Should we continue with CPA for filing taxes?

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jstriding
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Joined: Wed Jul 25, 2012 3:29 pm

Should we continue with CPA for filing taxes?

Post by jstriding »

Receive 2 W2's (one is full time other part time)
Multiple 1099-MISC from business
Various 1099-Int and 1099-B (banks and brokerage accts)
Some foreign tax related (due to brokerage when receiving divs from ex-US securities)
We've been hitting 25%-28% AMT the past 3 years

We've been using an accountant the past 3 years. She sends us a tax organizer that I fill out. Then I provide her an excel spreadsheet of all itemized income/expenses/mileage (essentially a ledger). She knows what forms to fill out, but we have enough prior year taxes for me to see what forms commonly pop up.

Maybe our tax situation is complicated enough where having a CPA do this is warranted, but after a few years I wonder if this is a matter of getting comfortable working with the IRS forms myself, since I'm doing a ton of prep work "up front" to begin with, then sending her the spreadsheets, she plugs in, tells me why I can or cannot deduct this-or-that (by now it's mostly common sense for us), but we're up against the AMT anyway.

At this point I'm wondering if it justifies paying around $1000 (includes both personal and business) to file taxes. Are taxes filed with CPAs less prone to be flagged/audited?
Leeraar
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Re: Should we continue with CPA for filing taxes?

Post by Leeraar »

$1,000 sounds very high to me, especially for a repeat customer.

Shop last year's tax return at a couple of other CPAs, and an HR Block storefront. Ask what they'd charge.

Use online tax prep software yourself, and see if you really get stuck.

My CPA charges about $250 for simple returns for spouse and me, and two unmarried sons. Three federal, three state, and one city return. Last year I forgot to tell him about an HSA contribution, and he did not charge extra for the amended returns.

I am with the CPA, but yours seems expensive.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
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gasdoc
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Re: Should we continue with CPA for filing taxes?

Post by gasdoc »

I pay $1250-$1500 per year, for both my personal and business CPA. Does that make you feel better? I think he is worth every penny.
spectec
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Re: Should we continue with CPA for filing taxes?

Post by spectec »

You could also look for an enrolled agent. On average, EA's charge a little less than CPA's and they are specialists in tax preparation & audit representation.

EA's are more of a known quantity when it comes to tax preparation. There are many very qualified CPA's who do excellent tax work, but there are also many CPA's whose main source of income is audit and consulting work. They prepare tax returns as a side line, and oftentimes the actual work is done by an assistant & only reviewed by the CPA. You usuallly won't know who is actually preparing your return, even if you ask.

The $1,000 fee doesn't seem out of line based on the issues you mentioned.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers
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ChowYunPhat
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Re: Should we continue with CPA for filing taxes?

Post by ChowYunPhat »

Recommend trying the taxes yourself, especially given the filing status you shared. If you have access to internet enabled PC, HRBlock and Taxact (my choice) are both good alternatives. The sites also provide intuitive step by step instructions based on your individual circumstances and cost is nominal ($<50 efiled for multiple returns). Give it a try....if the alternative is $1000 to have a CPA do it you've already done most of the work. Taxact also lets you print completed forms prior to filing at no charge I believe.
A wise man and his money are friends forever...
Topic Author
jstriding
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Re: Should we continue with CPA for filing taxes?

Post by jstriding »

bkinder wrote:I pay $1250-$1500 per year, for both my personal and business CPA. Does that make you feel better? I think he is worth every penny.
No, how I feel is not dependent on what you pay. There are people whom I'm sure need CPAs because of the complexity of their situation, or they want that peace of mind, or they don't want to be bothered filing their own taxes.

I view some items as crucial to learn to DIY. For example, understanding finances and managing our financial future, that's why I'm here at Bogleheads, knowing I can certainly pay for a (fee based) financial advisor. However, I view this as important to learn.

There are other services, like trusts and estate planning, that I don't do myself, because it's complex enough where I know I'd rather go with an attorney specializing in those areas, than even using Legalzoom (which I have, first, BEFORE hiring the lawyer. I wanted to understand the process.)

Taxes is the final frontier where I still don't quite understand, but after this many years and 3 accountants of varying costs (1 keeps wanting me to splinter my business into new businesses to get more deductions but then I end up with thousands of dollars in bills because it's a new tax return), it's come to the point where I wonder if I should try it myself. It's one thing if I send a shoebox full of receipts (like one of my relatives does, and that justifies the thousands he pays for his accountant, to wade through recipes), it's another when I keep meticulous paperwork and categorize all the expenses/income on Excel and then send it to the accountant.
Topic Author
jstriding
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Re: Should we continue with CPA for filing taxes?

Post by jstriding »

ChowYunPhat wrote:Recommend trying the taxes yourself, especially given the filing status you shared. If you have access to internet enabled PC, HRBlock and Taxact (my choice) are both good alternatives. The sites also provide intuitive step by step instructions based on your individual circumstances and cost is nominal ($<50 efiled for multiple returns). Give it a try....if the alternative is $1000 to have a CPA do it you've already done most of the work. Taxact also lets you print completed forms prior to filing at no charge I believe.
Thanks, that's what I thought too, at least for the initial year. File myself, pay the accountant, see how differently our filings look, before I decide.

I was actually thinking of filling the tax forms directly, without using tax software.
Topic Author
jstriding
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Re: Should we continue with CPA for filing taxes?

Post by jstriding »

Leeraar wrote:$1,000 sounds very high to me, especially for a repeat customer.

Shop last year's tax return at a couple of other CPAs, and an HR Block storefront. Ask what they'd charge.

Use online tax prep software yourself, and see if you really get stuck.

My CPA charges about $250 for simple returns for spouse and me, and two unmarried sons. Three federal, three state, and one city return. Last year I forgot to tell him about an HSA contribution, and he did not charge extra for the amended returns.

I am with the CPA, but yours seems expensive.

L.
Instead of keeping prices the same or lower for repeat customers, she's raised fees by $50 for personal and $100 for business over last year, so this year it's 495 + 615, last year was 445 + 515. They usually justify this by saying "tax preparation is deductible" I've heard this so many times, I don't care for that kind of tax deduction. She also charges me for reviewing the excel spreadsheet (that seems to be a repeating cost that's additional to the fee).
Leeraar
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Re: Should we continue with CPA for filing taxes?

Post by Leeraar »

I recommend the tax software. It's not just filling out the forms. They take you through an interview process and decide which forms you need.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
jmg229
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Re: Should we continue with CPA for filing taxes?

Post by jmg229 »

Leeraar wrote:I recommend the tax software. It's not just filling out the forms. They take you through an interview process and decide which forms you need.

L.
I would argue the opposite, actually. With the prior years' returns, you should be able to figure out which forms you need. And if you are paying the CPA one more year, there is no harm in trying to do it just with the forms. Plus, given your situation, reading some forms and understanding how it works is probably to your advantage going forward. In my opinion, the only value of the interviews is helping you find things you may otherwise have missed. You are not at risk of that by continuing to pay the CPA while doing them yourself for a year.
Caduceus
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Re: Should we continue with CPA for filing taxes?

Post by Caduceus »

Do you understand why things end up where they are on your tax form? It's not just a case of matching information to make sure that this year's return looks exactly like the last. If you have a good sense of why a calculation is being made that goes here rather than there, or why this form is necessary and that form isn't ... and you generally understand the principle that leads to the result, I think you can file on your own with the help of tax software.

Tax software prevents you from making calculation errors and it is a systematic way of collecting information.

Even if you use a CPA, it is always a good idea to do your own research and reading. They can only do as good a job as the data organization and information that you present them.
ralph124cf
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Re: Should we continue with CPA for filing taxes?

Post by ralph124cf »

You mentioned both personal and business taxes. Is this a schedule C business, or a corporation or partnership return?

Ralph
Topic Author
jstriding
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Re: Should we continue with CPA for filing taxes?

Post by jstriding »

ralph124cf wrote:You mentioned both personal and business taxes. Is this a schedule C business, or a corporation or partnership return?

Ralph
This is partnership.
Caduceus wrote:Do you understand why things end up where they are on your tax form? It's not just a case of matching information to make sure that this year's return looks exactly like the last. If you have a good sense of why a calculation is being made that goes here rather than there, or why this form is necessary and that form isn't ... and you generally understand the principle that leads to the result, I think you can file on your own with the help of tax software.

Tax software prevents you from making calculation errors and it is a systematic way of collecting information.

Even if you use a CPA, it is always a good idea to do your own research and reading. They can only do as good a job as the data organization and information that you present them.
I agree, I mostly understand where if I look at the actual forms, and I think it's time I learn too. That's why I am interested in going the "tax form" route versus tax software.
Caduceus
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Re: Should we continue with CPA for filing taxes?

Post by Caduceus »

Well, then you have to read the actual IRS publications pertaining to each situation you are in from cover to cover. They are actually pretty fun reads.

Some situations are ridiculously complex but that's why they are interesting.

In tax, it is what you don't realize you don't know that bites you. It is easier than you think to not even realize you have to file a particular form. Or not to realize you've received incorrect information on a tax form. And so on.

good luck.
kjvmartin
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Re: Should we continue with CPA for filing taxes?

Post by kjvmartin »

There's no harm in going to a tax website - Turbotax, TaxAct, etc. You see how they work and input your tax information without paying. If you like the outcome, you can then pay to file and save a few bucks.

Mike
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Toons
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Re: Should we continue with CPA for filing taxes?

Post by Toons »

Leeraar wrote:I recommend the tax software. It's not just filling out the forms. They take you through an interview process and decide which forms you need.

L.

+1.That is the way to go :happy
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LeeMKE
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Re: Should we continue with CPA for filing taxes?

Post by LeeMKE »

Back in the dark ages, I had a CPA doing our taxes (sch c, some real estate investment prop, W-2 and 1099 income). Once the software started looking good, I bought it one year and then compared that return with the one my CPA did. The software caught everything, and put it in the same place as the CPA, without my having to read every IRS regulation that pertained to our tax return. And the software correctly placed a deduction that saved us a few bucks over the place the CPA put it. There were a couple of places where I had to read the software explanation carefully and/or the IRS reg that was hot linked from the form.

Ever since, I've done my own taxes using Tax Cut or Turbo Tax. Everything I've thrown at the software it has been able to digest, and I've had some doozy years of financial activity.

I prefer doing it myself. First pass is to get everything in. Then the fun begins. Can I adjust some levers to do better? Almost always I find some option I can change to improve results by a little bit.

TRUE STORY: One year my return was exceptionally complex. After the first run through, I looked at the forms and decided a few items were in the wrong place and overrode the software to correct the errors. Natch, I was called for an office audit. It became hilarious as the agent pointed to each and every change I'd made to "correct" the software, and had indeed changed it wrongly when the software had it right. The agent sent me on my way with the admonition to let the software do it's job. I've done so ever since, and so far, no audits.
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Hayden
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Re: Should we continue with CPA for filing taxes?

Post by Hayden »

I have a CPA do my Form 1065 and Form 1120S, and then I do my personal return myself. This year, in particular, there are depreciation changes to deal with (form 3115). My CPA charged a lot, but I haven't wanted to tackle these returns myself.

I do my personal return myself so I understand how it works and understand what steps to take to reduce my taxes in the future.
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