a third party?

I've done my own taxes via Turbotax (relatively simple - W2 and 1099 misc, a few 1099-div's), solely for being squeamish in handing over papers that have my SSN...
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Re: What Tax Preparers Really Charge (WSJ)

Postby crowd79 » Sun Jan 27, 2013 1:31 am

No need to pay a preparer to do my taxes when every resource I could possibly ever need is at my fingertips on the keyboard and computer screen.
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Re: What Tax Preparers Really Charge (WSJ)

Postby travellight » Sun Jan 27, 2013 3:07 am

I paid $1200 last year for my tax preparation. I checked around this year and got quotes of around $1000. It seems steep since I gather and organize all the data extensively so that it is mostly data entry.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Boglenaut » Sun Jan 27, 2013 10:20 am

I am frugal, but some things just make sense to pay someone. I don't do my own oil changes and I pay to have my taxes done.

A piece of advice my accountant gave to me 15 years ago has paid for the fees ever since. It is worth it just to have a second set of eyes and the ability to sleep at night not worrying about it.
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Re: What Tax Preparers Really Charge (WSJ)

Postby KyleAAA » Sun Jan 27, 2013 10:55 am

I'm on the fence. I pay for the $80 or so version of Turbotax (plus $20ish? for the state filing) and it takes me 5 or 6 solid hours every year. If I did the math taking into account the value of my time, I'd probably be better off letting an accountant do my taxes. But I still do it myself because I like keeping up-to-date with the tax rules. Besides, at this point I've got the K-1 and Schedule C thing down, so it's mostly just gathering all the data together, which I would have to do anyway.

I do agree that if the extent of your tax situation is a W-2 from your job and a mortgage interest deduction, you really can do your taxes with most tax software on the market in under an hour. Kids, living in multiple states during the year, owning a business, or having non-job income does complicate things considerably, though.
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Re: What Tax Preparers Really Charge (WSJ)

Postby jdilla1107 » Sun Jan 27, 2013 12:39 pm

Another cost of not doing your own taxes is not understanding how could you save money by taking different actions. Doing what-ifs and checking your real marginal tax rate are important for this, IMO.

For example, I have found my federal marginal tax rate is closer 30%, even though I am in the 25% bracket and pay less than 10% overall. This is because I am right on the border of child tax credit phaseouts.

Most people I have encountered who don't do their own taxes have no idea as to how much they pay or how to reduce what they pay.
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Re: What Tax Preparers Really Charge (WSJ)

Postby deathb4disco » Sun Jan 27, 2013 1:56 pm

Peter Foley wrote:... $250 is a lot to spend for data entry and a little oversight.


So, I guess the $18,000 I billed a guy last year is out of the question. :wink:
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Re: What Tax Preparers Really Charge (WSJ)

Postby Cuzz35 » Sun Jan 27, 2013 2:10 pm

deathb4disco wrote:
Peter Foley wrote:... $250 is a lot to spend for data entry and a little oversight.


So, I guess the $18,000 I billed a guy last year is out of the question. :wink:


$250 is cheap compared to what my company charges. I don't understand it but I also don't receive $1million w-2s.
When I worked at H&R block one season they would charge $350 to folks getting large EIC refunds. These were folks well into poverty territory.
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Re: What Tax Preparers Really Charge (WSJ)

Postby cyfan » Sun Jan 27, 2013 2:50 pm

For those of us with only a 1040, Schedule A, and the accompanying state return, I would compare the decision to do taxes on our own (with or without tax software) similar to the decision to invest without a broker. With minimal effort and some interest in the subject along with some light reading, you can easily do it yourself and there is no need to pay for professional assistance. If I had a small business or a more complicated situation, I would certainly seek out a tax pro, at least for year 1, but as others have said, by learning how to do your taxes yourself, you can make better personal financial decisions relative to taxes.
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Re: What Tax Preparers Really Charge (WSJ)

Postby dhodson » Sun Jan 27, 2013 3:10 pm

i always did my own taxes until i started working as a contractor/owning my own business.

i believe that via turbotax and the equivalent, i was better off back then instead of paying someone.

now a days, im not 100% sure that the high costs of having an accountant work out in my favor but i consider it insurance to make sure its right since i havent put forth the effort to really figure out all the appropriate deductions and where they go.

I imagine a very high percentage of people would be best with turbotax or the equivalent. I might even still be better off just using turbotax but im just not sure.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Phineas J. Whoopee » Sun Jan 27, 2013 5:02 pm

There certainly are situations in which having a tax and accounting professional prepare one's return and plan for the upcoming year makes sense.

On the other hand, a number of my colleagues go to tax preparers (or at least claim to) as a status symbol. They announce from time to time that's where they are going for a couple of hours. They never tell us when they're going to the dentist. The same people tell us they've bought things like big 3D TVs.

To me it only makes them seem foolish, but I don't think I'm the one they're trying to impress.

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Re: What Tax Preparers Really Charge (WSJ)

Postby SSSS » Sun Jan 27, 2013 5:46 pm

Phineas J. Whoopee wrote:They never tell us when they're going to the dentist.


I tell people when I'm going to the dentist. :(
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Re: What Tax Preparers Really Charge (WSJ)

Postby Phineas J. Whoopee » Sun Jan 27, 2013 5:53 pm

SSSS wrote:
Phineas J. Whoopee wrote:They never tell us when they're going to the dentist.


I tell people when I'm going to the dentist. :(

I've never felt you were trying to impress me. :happy
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Re: What Tax Preparers Really Charge (WSJ)

Postby Slapshot » Sun Jan 27, 2013 7:09 pm

I used to have a CPA do my taxes. Then when Turbotax came out, I did my own and compared them to the CPA. Turns out he made two major errors (Put in dividends and capital gains twice and neglected to put in my wife's IRA contribution). Needless to say, that was the last time I had someone else do them. Plus I have to gather all the info together anyway, and I like having control over what I take.
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Re: What Tax Preparers Really Charge (WSJ)

Postby clevername » Sun Jan 27, 2013 8:08 pm

Meanwhile, on the other "do it yourself" web forums, people are wondering:

"why on earth do folks PAY other people to mow their lawns? Don't they realize they can buy a $300 lawn mower and do it themselves and save thousands?"

"Why doesn't everyone take care of their own pool? It really isn't that difficult to learn how to test ph levels and add chlorine, stabilizer, acid, etc. Pump maintenance isn't that big of a deal."

"Why does anyone buy a computer retail when they can buy the individual components, plug it all in, and install an operating system for a fraction of the price Best Buy charges? It's pretty easy to assemble your own computer and doing it yourself gives you plenty of opportunities to customize it exactly as you want it."
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Re: What Tax Preparers Really Charge (WSJ)

Postby SSSS » Sun Jan 27, 2013 8:25 pm

clevername wrote:"Why does anyone buy a computer retail when they can buy the individual components, plug it all in, and install an operating system for a fraction of the price Best Buy charges? It's pretty easy to assemble your own computer and doing it yourself gives you plenty of opportunities to customize it exactly as you want it."


This one actually makes sense, though. For desktop PCs, pre-built is generally overpriced, unreliable, low-quality crap that requires a clean install anyway to remove all the pre-installed shovelware.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Peter Foley » Sun Jan 27, 2013 8:36 pm

Going back to the original post, note that the cost for doing a 1040 and itemized deductions is $246.00.

According to the survey, the average cost to prepare an itemized Form 1040 with a Schedule A (for itemized deductions) and a state tax return is $246. The average rate for a return without itemized deductions is lower: $143.
$134 for Schedule D (gains and losses)


The 1040 and Schedule A form are primarily data entry of the deduction records one keeps over the year and various income sources. Note that w/o itemized deductions the average cost is $143. So, if you have a computer, you are paying someone $103 to enter in the data you collected regarding your itemized deductions. I don't fault anyone for going to a tax preparer, but many people could do it on their own without much difficulty.

There are forms that are difficult and there are worksheets that are confusing. I stopped doing my mother's by hand when two years in a row I got a letter from the IRS with a long list of offsetting debits and credits resulting in additional taxes owed of less than $10.00. I stopped doing my own by hand when the laws chaged regarding custodial accounts and you had to calculate some of your child's earnings at your rate. We have rental property and self employment income - if not for tax software I would be going to a tax preparer.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Kuckie » Sun Jan 27, 2013 8:46 pm

HueyLD » Sat Jan 26, 2013 1:21 pm

sscritic wrote:Federal + state with tax software shouldn't take more than an hour for most people (maybe 1.5 hours if you're using two services side-by-side to verify they match).

I bet you work for the IRS in the department that gives you those estimates that it will take 30 minutes to fill out a form that actually takes a Ph.D. two hours to fill out.

I have spent over an hour just trying to get my tax software to download correctly from Vanguard. Many taxpayers have a tendency to underestimate the complexity of their taxes and the amount of time and knowledge it takes to complete their tax returns. Whenever someone starts a tax conversation by saying that it is very simple or it shouldn't take much time to do taxes, I always smile.


Huey D, You sure are correct with your statement about realistic times. TurboTax does a decent job in trying to interpret the complex US tax code but some of the questions TT asks can be ambiguous and confusing, for a even a simple item like getting a Foreign Tax Credit for International funds. It took me at least 30 minutes to download and install Turbo Tax even though i have previous knowledge of this. Plus a minimum of 3 hours to carefully input and verify the correctness of 1099's and other Tax Statements, most of which can not be imported, and answer TT questions for each form. Even imports must be checked. One error and you may be getting an audit letter from the IRS. Add more hours for completing deductions and credits. This is for a fairly simple household return, with no business expenses, Home offices, RE transactions, etc. as others may need to do.

The comment of doing a complete tax return in an hour or maybe 1.5 hours reminds me of those Do It Yourself Programs showing a project being completed in 30 minutes, when in reality it takes a full day or more.
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Re: What Tax Preparers Really Charge (WSJ)

Postby SSSS » Sun Jan 27, 2013 9:30 pm

Kuckie wrote:The comment of doing a complete tax return in an hour or maybe 1.5 hours reminds me of those Do It Yourself Programs showing a project being completed in 30 minutes, when in reality it takes a full day or more.


Did you miss my post where I did my itemized return live on H&R Block's website in 35 minutes and posted timestamps of the major steps for verification? I was going a bit faster than normal since I had already done the return in TaxAct (about 2 hours) and TurboTax (about 1 hour), but cumulatively that's only 3.5 hours to do the same return three times in order to triple-check for accuracy. And that was a medium-complexity return (itemized, multiples each of 1099-DIV, 1099-INT, 1099-OID, 1099-R, and 1099-B). I know some people have more complex returns but mine is at least average.
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Re: What Tax Preparers Really Charge (WSJ)

Postby lindisfarne » Sun Jan 27, 2013 10:57 pm

As I mentioned before, I have always done my taxes by hand (but the most complicated thing I do is Sch A & D).

I've tried using Turbo Tax & H& R block software (last year I tried both), & the order they ask you to enter things drives me nuts - my mind thinks in the order of the 1040. I know in the end it comes out the same (except when it doesn't: last year, H&R block had an error in how it handled something; Turbo Tax handled it correctly; I think it had to do with how it handled a direct transfer of a retirement fund; I have the printouts but don't care enough to look at them now). I just fill out the forms on my computer & then enter them into Free Fillable Forms at the IRS.

I agree with what Kuckie says above about the way TT asks questions. They're at times vague. If I knew what line on the 1040 the question referred to, it would be easier to answer it. Perhaps reading through TTs documentation would help, but my solution of just filling out the actual 1040, & reading the IRS documentation, serves me well.
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Re: What Tax Preparers Really Charge (WSJ)

Postby FrugalInvestor » Sun Jan 27, 2013 11:09 pm

travellight wrote:I paid $1200 last year for my tax preparation. I checked around this year and got quotes of around $1000. It seems steep since I gather and organize all the data extensively so that it is mostly data entry.


Exactly!

I was paying a lot less than you but once I figured out that I was doing all the work to gather, organize, compile and report data on a questionnaire form from which a data entry person would do their job I figured I could to the data entry for a lot less than was being charged. Being retired with time on my hands left me absolutely no excuse not to take over the preparation (with the help of tax software).
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Re: What Tax Preparers Really Charge (WSJ)

Postby marcos123 » Sun Jan 27, 2013 11:22 pm

I file two sets of federal tax returns each year as a Brazil resident and US citizen.

The first couple of years here I utilized a big 4 accounting firm here specializing in expats for the local return (well over $1000); and a US-based tax preparation firm decently versed in international tax issues for the stateside return (around $500).

That was a good investment and more than sufficient learning curve (after very intense questioning of both tax preparers on my tax situation and potential hypotheticals as well as reading the actual instructions) to move on to TaxAct for the US return (which I can e-file from down here) and to the software package provided free of charge by the Brazilian government for the local return which is actually pretty user-friendly, and better than comparable US private software packages. It was a two-year investment as my tax position in both countries had changed significantly following my change of residency.

I save countless time in not having to meet with these preparers and to explain the change in my individual circumstances, not to mention checking their work, and do not miss both sets of fees.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Busting Myths » Sun Jan 27, 2013 11:25 pm

ResNullius wrote:For me, $250 is money well spent to avoid doing state and federal tax returns. I know I could get tax software, but I like the idea of having a human being with a CPA doing my taxes, and $250 is the going rate around here for getting both state and federal returns done for someone who itemizes deductions.

I suspect many firms assign lower level employees to actually prepare the tax returns and the CPA just signs them. I review business tax returns on a daily basis and I am surprised how many balance sheets on "CPA prepared" tax returns do not balance.
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Re: What Tax Preparers Really Charge (WSJ)

Postby interplanetjanet » Sun Jan 27, 2013 11:38 pm

I've done my tax returns since I was 18. I think that if you start out doing them, the process has less mystery surrounding it and you get used to how tax returns work while yours is relatively simple. Had I started doing my own now, it would have been far more daunting.

I'm certain that some preparers can be worth it, I would have no reluctance in using one if I was thrust into an unfamiliar situation (working as an expat, owning with a business of significant size, etc.). However, I would review what they had done for a year or two and then determine if it made sense for me to start doing them again myself.

I think that this connection with the tax process gives me a better idea of how to plan things going forward. It would be possible to have this awareness without doing my taxes and I'm certain that many people do, but it would require some degree of "continuing education".
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Re: What Tax Preparers Really Charge (WSJ)

Postby 1530jesup » Sun Jan 27, 2013 11:48 pm

Always filled out my own taxes; even when I was an independent contractor.
Then running several small businesses started clouding the picture and a professional was of great help and relief.
Now retired and some lingering write offs along with sporadic consulting projects; for me $250 is a fair price which includes guidance on Roth conversions to keep me at the 15% level.
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Re: What Tax Preparers Really Charge (WSJ)

Postby bUU » Mon Jan 28, 2013 7:20 am

SSSS wrote:This one actually makes sense, though.
The point is that they all make sense, for some people, and they all make no sense, for other people.
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Re: What Tax Preparers Really Charge (WSJ)

Postby johnep » Mon Jan 28, 2013 8:06 am

SSSS wrote:
sscritic wrote:I have spent over an hour just trying to get my tax software to download correctly from Vanguard.


Grt2bOutdoors wrote:You must be referring to the 47% who file the 1040-EZ form. :oops: Now take your 1.5 hours and multiply it by 8 to get to the average time it takes to enter data, complete the 1040 plus Sch. A,B,D,E,Form 8606, Form 4952, the AMT form and then the requisite state forms - and that is for someone who knows what they are doing.


HueyLD wrote:Whenever someone starts a tax conversation by saying that it is very simple or it shouldn't take much time to do taxes, I always smile.


Sounds like the gauntlet has been thrown down.

I'm going to re-do this year's taxes (itemized 1040 with a big stack of 1099's) right now to prove it shouldn't take more than two hours.

Current time is 11:35 AM CST -- clock starts now.

Live updates:

11:40 - W2 forms completed

11:45 - 1099-INT and 1099-OID forms completed

11:51 - 1099-DIV, 1099-R, and 1099-B forms completed

11:57 - Itemized deductions complete

12:03 - Got as far as possible with the federal return. Since I've already done TaxAct and TurboTax, I'm doing this run in H&R Block, but it's unfortunately incomplete -- it's listing my 1099-R and 1099-B forms as 100% taxable because some IRS forms are not finished yet, thus the final numbers don't match up with TaxAct and TurboTax. I'll return when it's complete (says Feb 7) to finish and compare.

12:08 - Finished state return as far as possible (same issues with incomplete software as noted above). Will return when complete.

12:10 - Remembered I forgot to list last year's state tax refund as income (didn't receive a 1099-G but I'm being proactive). Corrected.

Time elapsed so far: 35 minutes. I will come back to this thread & resume the clock once H&R block is fully usable, then when complete will post screenshots comparing against TaxAct and TurboTax to prove accuracy. I'll be very surprised if I go over an hour. I'm probably going a little bit faster than when I did the return in TaxAct and TurboTax, but probably not much faster.


After having done your taxes on two software products, the next one should be faster (why does anyone do their taxes on 3 software products? One is all the fun I need). You have omitted all the preparation: gathering of forms, income, expenses, etc. which to me is the most time consuming aspect of doing taxes.

I am pretty knowledgeable about taxes and always do a dry run myself projecting my income, expenses, etc. before using Turbotax. I always itemize but rarely have anything unusual (no side business, no rental property, etc.) I have pretty good idea what my outcome will be before starting TT. Even so, it takes me at least 2 hours to get through all of the questions. I always do my state return myself because it is simpler. It usually takes me less than an hour. Once I am ready to use TT, it takes me 4 to 6 hours to complete my taxes. I am sure some are much faster than me. I am somewhat deliberate in my tax return preparation because I want to make sure it is right. The less dealings I have with IRS, the better.

Sorry, but it is a gross misrepresentation to suggest that most people can do their return in one hour. That is unrealistic.
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Re: What Tax Preparers Really Charge (WSJ)

Postby HardKnocker » Mon Jan 28, 2013 9:43 am

Many CPAs charge less than the actual time they spend preparing your return (unless it is very simple).

Quite often they eat a lot of their time.

Generally, they earn their money.
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Re: What Tax Preparers Really Charge (WSJ)

Postby Epsilon Delta » Mon Jan 28, 2013 9:54 am

Grt2bOutdoors wrote:
You must be referring to the 47% who file the 1040-EZ form. :oops: Now take your 1.5 hours and multiply it by 8 to get to the average time it takes to enter data, complete the 1040 plus Sch. A,B,D,E,Form 8606, Form 4952, the AMT form and then the requisite state forms - and that is for someone who knows what they are doing.


The actual numbers from page 102 of the instructions for form 1040 are:

  • 1040EZ 12%
  • 1040A 19%
  • 1040 69%

Did you pick 47 because it's prime or was there some other reason?
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Re: What Tax Preparers Really Charge (WSJ)

Postby Grt2bOutdoors » Mon Jan 28, 2013 4:57 pm

Epsilon Delta wrote:
Grt2bOutdoors wrote:
You must be referring to the 47% who file the 1040-EZ form. :oops: Now take your 1.5 hours and multiply it by 8 to get to the average time it takes to enter data, complete the 1040 plus Sch. A,B,D,E,Form 8606, Form 4952, the AMT form and then the requisite state forms - and that is for someone who knows what they are doing.


The actual numbers from page 102 of the instructions for form 1040 are:

  • 1040EZ 12%
  • 1040A 19%
  • 1040 69%

Did you pick 47 because it's prime or was there some other reason?


I picked it as an example (imaginery or real). The point I was trying to make is it doesn't take the average bunch of tax filers 1.5 hours to compile,fill out, prepare for mailing/submission including signing it. It takes far longer.
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Re: What Tax Preparers Really Charge (WSJ)

Postby HardKnocker » Wed Jan 30, 2013 9:48 am

lindisfarne wrote:I've done my own taxes since I was 17. I've saved myself a lot of money through the years, apparently. I've looked once or twice at the cost of a tax preparer & been shocked every time.
The article mentions it takes time to read the regulations, but once you've figured them out one year (for personal tax returns; I'm sure business ones are more complicated), it goes faster (although you still always have to double-check). Still, doing it helps you have greater understanding of your options & the tax implications. With the internet, you can always check other sources to make sure you properly understood the regs. Many tax preparers understand less than I do (obviously, I'm not talking about CPAs).

According to the survey, the average cost to prepare an itemized Form 1040 with a Schedule A (for itemized deductions) and a state tax return is $246. The average rate for a return without itemized deductions is lower: $143.
$134 for Schedule D (gains and losses)




http://blogs.wsj.com/totalreturn/2013/0 ... ly-charge/


Take your car to your mechanic. In my area they charge at least $100/hr. Go to a CPA or tax professional. He charges how much per hour? $50...$75...$100...$150/hr?

Go to a lawyer. He charges how much per hour? $350...$500...$750?

Plumbers charge $100/hr.

Do you really think CPAs/Tax preparers overcharge for their time? By the time they meet you, get your info, call you back to ask questions, chase you down for the info, prepare the return, package the return, meet you to give you the return and review it, etc. how much time do you think they are taking?

And then people moan about the fee and they have to eat some time. :oops:
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett
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Re: What Tax Preparers Really Charge (WSJ)

Postby Calm Man » Wed Jan 30, 2013 11:36 am

EmergDoc wrote:It takes me a long time. Mostly because every year I have to learn a new schedule. This year it'll be the K-1. Last year was E. Year before was D and B. Year before that was C and SE. Year before that was A. Eventually I may have it figured out.


Emergdoc,
When I was younger I had a partnership that required a K1 and Schedule E. That was before tax software. After that asset was disposed of (I did well -- put in all my 70K of savings and got out zero but I did have tax losses), I inquire whether there is a K1 for any new investment I consider. (Well now I don't consider anything except Vanguard funds.) If the answer is yes, I say (said) no. K1's always come very late and are often incorrect and require revisions.
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