How much money can a CPA save you?

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randomizer
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How much money can a CPA save you?

Post by randomizer » Sun Mar 18, 2018 5:34 pm

Most years, I feel like my CPA identifies some deduction or other means of reducing my tax burden. This year, for example, he found a deduction that probably reduced my bill by about two grand. On average, it seems like every dollar I pay him, he saves me two or three in taxes. (All that plus the intangible benefit of the peace of mind of knowing that an expert has done to work.)

What is other people’s experience in this regard?
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livesoft
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Re: How much money can a CPA save you?

Post by livesoft » Sun Mar 18, 2018 5:36 pm

Tell us about the deduction please. Was it something that we all already do every year?

I only hear from people where their tax person cost them money.
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magicrat
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Re: How much money can a CPA save you?

Post by magicrat » Sun Mar 18, 2018 5:40 pm

I get a letter from the IRS every year telling me I owe them money. Usually it is related to a Backdoor Roth or similar, and they are always wrong. My CPA takes care of the correspondence to clear up the matter, at no extra charge. I'm sure I could figure out how to do it myself, but I'd rather not and am happy to pay for the peace of mind to not deal with those types of hassles.

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randomizer
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Re: How much money can a CPA save you?

Post by randomizer » Sun Mar 18, 2018 5:53 pm

livesoft wrote:
Sun Mar 18, 2018 5:36 pm
Tell us about the deduction please. Was it something that we all already do every year?

I only hear from people where their tax person cost them money.
This time it was related to buying a house, so (probably) a one-off thing.
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Re: How much money can a CPA save you?

Post by Mike Scott » Sun Mar 18, 2018 6:01 pm

I would be very surprised if a CPA saved us as much $ as they charged for doing it. I find more benefit in knowing about the sorts of things we run into normally and planning ahead for them throughout the year. The new tax laws will make it even easier for us although it won't change the taxes much if any.
Last edited by Mike Scott on Sun Mar 18, 2018 6:04 pm, edited 1 time in total.

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Alexa9
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Re: How much money can a CPA save you?

Post by Alexa9 » Sun Mar 18, 2018 6:03 pm

They are very helpful for small businesses. At least initially when you are figuring things out or if you get audited they are priceless. For the average salaried individual using TurboTax, probably not that helpful.

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Re: How much money can a CPA save you?

Post by neoptolemus412 » Sun Mar 18, 2018 6:12 pm

Probably not worth it for a W-2 wage earner. Add in a rental property, probably still not worth it, but debatable. Add in a business. Definitely worth it. The value comes with complexity. I argue the real value is in the SALT deductions/credits. The federal information is very easy to find. The SALT stuff can really differ per state and a local CPA provides excellent value in preparing those returns.

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Re: How much money can a CPA save you?

Post by anoop » Sun Mar 18, 2018 6:21 pm

I have and have always had a simple W-2 return.

About 10 years ago, I used to use accountants to get my taxes done (I has used accountants from around 1996/1997 until 10 or so years ago, many different ones). At the time, the charge was roughly $300. I found that I still had to go through the returns to make sure they were correct. And I didn't notice any special deductions being taken. Eventually I started using Turbo Tax to do it myself. Now I try to keep things simple--I don't do any investments that I think will complicate my taxes.
Last edited by anoop on Sun Mar 18, 2018 6:26 pm, edited 3 times in total.

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Re: How much money can a CPA save you?

Post by Hillview » Sun Mar 18, 2018 6:23 pm

We paid 1800 to a new tax cpa and I felt like it was worth 0 dollars. We didn't save anything and he said IBonds were stupid (and had never heard of anyone using them). YMMV. This guy came highly recommended from a neighbor and friend with a high financial IQ (I believe!). I am considering doing it myself next year. Before I met my husband I always did my own and in the time we've been married we've used his "guy" and now we have a new "guy" and well I am not sure it is worth the cost TBH.

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Re: How much money can a CPA save you?

Post by anoop » Sun Mar 18, 2018 6:29 pm

Alexa9 wrote:
Sun Mar 18, 2018 6:03 pm
They are very helpful for small businesses. At least initially when you are figuring things out or if you get audited they are priceless. For the average salaried individual using TurboTax, probably not that helpful.
I have a friend who owns a small business. He ended up getting audited and owed a ton in penalties because of a mistake made by his tax guy. Tax guy couldn't help him because it was a mistake and my friend had to pay up. So even if you have a tax guy, it doesn't let you off the hook...

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Re: How much money can a CPA save you?

Post by anoop » Sun Mar 18, 2018 6:31 pm

Hillview wrote:
Sun Mar 18, 2018 6:23 pm
We paid 1800 to a new tax cpa and I felt like it was worth 0 dollars. We didn't save anything and he said IBonds were stupid (and had never heard of anyone using them). YMMV. This guy came highly recommended from a neighbor and friend with a high financial IQ (I believe!). I am considering doing it myself next year. Before I met my husband I always did my own and in the time we've been married we've used his "guy" and now we have a new "guy" and well I am not sure it is worth the cost TBH.
$1800 for a return? Is your return that complicated? Or did you find someone that charges $1800/hour? :)

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Re: How much money can a CPA save you?

Post by Goal33 » Sun Mar 18, 2018 6:32 pm

magicrat wrote:
Sun Mar 18, 2018 5:40 pm
I get a letter from the IRS every year telling me I owe them money. Usually it is related to a Backdoor Roth or similar, and they are always wrong. My CPA takes care of the correspondence to clear up the matter, at no extra charge. I'm sure I could figure out how to do it myself, but I'd rather not and am happy to pay for the peace of mind to not deal with those types of hassles.
Are you sure these aren’t caused because your accountant made mistakes leading them to ask questions? Just saying it might be worth a second look...
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Re: How much money can a CPA save you?

Post by exexpat » Sun Mar 18, 2018 6:34 pm

magicrat wrote:
Sun Mar 18, 2018 5:40 pm
I get a letter from the IRS every year telling me I owe them money. Usually it is related to a Backdoor Roth or similar, and they are always wrong. My CPA takes care of the correspondence to clear up the matter, at no extra charge. I'm sure I could figure out how to do it myself, but I'd rather not and am happy to pay for the peace of mind to not deal with those types of hassles.
Perhaps your CPA is doing it wrong in the first place. I've never received a follow-up in the past 6 years of doing backdoor contributions.

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Re: How much money can a CPA save you?

Post by MathWizard » Sun Mar 18, 2018 6:36 pm

In our case, it costs us more to use a CPA.

We tried a CPA twice, each time the first year of a business.

They didn't save us any money, but we wanted to make sure there we were filling out the
correct forms. This was back when we did things by pencil and paper.

We ended up getting more back the next year filing ourselves as we were doing our own tax planning,
since we understood the taxes better doing them ourselves.

Now with TurboTax, it tales much less time.

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Re: How much money can a CPA save you?

Post by UpperNwGuy » Sun Mar 18, 2018 6:37 pm

anoop wrote:
Sun Mar 18, 2018 6:21 pm
Now I try to keep things simple--I don't do any investments that I think will complicate my taxes.
+1
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Re: How much money can a CPA save you?

Post by JBTX » Sun Mar 18, 2018 6:37 pm

I don’t use a cpa. But the guy who does our estate plans is tax lawyer and cpa. One time in passing he recommended alternative strategies for self employment that probably would have saved some money (set up S Corp, pay myself lower salary, save on some self employment taxes). It would have added some complication but probably saved some money. For various reasons, for better or for worse, I chose not to do any of that.

I’m guessing some CPAs may be a little more aggressive than a typical filer (or the typical bogleheads conservative letter of the law approach). I think they weigh in the low probability of whether or not a more aggressive strategy will raise audit flags.

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Re: How much money can a CPA save you?

Post by lakja » Sun Mar 18, 2018 6:46 pm

CPA’s are useful for even simple returns. My cost is around $300. The cost is negligible especially considering most BH’s portfolio’s seem to be well over 1MM. If you do considerable taxable stock transactions, it’s well worth it.

Just my $0.02. Can’t imagine being too cheap to pay a couple hundred bucks a year to save a large amount of work plus the headache if you are audited

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Re: How much money can a CPA save you?

Post by Dottie57 » Sun Mar 18, 2018 7:02 pm

lakja wrote:
Sun Mar 18, 2018 6:46 pm
CPA’s are useful for even simple returns. My cost is around $300. The cost is negligible especially considering most BH’s portfolio’s seem to be well over 1MM. If you do considerable taxable stock transactions, it’s well worth it.

Just my $0.02. Can’t imagine being too cheap to pay a couple hundred bucks a year to save a large amount of work plus the headache if you are audited
Too cheap? I’ve always done my own taxes since they are SO SIMPLE. Why pay $300 instead of $70 for Turbo Tax. The time it takes is less than 2 hours.

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Re: How much money can a CPA save you?

Post by mhadden1 » Sun Mar 18, 2018 7:15 pm

I was able to use tax software to file electronically for FREE! :D
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Re: How much money can a CPA save you?

Post by harrychan » Sun Mar 18, 2018 7:15 pm

I see having a CPA as saving me time and time is money. I can't stand to read irs guidelines or understand the questions on any tax software. Each year I drop off a pile of paperwork from work income, wife and my side businesses, stock transactions and I'm done. Well worth the $250 each year as I'm saving tens of hours that I'd rather spend doing something I enjoy.
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Re: How much money can a CPA save you?

Post by bi0hazard » Sun Mar 18, 2018 8:05 pm

My CPA charges have been creeping up from $200s, each year increasing until I got to $800s.

This year I started using turbo tax live. Most info is downloaded and filled in from my employer, bank, vanguard, etc. That takes very little time. It took about 30 minutes to fill out w4, couple k1s, etc. I'm not done yet, as I need my wife's info.

The software is online. $179. Online help with CPAs teleconference live is inlcuded... I tried this twice and they were mostly helpful. At the end, before filing, a CPA reviews it approves it. This is included. If they mess up, they pay for any IRS penalty.

I'll see how this works at the end, but so far I'm pleased.

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Re: How much money can a CPA save you?

Post by triceratop » Sun Mar 18, 2018 8:09 pm

Dottie57 wrote:
Sun Mar 18, 2018 7:02 pm
lakja wrote:
Sun Mar 18, 2018 6:46 pm
CPA’s are useful for even simple returns. My cost is around $300. The cost is negligible especially considering most BH’s portfolio’s seem to be well over 1MM. If you do considerable taxable stock transactions, it’s well worth it.

Just my $0.02. Can’t imagine being too cheap to pay a couple hundred bucks a year to save a large amount of work plus the headache if you are audited
Too cheap? I’ve always done my own taxes since they are SO SIMPLE. Why pay $300 instead of $70 for Turbo Tax. The time it takes is less than 2 hours.
Why do it for $70 instead of $0 by filling out by hand? It took me 50 minutes to do my federal tax return this year.
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Re: How much money can a CPA save you?

Post by SlowMovingInvestor » Sun Mar 18, 2018 8:12 pm

Goal33 wrote:
Sun Mar 18, 2018 6:32 pm
magicrat wrote:
Sun Mar 18, 2018 5:40 pm
I get a letter from the IRS every year telling me I owe them money. Usually it is related to a Backdoor Roth or similar, and they are always wrong. My CPA takes care of the correspondence to clear up the matter, at no extra charge. I'm sure I could figure out how to do it myself, but I'd rather not and am happy to pay for the peace of mind to not deal with those types of hassles.
Are you sure these aren’t caused because your accountant made mistakes leading them to ask questions? Just saying it might be worth a second look...
Exactly what I was wondering. I don't have an accountant, but if I did, I'd wonder why I get correspondence from the IRS every year on an accountant filled return. I've been backdooring for years too, with no issues.

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Re: How much money can a CPA save you?

Post by SlowMovingInvestor » Sun Mar 18, 2018 8:18 pm

triceratop wrote:
Sun Mar 18, 2018 8:09 pm
Dottie57 wrote:
Sun Mar 18, 2018 7:02 pm
lakja wrote:
Sun Mar 18, 2018 6:46 pm
CPA’s are useful for even simple returns. My cost is around $300. The cost is negligible especially considering most BH’s portfolio’s seem to be well over 1MM. If you do considerable taxable stock transactions, it’s well worth it.

Just my $0.02. Can’t imagine being too cheap to pay a couple hundred bucks a year to save a large amount of work plus the headache if you are audited
Too cheap? I’ve always done my own taxes since they are SO SIMPLE. Why pay $300 instead of $70 for Turbo Tax. The time it takes is less than 2 hours.
Why do it for $70 instead of $0 by filling out by hand? It took me 50 minutes to do my federal tax return this year.
I get Turbotax for free from Fidelity, but I would certainly be willing to pay upto $35-40 or so for it. Simply downloading transactions from brokerages automatically eliminates a potential source of mistakes. Then there are the arcane AMT calculations, foreign tax credits, and state taxes. I could do it by hand, but definitely not worth the hassle to me.

OTOH, I do not find using a CPA to be worth it. Anyway, I would have to assemble all the data. And I would probably check and double check everything, including verifying most transactions manually. I doubt I would save much time.

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Re: How much money can a CPA save you?

Post by anoop » Sun Mar 18, 2018 8:20 pm

harrychan wrote:
Sun Mar 18, 2018 7:15 pm
I see having a CPA as saving me time and time is money. I can't stand to read irs guidelines or understand the questions on any tax software. Each year I drop off a pile of paperwork from work income, wife and my side businesses, stock transactions and I'm done. Well worth the $250 each year as I'm saving tens of hours that I'd rather spend doing something I enjoy.
You might spend 10 hours your first year, but after that once you have learned to use the software, it will become routine and take less than a couple of hours. Most of the forms for investments are handled automatically when imported into turbo tax.

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Re: How much money can a CPA save you?

Post by drzzzzz » Sun Mar 18, 2018 8:53 pm

This probably depends on the complexity of your return and how much tax law and research you want to put into it. It's also been beneficial for us since we also have to file state taxes in multiple states so discovering the nuances from each state is also not something we want to do.

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Re: How much money can a CPA save you?

Post by thx1138 » Sun Mar 18, 2018 9:05 pm

My issue with CPAs is that if I need them because of some sort of complexity the issue is that fundamentally I need to understand that complexity and its solution. Blindly hoping the CPA will "do it right" and then me not understanding what has been done or why really doesn't help the situation should the CPA have made an error. It's my taxes and I'm the one on the hook for the error no matter who makes it. The problem is CPAs *do in fact make errors*.

I think there is a fair chance the OP doesn't realize this has already happened with their CPA. If the IRS comes calling and is "wrong" about something like a Backdoor Roth what likely really happened is either CPA made a mistake filing or the 1099-R was wrong and the CPA didn't catch that and request a corrected 1099-R at the time of filing. Yes the CPA "fixed" the issue when the IRA sent a letter but in most cases the CPA also caused or did not catch the issue at time of filing which was the root cause of the IRS sending a letter in the first place.

I've dealt with a few too many CPA problems with friends and family in the past to have much faith in them to be honest. In one case a CPA was trying to erroneously claim an education tax credit that two filers were quite clearly not eligible for. I pointed this out to them and they went and read the IRS documentation themselves and then had to educate the CPA about how their situation didn't qualify. In another case an extended family member sought advice regarding a foreign inheritance and again the CPA got nearly everything wrong filing wise and again had to provide direct references to the rather clear and easy to understand IRS documentation covering their particular situation.

Does this mean CPAs are worthless for taxes? Of course not! Good resource to consult with but you need to do the leg work yourself too. And certainly potentially very worthwhile to deal with things like filing in multiple states or doing anything else that is just burdensome paperwork wise assuming you've got better things to do with your time.

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Re: How much money can a CPA save you?

Post by HIinvestor » Sun Mar 18, 2018 9:06 pm

It’s not money the cpa saves us as much as time and stress. I rather the cpa do it all and so does H. We have a rental partnership as well as a separately owned rental. I’m also an independent contractor and an employee and H is an annuitant. We also have an adult dependent.

I’m sure we COULD do our own taxes but are fine with paying the CPA to do it. He handles any of the rare messages we have ever received from IRS or state tax office. When his firm makes any mistakes (rare), they file corrected returns and apologize.

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Re: How much money can a CPA save you?

Post by Earl Lemongrab » Mon Mar 19, 2018 12:46 am

randomizer wrote:
Sun Mar 18, 2018 5:53 pm
livesoft wrote:
Sun Mar 18, 2018 5:36 pm
Tell us about the deduction please. Was it something that we all already do every year?

I only hear from people where their tax person cost them money.
This time it was related to buying a house, so (probably) a one-off thing.
What specifically? Most of the deductions related to home purchase are pretty well known.
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Re: How much money can a CPA save you?

Post by AlohaJoe » Mon Mar 19, 2018 12:56 am

lakja wrote:
Sun Mar 18, 2018 6:46 pm
If you do considerable taxable stock transactions, it’s well worth it.
How does a CPA help with taxable stock transactions?

I have (by Boglehead standards) numerous stock transactions. Even when I do my taxes by hand it takes me <10 minutes to enter in all of the stock transactions. Each lot takes maybe 10 seconds of data entry, then you have a calculator do some math.

I've used a half-dozen CPAs over the years. They've never saved me any money or done anything I couldn't have done myself. I always had to check over their work (and find problems every single time), so it wasn't like I could avoid reading the IRS rules anyway. After all, I'm the one signing the tax return saying the return is correct.

In my experience all of the real value of "tax planning" is stuff you have to do up front, not just as filing time. Things like 1031 exchanges for property or 83(b) elections for stock options aren't the kind of thing you just do when filling out the return form. If you have a good CPA who knows all stuff and you talk to them throughout the year, then I can see them saving you money. The problem is that, especially nowadays, the easy information is easy to find even for you & me but the hard information....they might not know either. (Like when I asked a CPA about certain implications of the tax treaty between the US and Australia and whether I could re-source income from the US to Australia.)

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Re: How much money can a CPA save you?

Post by randomizer » Mon Mar 19, 2018 1:35 am

Earl Lemongrab wrote:
Mon Mar 19, 2018 12:46 am
randomizer wrote:
Sun Mar 18, 2018 5:53 pm
livesoft wrote:
Sun Mar 18, 2018 5:36 pm
Tell us about the deduction please. Was it something that we all already do every year?

I only hear from people where their tax person cost them money.
This time it was related to buying a house, so (probably) a one-off thing.
What specifically? Most of the deductions related to home purchase are pretty well known.
There were a few items in there that I wasn’t 100% sure about but the main one I hadn’t expected was travel expenses related to the purchase (we traveled outside our current state of residence).
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Re: How much money can a CPA save you?

Post by Tamarind » Mon Mar 19, 2018 3:26 am

It's important to understand your own taxes whether you use a CPA or not. Once you understand your own taxes, you are much less likely to need one every year.

I use free fillable forms, so routine cost is $0. If I have a question about tax effect of an upcoming event, I know a CPA who'll provide advice by phone or email and the small bill is well worth it. $50 to understand AMT better for potential 2018 ISO exercise was well worth it.

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Re: How much money can a CPA save you?

Post by magicrat » Mon Mar 19, 2018 6:16 am

exexpat wrote:
Sun Mar 18, 2018 6:34 pm
magicrat wrote:
Sun Mar 18, 2018 5:40 pm
I get a letter from the IRS every year telling me I owe them money. Usually it is related to a Backdoor Roth or similar, and they are always wrong. My CPA takes care of the correspondence to clear up the matter, at no extra charge. I'm sure I could figure out how to do it myself, but I'd rather not and am happy to pay for the peace of mind to not deal with those types of hassles.
Perhaps your CPA is doing it wrong in the first place. I've never received a follow-up in the past 6 years of doing backdoor contributions.
Not doing it wrong. The letters are triggered by the 1099s that are autosent to the IRS and say that the taxable amount is undetermined.

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Re: How much money can a CPA save you?

Post by Dottie57 » Mon Mar 19, 2018 2:53 pm

triceratop wrote:
Sun Mar 18, 2018 8:09 pm
Dottie57 wrote:
Sun Mar 18, 2018 7:02 pm
lakja wrote:
Sun Mar 18, 2018 6:46 pm
CPA’s are useful for even simple returns. My cost is around $300. The cost is negligible especially considering most BH’s portfolio’s seem to be well over 1MM. If you do considerable taxable stock transactions, it’s well worth it.

Just my $0.02. Can’t imagine being too cheap to pay a couple hundred bucks a year to save a large amount of work plus the headache if you are audited
Too cheap? I’ve always done my own taxes since they are SO SIMPLE. Why pay $300 instead of $70 for Turbo Tax. The time it takes is less than 2 hours.
Why do it for $70 instead of $0 by filling out by hand? It took me 50 minutes to do my federal tax return this year.
Because this is an area where I want easy. I just started retirement this year and plan to compare TT results with a by hand calc. All I was saying is that I see no reason to pay $300 for my tax to be done for me.

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Re: How much money can a CPA save you?

Post by greg24 » Mon Mar 19, 2018 3:52 pm

Tamarind wrote:
Mon Mar 19, 2018 3:26 am
It's important to understand your own taxes whether you use a CPA or not. Once you understand your own taxes, you are much less likely to need one every year.
Agreed. Understanding how taxes work is important in minimizing taxes. If you do your own taxes, you understand how you're being taxed, and how to minimize taxes in the future.

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Re: How much money can a CPA save you?

Post by lakja » Mon Mar 19, 2018 4:00 pm

Dottie57 wrote:
Sun Mar 18, 2018 7:02 pm
lakja wrote:
Sun Mar 18, 2018 6:46 pm
CPA’s are useful for even simple returns. My cost is around $300. The cost is negligible especially considering most BH’s portfolio’s seem to be well over 1MM. If you do considerable taxable stock transactions, it’s well worth it.

Just my $0.02. Can’t imagine being too cheap to pay a couple hundred bucks a year to save a large amount of work plus the headache if you are audited
Too cheap? I’ve always done my own taxes since they are SO SIMPLE. Why pay $300 instead of $70 for Turbo Tax. The time it takes is less than 2 hours.
Takes me about 10 minutes total.

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Re: How much money can a CPA save you?

Post by lakja » Mon Mar 19, 2018 4:02 pm

greg24 wrote:
Mon Mar 19, 2018 3:52 pm
Tamarind wrote:
Mon Mar 19, 2018 3:26 am
It's important to understand your own taxes whether you use a CPA or not. Once you understand your own taxes, you are much less likely to need one every year.
Agreed. Understanding how taxes work is important in minimizing taxes. If you do your own taxes, you understand how you're being taxed, and how to minimize taxes in the future.
I understand taxes quite well and my CPA knows them much better than myself, or any other non-CPA on here. It’s just that I’d rather not waste any time filling out the forms. To each their own, if $300 is a lot of money to you, then it’s probably best you save your money to pay for your necessities.

Edit: My CPA also provides mid-year projections and provides analysis on how to minimize my tax liability. I also received a projection for next year and what my tax liability would have been this year under the 2018 rules. It’s pretty convenient. Again, it’s a personal decision that I don’t mind spending on. Plus, it puts money in the hands of local entrepreneurs. I’ve nothing more to add.

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Re: How much money can a CPA save you?

Post by dbr » Tue Mar 20, 2018 8:49 am

I had a CPA save me a lot one time. Otherwise not. This was when I was dealing with taxes for more than just myself. I am comfortable I am doing fine for my own taxes.

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Re: How much money can a CPA save you?

Post by UpperNwGuy » Tue Mar 20, 2018 9:01 am

lakja wrote:
Mon Mar 19, 2018 4:02 pm
I also received a projection for next year and what my tax liability would have been this year under the 2018 rules.
That's what I would want to see.
Retiree with a pension and a 60/40 taxable portfolio: Total Stock + Total Int'l + Total Bond + Interm Term Tax Exempt.

jaj2276
Posts: 353
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Re: How much money can a CPA save you?

Post by jaj2276 » Tue Mar 20, 2018 9:18 am

magicrat wrote:
Mon Mar 19, 2018 6:16 am
exexpat wrote:
Sun Mar 18, 2018 6:34 pm
magicrat wrote:
Sun Mar 18, 2018 5:40 pm
I get a letter from the IRS every year telling me I owe them money. Usually it is related to a Backdoor Roth or similar, and they are always wrong. My CPA takes care of the correspondence to clear up the matter, at no extra charge. I'm sure I could figure out how to do it myself, but I'd rather not and am happy to pay for the peace of mind to not deal with those types of hassles.
Perhaps your CPA is doing it wrong in the first place. I've never received a follow-up in the past 6 years of doing backdoor contributions.
Not doing it wrong. The letters are triggered by the 1099s that are autosent to the IRS and say that the taxable amount is undetermined.
Adding to the chorus of others who think something else is happening regarding you backdoor Roth IRA conversions. Every year my 1099 (also autosent to the IRS) shows the taxable amount is undetermined. I've never heard anything from the IRS. It would be interesting if you would post a few things about your return:

What do you have on lines 15a and 15b of Form 1040.
List out the amounts on Form 8606.

It could be simply a case of your backdoor Roth IRAs being a bit more complex than what most of us are used to (contribute $5500 to an IRA which has $0 cost basis prior to the contribution and then immediately converting the $5500 to a Roth IRA).

I also understand if you don't want to post the information!

ryman554
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Re: How much money can a CPA save you?

Post by ryman554 » Tue Mar 20, 2018 9:28 am

magicrat wrote:
Mon Mar 19, 2018 6:16 am
Not doing it wrong. The letters are triggered by the 1099s that are autosent to the IRS and say that the taxable amount is undetermined.
No, your CPA is most certainly doing it wrong since these are also on *my* 1099-R and I *never* get this CP2000.

KATNYC
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Re: How much money can a CPA save you?

Post by KATNYC » Mon Apr 09, 2018 1:49 pm

We used a CPA after being audited a few years ago. We had to pay the IRS a substantial amount, but not nearly as much as they initially said we owed during the audit. We had several rental properties at the time, which have long since been sold.

We are changing CPA's for 2018 or doing the taxes on our own. I ran the numbers myself and was less than $10 off from the CPA's final number.
I used http://www.moneychimp.com/features/tax_calculator.htm, not 2017 tax software that generates forms.

Not only did they make several mistakes on the 2017 taxes (they always make a couple of mistakes) but they also attempted to retroactively raise the fees. We pay $500 for personal and $500 for business. This year the owner of the firm called to discuss the 2017 taxes and his error in not sending an updated engagement letter with the new pricing: $2,300 total. Needless to say, we were invoiced $1,000 and told him that we will not use him going forward. Oddly enough, about 2 weeks prior, I saved a NY Times article with the name of another CPA had given advice about business entity formation. I reached out to him for pricing.

The current CPA said our returns are complicated since we have a business and K-1's.
With all the 2018 changes, I think using a CPA would be our best bet until the kinks are worked out in the new tax law. I am also not sure how section 199A will apply since the IRS hasn't issued guidance.

2017 FEDERAL FORMS used for the business:
Form 1065 2017 U.S. Return of Partnership Income
Schedule B-1 Information on Partners Owning 50% or More
Schedule K-1 Partner's Share of Income, Deductions, Credits
Form 8879-PE IRS e-file Signature Authorization

NEW YORK FORMS used for the business:
Form IT-204 2017 New York State Partnership Return
Form IT-204-IP New York Partner's Schedule K-1
Form TR-579-PT Signature Authorization Efile Certification Efile Certification
Form NYC-204 2017 New York City Unincorporated Business Tax Ret
Form NYC-NOLD-UBTP New York City Net Operating Loss Deduction
NYC 579-UBTP NYC Signature Authorization Form

For our personal returns we used:
2017 FEDERAL FORMS
Form 1040 2017 U.S. Individual Income Tax Return
Schedule A Itemized Deductions
Schedule B Interest and Dividend Income
Schedule C Profit or Loss From Business
Schedule D Capital Gains and Losses
Schedule E p2 Supplemental Income and Loss
Form 2106-EZ Unreimbursed Employee Business Expenses
Form 4952 Investment Interest Expense Deduction
Form 5329 Additional Taxes on Retirement Plans
Form 8606 Nondeductible IRAs
Form 8829 Expenses for Business Use of Your Home
Form 8879 IRS e-file Signature Authorization
Form 8889 Health Savings Accounts Depreciation Schedules

NEW YORK FORMS for personal returns:
Form IT-201 2017 New York Resident Income Tax Return
Form IT-2 Summary of W-2 Statements
e-file Sign. Auth. NYS e-file Signature Authorization Depreciation Schedules

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Portfolio7
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Re: How much money can a CPA save you?

Post by Portfolio7 » Mon Apr 09, 2018 3:21 pm

DW is a CPA, so we save a lot! :P Seriously, I always did my own taxes until we got married, but I had some experience (I took a class in college and used to volunteer at community tax prep sessions, helping people with simple returns.)

I've had a chance to see inside the business a little, as DW has had several jobs with local firms. There seem to be a wide variety of firms with different rates and standards. If you're engaging the cheapest tax prep firm (which may not actually employ any CPAs, it's not required for standard returns) you are going to likely end up in what I call a volume shop. They push through returns as fast as possible, mistakes or no, and if there are errors they deal with them when and if they are found. If the place is charging close to $1K for a simple return, it's likely because they have strong CPAs who are focused on value-add services, and are going to make sure they get a good return on their time, be it a multi-state return with lots of complications, or a ten minute filing. That, or they may have all the business they can handle, and only bother with new clients if they are willing to pay a lot. There is also the perception of quality that comes with high rates to consider. Then there are all levels of service in between, but the higher end firms are a lot more likely to provide relevant tax saving suggestions, YE tax planning, that sort of thing. You can have good employees, & good CPAs, at any kind of firm, but my sense is that accuracy is a real gamble with the volume firms.
An investment in knowledge pays the best interest.

bayview
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Re: How much money can a CPA save you?

Post by bayview » Mon Apr 09, 2018 5:48 pm

We used a CPA for 3 years when we had a rental, which we still have. DH started doing the taxes in TT that year, but things were just different enough that he wasn't comfortable, so we went with the "expert."

The expert kept messing up pretty basic things, like thinking I still had out-of-state income and entering 401k info on the pension line, but we crossed our fingers and kept going until this year. Don't know what kind of drama was going on, but he essentially went MIA in February and we said enough already. (We still don't have the records back that we gave him last year. He blamed this on an employee.) We went back to TT, and with the chance to refer to the past three years' worth of forms, DH became more comfortable with doing it himself. (He also caught some more errors, lol, sort of.)

It was helpful initially to see how he handled the rental income and expenses, but we're much happier taking it back. CPAs are humans, and they have their failings too.

--oh, and I didn't like him from the get-go, because I had most of the income, did most of our planning, and the CPA kept addressing DH in our meetings. :D Also, he started trying to steer us to his "friend" at Edward Jones, and that was the nail in the coffin, as far as I was concerned.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

xenochrony
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Location: California

Re: How much money can a CPA save you?

Post by xenochrony » Mon Apr 09, 2018 6:41 pm

Most of these posts are referring to a CPAs value in terms of preparing tax returns. What about tax planning? My CPA has provided immense value with regard to tax planning. Both my wife and I own our own businesses (S-corp and sole prop) and a historical look at our annual household and business tax liabilities is proof enough that our tax planning sessions and emails continue to provide incremental value year over year; especially tax planning for 2018 with the new 20% QBI deduction.

But even for tax preparation, our CPA provides great value. While I do read a lot of IRS and FTB (CA) regulatory documents (too much probably), our CPA is always 3 steps ahead of me with regard to tax policy/regs that have a direct and positive impact on our returns. He has also caught several mistakes over the years in our W2s that were the fault of the payroll company by reconciling W2 reported tax payments against IRS/FTB transcripts. sometimes these reconciliation exercises became very complex with payroll companies refusing to cooperate. In these cases, I was so glad to have our CPA fighting for us and spending considerable time doing so.

Lastly, when the IRS or FTB sent us letters regarding discrepancies in our returns, our CPA was very helpful in determining whether their claims were valid, and if so, helpful in suggesting appropriate corrective actions. He may not be the best CPA out there but he unequivocally provides real value in terms of both time and money saved.

xenochrony

JBTX
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Re: How much money can a CPA save you?

Post by JBTX » Mon Apr 09, 2018 7:54 pm

bayview wrote:
Mon Apr 09, 2018 5:48 pm
We used a CPA for 3 years when we had a rental, which we still have. DH started doing the taxes in TT that year, but things were just different enough that he wasn't comfortable, so we went with the "expert."

The expert kept messing up pretty basic things, like thinking I still had out-of-state income and entering 401k info on the pension line, but we crossed our fingers and kept going until this year. Don't know what kind of drama was going on, but he essentially went MIA in February and we said enough already. (We still don't have the records back that we gave him last year. He blamed this on an employee.) We went back to TT, and with the chance to refer to the past three years' worth of forms, DH became more comfortable with doing it himself. (He also caught some more errors, lol, sort of.)

It was helpful initially to see how he handled the rental income and expenses, but we're much happier taking it back. CPAs are humans, and they have their failings too.

--oh, and I didn't like him from the get-go, because I had most of the income, did most of our planning, and the CPA kept addressing DH in our meetings. :D Also, he started trying to steer us to his "friend" at Edward Jones, and that was the nail in the coffin, as far as I was concerned.
On the CPAs are humans note....

I know this person, older than I, keeps emaculate manual records. Not a computer guy. He would pretty much complete everything and his CPA would basically just check it. After a few years forms were not getting filed on time, and other errors, finally my acquaintance went in and somebody else was there trying to pick up the pieces. Turns out the CPA had some sort of drug problems and apparently he was keeping drug addict prostitutes in his basement (possibly against their will) and eventually ended up in jail.

veindoc
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Re: How much money can a CPA save you?

Post by veindoc » Mon Apr 09, 2018 8:07 pm

Every year I think I will do my taxes on my own, but something always changes.

One year I had rental property
The following year I did a 1031 exchange
Then I sold a rental
Things were fairly stable and I though of doing my own taxes again then...
I added a household employee and got a little nervous.
I picked up some self-employed income
Another year, we got a K1 from an investment we participated in.
Then the backdoor ROTH....

I make an attempt every year on turbo tax. My final result is always different than my CPA's. Some years a bit more different than others. Last year was very close ---within a few hundred. Apparently not so much this year. This year, turbo tax stated a refund of $400 which I was pretty pleased about. That was as close to zero as we have had in a long time, but an email from my CPA just told me we would be refunded roughly $2500. I am curious to see how he came up with that when I get the return.

Letitroll
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Re: How much money can a CPA save you?

Post by Letitroll » Tue Apr 10, 2018 9:22 pm

I have been doing my own taxes with Turbo Tax for several years and felt very comfortable until 2017 was due and I got help from a CPA locally who was recommended. To me a $250 CPA fee vs Turbo Tax at $70 is not that big a deal. My Tax filing was 22 pages long. I bought and sold rental properties and was getting hung up on depreciation values. I had never used a CPA before but I think he was worth the $180 difference. Next year, I am going to use Turbo Tax and use my 2017 return as a template and try to figure out. I don't anticipate selling any property.

MrPotatoHead
Posts: 429
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Re: How much money can a CPA save you?

Post by MrPotatoHead » Tue Apr 10, 2018 10:31 pm

Cripes am I the only person who files his own taxes with pencil and paper? Feeling like a dinosaur...

BCNR
Posts: 15
Joined: Sun Jan 28, 2018 9:20 pm

Re: How much money can a CPA save you?

Post by BCNR » Tue Apr 10, 2018 10:44 pm

CPAs can save time and stress that is worth more than what you pay, if all the following points met

1. You are workin with a highly competent CPA who files best possible returns for their clients with little or no track record of errors

2. You are not a kind of person who wants to understand the return and checks CPA work for your own comfort

3. Your taxes are too complex to your level of understanding at this moment ( believe me, they become simpler as your financial wisdom grows)

I have used CPA for couple years and then started doing on my own to save couple hundred dollars on a 30 min CPA appointment. With CPAs, It was much more stressful for me to ensure I have all the documents and itemizable deductions info ready for the appointment.
I wouldn’t mind spend few hours a year (believe me it is just once year) to not only understand my returns better but also save couple hundred dollars.

As always, this forum helped me a lot with my tax questions.

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