Do tax accountants add any value?

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Topic Author
crockpotinvesting
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Do tax accountants add any value?

Post by crockpotinvesting » Thu Feb 21, 2019 10:16 am

Ive always done my taxes myself via turbo tax. I’m by no means a tax guru but my tax situation is fairly simple and I enjoyed doing them myself.

2018 some changes took place, bought a house mid year. SALT and interest on mortgage is about below the standard deduction of 24k. I have some student loan interest but I no longer qualify to deduct this.

I ran through my taxes and I owe about $4,000 on federal and should gee about $650 state refund.

I believe in paying my fair share of taxes but at the same time paying the least amount legally possible. I’ve heard many of my peers say their accountants write off profession subscriptions (magazines), work clothes, etc. I’ve never done this myself.

I wanted to know other peoples perspectives. Does an accountant add any value? Or is it a waste of money.

barnaclebob
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Re: Do tax accountants add any value?

Post by barnaclebob » Thu Feb 21, 2019 10:23 am

crockpotinvesting wrote:
Thu Feb 21, 2019 10:16 am
Ive always done my taxes myself via turbo tax. I’m by no means a tax guru but my tax situation is fairly simple and I enjoyed doing them myself.

2018 some changes took place, bought a house mid year. SALT and interest on mortgage is about below the standard deduction of 24k. I have some student loan interest but I no longer qualify to deduct this.

I ran through my taxes and I owe about $4,000 on federal and should gee about $650 state refund.

I believe in paying my fair share of taxes but at the same time paying the least amount legally possible. I’ve heard many of my peers say their accountants write off profession subscriptions (magazines), work clothes, etc. I’ve never done this myself.

I wanted to know other peoples perspectives. Does an accountant add any value? Or is it a waste of money.
It doesn't sound like you need a tax accountant. Turbo tax would make those deductions as well except for the fact that they don't exist anymore. Many people like to brag about "their guy" in various fields but most of the time they aren't coming out ahead except for those with complicated situations.

Also I believe in the past that those would be miscellaneous deductions which really only apply if your income is low or spending on the qualified expenses is high (only the amount greater than 2% of your taxable income was deductible) and only if you also itemized. Sure you could always put them into the program but it doesn't mean it decreases your taxes. My union dues are about $500 a year but since that didn't exceed 2% of my income it wasn't deductible. After a couple of years I didn't even bother putting it into turbotax.

I bet that many tax accountants always asked for this information about miscellaneous deductions knowing it wont affect most peoples taxes but asking for it makes people think they are getting better service. Like anything its all about making sales. Turbotax even says things like "We've found $487 of extra deductions for you". Turbotax hasn't "found" anything, its a simple program of if:then statements.

The bottom line is that for most W-2/1099 people there isn't some magic knowledge that tax professionals have which lets you legally deduct a bunch more.
Last edited by barnaclebob on Thu Feb 21, 2019 10:35 am, edited 6 times in total.

Goal33
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Re: Do tax accountants add any value?

Post by Goal33 » Thu Feb 21, 2019 10:30 am

You won’t come out ahead.
A man with one watch always knows what time it is; a man with two watches is never sure.

Admiral
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Re: Do tax accountants add any value?

Post by Admiral » Thu Feb 21, 2019 10:41 am

The answer is "it depends." We have W2 plus 1099 and Sked C income and deductions. I am not a tax nor a math whiz. I also like having a "barrier" or "buffer" who will handle issues that (have) come up with the IRS. I pay $600/year which I deduct as a business expense. Based on the above plus the value of my time, it's worth it to let someone else handle it.

For someone with straight W2 income, it's likely not worth it.

Topic Author
crockpotinvesting
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Re: Do tax accountants add any value?

Post by crockpotinvesting » Thu Feb 21, 2019 10:47 am

Besides some dividend income/and a few trades ( im young so my taxable portfolio is still relatively small) I’m 99% w2 income.

anil686
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Re: Do tax accountants add any value?

Post by anil686 » Thu Feb 21, 2019 10:53 am

No IMO. If you have complicated situations such as owning a small business or some joint ventures with K-1 income and possible business deductions - sure it probably helps if you are not skilled in tax areas (I am not). JMO though...

livesoft
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Re: Do tax accountants add any value?

Post by livesoft » Thu Feb 21, 2019 10:55 am

Our tax return seems to be much more complicated than yours. I feel an accountant would cost me money to pay them and would cost me more in taxes, too. Why pay $2 to save $1 in taxes?

But I am different than you. I like to read IRS publications, tax forms, and tax form instructions. I had a career doing lots of math, too. I also read many of the tax discussions on bogleheads.org.
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Admiral
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Re: Do tax accountants add any value?

Post by Admiral » Thu Feb 21, 2019 11:52 am

livesoft wrote:
Thu Feb 21, 2019 10:55 am
Our tax return seems to be much more complicated than yours. I feel an accountant would cost me money to pay them and would cost me more in taxes, too. Why pay $2 to save $1 in taxes?

But I am different than you. I like to read IRS publications, tax forms, and tax form instructions. I had a career doing lots of math, too. I also read many of the tax discussions on bogleheads.org.
What is your rationale for assuming that hiring a good accountant would result in paying higher tax? Accountants in the business of raising their clients' tax bills would, in my experience, not have especially long or lucrative careers. For example, my accountant is much more familiar than I am on deductions (and the new QBI deduction), the recharacterization of certain kinds of income, and what the IRS may or may not flag, based on many years of experience and hundreds if not thousands of tax returns.

You're paying for expertise, in the same way you might pay a lawyer, architect, or contractor.

livesoft
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Re: Do tax accountants add any value?

Post by livesoft » Thu Feb 21, 2019 12:04 pm

Tax accountants are well known for making mistakes. There is no expectation that one's accountant does not make mistakes.

Do you think contractors don't make mistakes? That is not an example that I would have used. :)
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Admiral
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Re: Do tax accountants add any value?

Post by Admiral » Thu Feb 21, 2019 12:14 pm

livesoft wrote:
Thu Feb 21, 2019 12:04 pm
Tax accountants are well known for making mistakes. There is no expectation that one's accountant does not make mistakes.

Do you think contractors don't make mistakes? That is not an example that I would have used. :)
Everyone makes mistakes. Even you, I'd venture. So what? That does not strike me as sufficient reason to disclaim expertise. Should one who uses an accountant sign their return blindly without review? Of course not. In the same way one should check a contractor's work.

That does not mean their work cannot save you money and time (which amounts to money).

thx1138
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Re: Do tax accountants add any value?

Post by thx1138 » Thu Feb 21, 2019 12:17 pm

I strongly suspect no value at all in your situation.

Tax preparers sadly also make mistakes just like anyone else and it seems like from my anecdotal experience with friends this happens far too frequently on what should have been "simple" returns. So if you are already capable of doing your taxes - which don't sound complicated at all - I'd just continue to do them yourself.

There are most definitely situations in which they add value of course. It seems those cases are often more specialized and in those cases going to someone with experience in that area is where they can add the most value.

But on a more typical return - even self employed - really not necessary and asking a few clarifying questions here is usually more than enough to do at least as good as or often a better job than using a generic tax preparer.

Lol_wut94
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Re: Do tax accountants add any value?

Post by Lol_wut94 » Thu Feb 21, 2019 12:39 pm

yes, they understand how to best liaise with the IRS and support you in event of an audit

edgeway
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Re: Do tax accountants add any value?

Post by edgeway » Thu Feb 21, 2019 1:23 pm

Reasons I use a tax accountant: (1) my taxes are complicated and I'd rather not worry about getting them right, (2) my time is valuable to me and I'd have to dedicate too much of that valuable time to making sure I got my complicated taxes right, and (3) there are some other benefits like being less likely to be audited, and if I were audited, the accountant knows everything and can handle it all for me (for $$$ of course), thus saving me even more time. I have too many friends and family who handle their own taxes and have been audited. I think I've avoided it my entire adult life (20 years) because I use a tax accountant to prepare/file for me.

livesoft
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Re: Do tax accountants add any value?

Post by livesoft » Thu Feb 21, 2019 1:31 pm

Admiral wrote:
Thu Feb 21, 2019 12:14 pm
That does not mean their work cannot save you money and time (which amounts to money).
If one made no mistakes on their tax return, then it is unlikely that an accountant will save one on taxes. The OP's description of their tax return had nothing that an accountant would be helpful with. As far as saving time, one has to review whatever an accountant does with a fine-tooth comb, so no real time savings as well. And any time invested in tax preparation just makes things easier for the future.

If you expect me to give accountants a break, it ain't gonna happen in this thread.
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sthadani
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Re: Do tax accountants add any value?

Post by sthadani » Thu Feb 21, 2019 1:47 pm

I always wondered this too. I have come to realize that in my situation (MFJ, W-2 & 1099, now std. ded.) doing my taxes with TT vs. a tax accountant won't bring me a bigger refund.

I am always curious though about if a good tax accountant could give you advise on how to structure your investments based on your income in order to adjust your tax brackets and qualify for other credits in the future years.

Example, What if an extra 1% into your 401(k) brings your AGI to qualify for the Saver's Credit and you make some/most of that 1% back in the form of your refund. I'd pay for that kind of service.

livesoft
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Re: Do tax accountants add any value?

Post by livesoft » Thu Feb 21, 2019 1:53 pm

sthadani wrote:
Thu Feb 21, 2019 1:47 pm
Example, What if an extra 1% into your 401(k) brings your AGI to qualify for the Saver's Credit and you make some/most of that 1% back in the form of your refund. I'd pay for that kind of service.
That's exactly the kind of question that TurboTax can answer for you if you complete a "What if?" tax return.

There have been a number of queries asking about how to find a competent tax person who can help one make plans. The responses have been less than satisfying.

But I agree that one can pay a tax accountant to read IRS instructions if one doesn't want to read them.
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chicagoan23
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Re: Do tax accountants add any value?

Post by chicagoan23 » Thu Feb 21, 2019 1:57 pm

crockpotinvesting wrote:
Thu Feb 21, 2019 10:16 am
Ive always done my taxes myself via turbo tax. I’m by no means a tax guru but my tax situation is fairly simple and I enjoyed doing them myself.

2018 some changes took place, bought a house mid year. SALT and interest on mortgage is about below the standard deduction of 24k. I have some student loan interest but I no longer qualify to deduct this.

I ran through my taxes and I owe about $4,000 on federal and should gee about $650 state refund.

I believe in paying my fair share of taxes but at the same time paying the least amount legally possible. I’ve heard many of my peers say their accountants write off profession subscriptions (magazines), work clothes, etc. I’ve never done this myself.

I wanted to know other peoples perspectives. Does an accountant add any value? Or is it a waste of money.
If you have almost entirely W-2 income and you owe $4,000, are you underwithholding? Did you have a penalty? If so, an accountant may help you get your withholding optimized.

Also, for a W-2 employee there are no longer any deductions for professional subscriptions, work clothes, etc.

HoosierJim
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Re: Do tax accountants add any value?

Post by HoosierJim » Thu Feb 21, 2019 2:44 pm

crockpotinvesting wrote:
Thu Feb 21, 2019 10:16 am
to know other peoples perspectives. Does an accountant add any value? Or is it a waste of money.
I think it's like asking if landscapers add any value. Tax software has come a long way. If you only need a weekly lawn cutting and a once per year bush trimming, AND you like mowing the lawn, then a landscaper adds no value. If you HATE it and are bad at it (and recognize you are bad at it), then get hired help.

If you can read this Schedule C instructions and think it's the most thrilling novella ever - then you are one of the wonks on this site that look forward to the new documents and IRS changes/rulings each year. If reading this is equivalent to the Spanish Inquisition, then get help.

MathWizard
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Re: Do tax accountants add any value?

Post by MathWizard » Thu Feb 21, 2019 2:56 pm

For me , no.

Married over 35 years, filed by hand most of them.
We had a CPA firm do ours twice, once each at the start of a new business,
and compared with having done it ourselves.

The firm just had some assistant enter the numbers my wife had already
generated going through the receipts, and then had a partner sign the form.
We got the same result as the firm did (no surprise) so we went back to
doing them ourselves.

It helps that my wife was a bookkeeper and is very detailed, using a
printing calculator to attach to our copy of the returns with the exact calculations
for each number entered.

TurboTax generally gives you the best option for each situation, so you
don't have to fill out multiple paper forms to see which options are best.

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greg24
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Re: Do tax accountants add any value?

Post by greg24 » Thu Feb 21, 2019 3:03 pm

To me, having someone else do your taxes can have negative value.

By doing my own taxes, I feel I have a much greater understanding of our tax structure and how it affects me.

This understanding allows me to minimize my taxes over the course of my life.

iamlucky13
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Re: Do tax accountants add any value?

Post by iamlucky13 » Thu Feb 21, 2019 3:05 pm

A family member who is tax accountant has said that he gains a lot of long term clients by fixing mistakes made by self-preparers and especially the discount preparers like Liberty. I don't remember for sure, but I think he said he sometimes advertises that he'll review returns prepared by the discount preparers, and only charge if he finds mistakes, but he finds mistakes quite regularly.

He may be talking himself up a bit, but it sounds like a good case compared to using Liberty, etc.

Compared to doing it yourself, I guess it depends on your level of willingness to be careful and thorough, and spend the time on it. I know when I do mine, I have to spend a lot of time re-reading the same instructions I know I read last year to recall all the conditions under which things like sales tax deductions apply (no state income tax for me).

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TomatoTomahto
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Re: Do tax accountants add any value?

Post by TomatoTomahto » Thu Feb 21, 2019 3:11 pm

I might be a bad BH because I pay for TurboTax and a CPA. I simply cannot read IRS documents. My eyes roll back into my head.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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changingtimes
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Re: Do tax accountants add any value?

Post by changingtimes » Thu Feb 21, 2019 3:26 pm

Admiral wrote:
Thu Feb 21, 2019 12:14 pm
livesoft wrote:
Thu Feb 21, 2019 12:04 pm
Tax accountants are well known for making mistakes. There is no expectation that one's accountant does not make mistakes.

Do you think contractors don't make mistakes? That is not an example that I would have used. :)
Everyone makes mistakes. Even you, I'd venture. So what? That does not strike me as sufficient reason to disclaim expertise. Should one who uses an accountant sign their return blindly without review? Of course not. In the same way one should check a contractor's work.

That does not mean their work cannot save you money and time (which amounts to money).
Just found two mistakes in my taxes prepared by my tax accountant (not filed yet, thankfully!).

But I never would have found them if I hadn't started tracking my taxes very closely throughout the year, with a spreadsheet I created to try to forecast how much I can convert to Roth, etc. etc.

I'll give them a pass in that this year is of course the first year with massive changes in the forms and whatnot. And I very much appreciated having a tax accountant I had worked with for a number of years when DH died, to help guide me through all of the tax-related stuff on that end.

But could I do them myself in future years? Yeah, probably. Tough call.

barnaclebob
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Re: Do tax accountants add any value?

Post by barnaclebob » Thu Feb 21, 2019 3:29 pm

Lol_wut94 wrote:
Thu Feb 21, 2019 12:39 pm
yes, they understand how to best liaise with the IRS and support you in event of an audit
I'd be curious how many people here with only 1099's and W-2's have actually been audited and were not able to provide their own justifications.

rich126
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Re: Do tax accountants add any value?

Post by rich126 » Thu Feb 21, 2019 3:33 pm

I used to do my own but once I had a job in one state but also lived in another, it complicated things so I hired someone. Now that isn't an issue but I do have an out of state rental property and don't want to deal with depreciation, filing taxes in multiple states, etc. so I do hire someone. The current person is pretty reasonable so it is worth letting him do it, instead of me wasting hours trying to figure out stuff.

If I didn't have the rental property I'd definitely do it myself since the only complicating thing would be gains/losses of investments but while tedious, they aren't too hard.

Of course once years ago I used a tax program and ignored/shut down a pop up box without paying attention to what it said or what effect it had on my tax form. Then I got a letter from the IRS because I left out my state tax refund. I knew that had to be reported but whatever I did to the pop up window caused it to zero out the info I had previously entered. Ended up being a trivial thing to fix.

NotWhoYouThink
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Re: Do tax accountants add any value?

Post by NotWhoYouThink » Thu Feb 21, 2019 3:42 pm

The firm just had some assistant enter the numbers my wife had already
generated going through the receipts, and then had a partner sign the form.
We got the same result as the firm did (no surprise) so we went back to
doing them ourselves.
That's been my experience with in-law/parent tax situations. In my mom's case last year, $600 for taking the numbers I gave them by going through receipts and plugging them into their tax software to get the same answer I got from Turbo Tax.

This year I'll do hers in TT along with mine.

As for whether they add value, it depends. For me, for filling out tax returns, no.
For some people for filling out tax returns, probably quite a bit.
For people wanting to think about ways to live and invest more tax efficiently without having to understand taxes, probably, but you won't get that help having them prepare your tax return, you need to set up a consultation and pay them by the hour. Many tax accountants probably wouldn't want to work with retail customers in that way, they get paid more just to do taxes. But if you find a good one you could get some help.

DoctorPhysics
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Re: Do tax accountants add any value?

Post by DoctorPhysics » Thu Feb 21, 2019 3:50 pm

Freeing up my time for the amount of money involved. That value is worth it to me.

Thankfully my accountant is reasonable and doesn’t charge me an arm and a leg. I’ve had some that do and I don’t use them.

thx1138
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Re: Do tax accountants add any value?

Post by thx1138 » Thu Feb 21, 2019 3:53 pm

Lol_wut94 wrote:
Thu Feb 21, 2019 12:39 pm
yes, they understand how to best liaise with the IRS and support you in event of an audit
And you can hire them to do this in the event of an audit. You don't need to hire them in advance to do every year of taxes for you.

Similarly you can still do your taxes yourself and pay a tax accountant to answer your questions and give you advice only on the occasions you need clarification or advice.

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GoldStar
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Re: Do tax accountants add any value?

Post by GoldStar » Thu Feb 21, 2019 3:58 pm

Personally I think its a waste of money and something I wouldn't trust anyone else to do on my behalf. I still would need to collect all the stuff they need myself and then check over all their work before I sign my return so I simply pay $50 or so for TurboTax and cut out the person entering the data for me.
I helped a relative with taxes this year after he was complaining that his tax accountant (at H&R) kept increasing their prices. I looked at the last 3 years of returns as I was filling out their return and found mistakes every single year AND The mistakes weren't even consistent (for example, one year a claim was made that taxes had already been paid on an IRA that was paying out RMDs; the year prior this claim for the same account wasn't made; etc.). I was surprised this person had never been audited based upon the mistakes and year-to-year inconsistencies. Most of the mistakes were to the advantage of the filer which had me wondering if they were really honest mistakes or simply a method to keep a client happy by assuring they would get a refund.

bltn
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Re: Do tax accountants add any value?

Post by bltn » Thu Feb 21, 2019 4:45 pm

I ve used the same accountant for the last thirty years. He s very bright and a valued general business advisor. His firm also kept our small company s books.
I ve withdrawn from several partnerships in the last couple of years. I ve also consolidated all my investment accounts into two brokerages and and two bank accounts. My taxes now are all based on 1099 forms. I ve always paid attention to the tax rules, so this year I put the numbers through Turbotax and I did a quick run through by hand , skimming the instructions. The results are pretty close and the differnce may be due to an error either in the hand return or a mistake in using the Turbotax.
I ll still carry the return material to my acountant for preparation. But if I didn t have such an important relationship with my accountant, in my legacy planning as well as my tax care, I would consider switching to one of the tax services. I ll carefully prepare another TurboTax return and see just how close it comes to my accountant’s return.

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Re: Do tax accountants add any value?

Post by montanagirl » Thu Feb 21, 2019 5:08 pm

barnaclebob wrote:
Thu Feb 21, 2019 3:29 pm

I'd be curious how many people here with only 1099's and W-2's have actually been audited and were not able to provide their own justifications.
A looong time ago when I was very young and in the music business I had my taxes done by a CPA who claimed to know all about doing entertainers' returns. He had me take all sorts of deductions and I got audited. When I called to tell him he just said "good luck!" No way he was going to be there.

I had my receipts and all but did not realize I couldn't deduct ALL of my clothing LOL. The IRS lady said fine, I'll give you half and call it good.
She stopped short of looking at the rest of my deductions...fortunately....

MJS
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Re: Do tax accountants add any value?

Post by MJS » Thu Feb 21, 2019 6:09 pm

For simple, one-state taxes - no.

If you've recently inherited some 401k's & IRAs or just started a business - perhaps Airbnb or Lyft - then doing taxes yourself and having a tax account do it a second time might save you time & aggravation.

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AerialWombat
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Re: Do tax accountants add any value?

Post by AerialWombat » Thu Feb 21, 2019 6:20 pm

livesoft wrote:
Thu Feb 21, 2019 12:04 pm
Tax accountants are well known for making mistakes. There is no expectation that one's accountant does not make mistakes.

Do you think contractors don't make mistakes? That is not an example that I would have used. :)
Your statement is accurate. I have corrected numerous mistakes made by everybody from the seasonal workers at retail chains (I call them “tax shacks”) to CPAs at Big 4 firms.

On the other hand, I have also corrected numerous mistakes made by people trying to DIY with TurboTax and other programs. Software does what you tell it to, so garbage in is garbage out.

The OP probably doesn’t need one of my colleagues, but millions of clueless Americans definitely do. Ditto with folks with very complex returns.

AI will soon consume the bottom end of the tax prep market, which I consider a good thing. But for somebody with a lot of moving pieces, a tax accountant can bring piece of mind and expertise that you will simply never acquire.

I’m in this field, but still pay another tax accountant to do stuff that I have no competency at.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

Topic Author
crockpotinvesting
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Re: Do tax accountants add any value?

Post by crockpotinvesting » Thu Feb 21, 2019 6:24 pm

chicagoan23 wrote:
Thu Feb 21, 2019 1:57 pm
crockpotinvesting wrote:
Thu Feb 21, 2019 10:16 am
Ive always done my taxes myself via turbo tax. I’m by no means a tax guru but my tax situation is fairly simple and I enjoyed doing them myself.

2018 some changes took place, bought a house mid year. SALT and interest on mortgage is about below the standard deduction of 24k. I have some student loan interest but I no longer qualify to deduct this.

I ran through my taxes and I owe about $4,000 on federal and should gee about $650 state refund.

I believe in paying my fair share of taxes but at the same time paying the least amount legally possible. I’ve heard many of my peers say their accountants write off profession subscriptions (magazines), work clothes, etc. I’ve never done this myself.

I wanted to know other peoples perspectives. Does an accountant add any value? Or is it a waste of money.
If you have almost entirely W-2 income and you owe $4,000, are you underwithholding? Did you have a penalty? If so, an accountant may help you get your withholding optimized.

Also, for a W-2 employee there are no longer any deductions for professional subscriptions, work clothes, etc.
I think I’ll have a small penalty. To be honest, it’s a rookie mistake. Our income has been increasing nicely the past few years and I just assumed (rookie mistake) payroll was deducting the right amount.

AlohaJoe
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Re: Do tax accountants add any value?

Post by AlohaJoe » Thu Feb 21, 2019 6:27 pm

montanagirl wrote:
Thu Feb 21, 2019 5:08 pm
barnaclebob wrote:
Thu Feb 21, 2019 3:29 pm

I'd be curious how many people here with only 1099's and W-2's have actually been audited and were not able to provide their own justifications.
A looong time ago when I was very young and in the music business I had my taxes done by a CPA who claimed to know all about doing entertainers' returns. He had me take all sorts of deductions and I got audited. When I called to tell him he just said "good luck!" No way he was going to be there.
Many years ago my dad hired an tax accountant for a few years. I still remember the name of the business: STIRS, which was short for "Screw The IRS". My dad got a refund every year. Then he got audited, the tax accountant said he was on his own, and he ended up needing to pay back $5,000 in taxes and penalties.

If the tax accountant makes a mistake, you're the one who pays.

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vitaflo
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Re: Do tax accountants add any value?

Post by vitaflo » Thu Feb 21, 2019 6:36 pm

How much is your time worth? I have two businesses so it's not only worth a lot, but the taxes are much more involved than a typical person. As such one of my favorite checks to write every year is the one to my accountant. Saves me a ton of time, and thus, money.

JBTX
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Re: Do tax accountants add any value?

Post by JBTX » Thu Feb 21, 2019 6:37 pm

In most cases yes they add value. But in some simple cases the $ value may be less than applicable fee.

If you know a little about finances and taxes, and are just an employee, probably no need for a tax accountant.

If you are, self employed or have some other business or real estate interests , or have stock options, multi state sources of income, then a cpa probably will add value for most people. But if you are willing to invest the time in effort you can do it yourself.

I think in some cases they are willing to be more aggressive in how they approach certain issues. An auditor will often weigh the chance of an audit with a particular approach they may take.

Having said that, they do make mistakes. Sometimes they get overwhelmed with the amount of work and may get sloppy.

I agree with one take above that if you are willing to do it yourself it does help you learn and plan in the future n

grylex
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Re: Do tax accountants add any value?

Post by grylex » Thu Feb 21, 2019 6:51 pm

livesoft wrote:
Thu Feb 21, 2019 12:04 pm
Tax accountants are well known for making mistakes. There is no expectation that one's accountant does not make mistakes.

Do you think contractors don't make mistakes? That is not an example that I would have used. :)
This.
Last year I prepared taxes myself but decided still to go to CPA. When I came I didn’t disclose that I already prepared taxes and wanted to check what CPA will find.
As a result he make a mistake that would cost me about ~6k (tax overpayment).
Mistake was in 1099-R (backdoor and mega Backdoor Roth). He taxed rollovers.

Since then I prepare taxes myself but calculate them in both TurboTax and HR Block to check if they match.

ERISA Stone
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Re: Do tax accountants add any value?

Post by ERISA Stone » Thu Feb 21, 2019 6:58 pm

my accountant has saved me a pretty hefty amount of money over the years. I don't think I would have access to several of the tax savings vehicles on my own. If I were w-2 only, I don't think I'd have an accountant.

SandysDad
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Re: Do tax accountants add any value?

Post by SandysDad » Thu Feb 21, 2019 7:07 pm

As the complexity goes up their value increases.

For me the big value is risk mitigation. An experience enrolled agent knows what is a flag and what is not. They also know how to make sure you don’t mischaractoriZe somethingnthat increases risk of audit.

For me it is not about saving money. It’s about making sure nothing is wrong on my complex return with multiple schedule e pages as well as schedule c. Plus many of my schedule e properties are vacation rentals which adds another dimension.

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Re: Do tax accountants add any value?

Post by whodidntante » Thu Feb 21, 2019 7:29 pm

I thought I needed an accountant when I had a business. But I found that communicating with the accountant was just as much work as educating myself. You could try it for a year and see how it goes.

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Re: Do tax accountants add any value?

Post by grabiner » Thu Feb 21, 2019 9:38 pm

crockpotinvesting wrote:
Thu Feb 21, 2019 6:24 pm
chicagoan23 wrote:
Thu Feb 21, 2019 1:57 pm
crockpotinvesting wrote:
Thu Feb 21, 2019 10:16 am
I ran through my taxes and I owe about $4,000 on federal and should gee about $650 state refund.
If you have almost entirely W-2 income and you owe $4,000, are you underwithholding? Did you have a penalty? If so, an accountant may help you get your withholding optimized.
I think I’ll have a small penalty. To be honest, it’s a rookie mistake. Our income has been increasing nicely the past few years and I just assumed (rookie mistake) payroll was deducting the right amount.
This happened to a lot of people. With the changes to the tax law in 2018, many taxpayers who itemized deductions in 2017 needed to file new Forms W-4 to claim fewer withholding allowances. If you didn't file a new W-4, your 2018 withholding based on the 2017 allowances was probably too little.
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Re: Do tax accountants add any value?

Post by beagler1 » Thu Feb 21, 2019 10:33 pm

I read the topic with a different take. Do they add value to our society and economy? No.

We should simplify the tax code even if it’s imperfect. So much wasted time and effort of taxpayers and CPAs. CPAs should be using their smarts for helping businesses figure out effective capital use on new projects. Very high value add.

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Re: Do tax accountants add any value?

Post by alfaspider » Fri Feb 22, 2019 6:28 am

beagler1 wrote:
Thu Feb 21, 2019 10:33 pm
I read the topic with a different take. Do they add value to our society and economy? No.

We should simplify the tax code even if it’s imperfect. So much wasted time and effort of taxpayers and CPAs. CPAs should be using their smarts for helping businesses figure out effective capital use on new projects. Very high value add.
Simplicity often comes at the expense of clarity and fairness. I've done business in countries with tax codes that run only a few dozen pages. Such countries are most definitely not easy to do business in.

I'm rather biased as a tax professional (attorney not CPA), but I think there is more value-add in tax professionals than people realize. Some of the U.S. tax code is unnecessarily complex, but other aspects are complex for good reason- usually because the underlying activity being taxed is itself complex. As for whether hiring a tax professional makes sense for you, it's going to depend on the complexity of your personal tax situation. A $1,500/hr tax attorney can add no value to an ordinary W-2 wage earner, but could earn their fee many times over in the context of a multi-billion dollar merger transaction. Likewise, a more basic tax preparation service could add significant value if they save you sufficient time and headache. However, for most individuals who are not self-employed, I suspect Turbotax (or equivalent) may be just as quick as a CPA. For me, assembling the information is most of the work - which would be required regardless of whether I hired someone.

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Re: Do tax accountants add any value?

Post by harvestbook » Fri Feb 22, 2019 8:49 am

I always did my own when I was a W-2 employee or an employee with a side business. Now, with three businesses in the family, capital gains, the QBI, s401ks, several corporations come and gone, a private investment, home offices, 529 disbursements, savers' credits...I'm exhausted just thinking about it, much less reading every IRS publication on all those topics.

I track the numbers as well as I can throughout the year but still things fall through the cracks. I'm just realizing I had room for lots more Roth conversions last year but now there's not much I can do about it. Things will be simpler for this year and we'll only have one return with three Schedule Cs, but I don't mind paying someone $450 to do it. I don't trust a CPA any more than I would a robot, but at least I'd have someone to blame.
I'm not smart enough to know, and I can't afford to guess.

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Re: Do tax accountants add any value?

Post by MikeG62 » Fri Feb 22, 2019 12:22 pm

Retired finance guy (started my career as a CPA, but was financial accountant and not tax expert). Of course I have always done my own taxes.

My father-in-law uses an accountant to do his taxes. Loves her. She's very aggressive in taking deductions. He sees this as wonderful. He's done consulting for a number of years, but for one company out of their office (never done anything from home). Yet his accountant has him convinced that he can take a home office deduction. I've talked to him about this and shown him copies of the rules - it's clear he does not meet the rules. Despite this he continues to take the deduction because his accountant has told him it's ok. I've pointed out the multi-year risk he'd face on audit, but none of that dissuades him.

I mention this to say that some accountants are super aggressive and their clients (most of whom don't know any better) think they are wonderful because they claim lots of deductions and get large refunds - much larger than they'd ever get if filing on their own.

So the answer to the OP's question may be "it depends on who you ask and what they know or don't know about taxes". I think accountants can add value for people who have no idea what they are doing and would likely make mistakes despite software like TT that make it virtually idiot proof. They also add value for people who have complex tax situations. Might be able to toss in folks who are just too busy to do it themselves too.

Most others would be fine doing it themselves as software like TT does make it easy. I can't imagine having had to do my return the last 15-20 years by hand (which I did for the first ten years of my career). The software makes life so much easier.
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Prokofiev
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Re: Do tax accountants add any value?

Post by Prokofiev » Fri Feb 22, 2019 1:33 pm

This may sound like hyperbole . . . but EVERY single year where a tax consultant / CPA was involved I have found errors. No exceptions. This is not for my returns or my girlfriends - I do all those myself. But I became involved with my parents taxes during their final years and every one needed corrections. Even my 88 yo mother with dementia was able to find mistakes. I dumped their CPA, but she wanted to use another one "to be safe". Same problem.

Now my girlfriend's family business still uses an accountant. 9 years in and 9 years of mistakes. Sometimes just 1 or 2 little ones. Sometimes large ones. He doesn't bother to file anything without first sending me the returns and asking me to fix the errors. And the worst part is that you still need to fill in all the forms with correct amounts in the correct columns for his services. Also tax planning advice is nil. Absolutely nothing - nor would I trust any advice given.

Now some people may say, "Wow, that never happens with our CPA". But how would you know that without checking the work? Yes, after being audited several times you might come to that realization. My parents did have one audit and several IRS billings for under-reported income due to his inability to copy the numbers correctly. A waste of time and money.

I do think there is one area where a CPA could help some and that is leaning forward on deductions. Our present CPA is quite aggressive in deductions and write-offs. The business is self reporting for both income and expenses (like all businesses?). Why not consider grey-area write-offs or questionable deduction amounts? Well, because we have no receipts or proof of that particular expense! But his idea is that so few returns are ever audited that you should just take that chance. If your expense is disallowed by an auditor, so be it. He doesn't encourage cheating(?) but if that vacation trip was turned into a business trip because you checked-in on the business or met with someone connected to it . . . well why not? And was that trip $2800? or $4200? Who knows? Yes, this is cheating in my book. But if his return saves $3000 in taxes over my return, well is it not worth his $750 fee? That's their feelings at least. BTW, my yearly corrections have NOTHING to do with these questionable deductions. They stay. It is all the wrong numbers in the wrong boxes that I fix.


OK Enough of this rant!


Later, P
Everything should be made as simple as possible, but not simpler - Einstein

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Re: Do tax accountants add any value?

Post by batpot » Fri Feb 22, 2019 1:56 pm

I don't see it as a value proposition so much as a time savings one.

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Re: Do tax accountants add any value?

Post by grabiner » Fri Feb 22, 2019 7:40 pm

Prokofiev wrote:
Fri Feb 22, 2019 1:33 pm
This may sound like hyperbole . . . but EVERY single year where a tax consultant / CPA was involved I have found errors. No exceptions. This is not for my returns or my girlfriends - I do all those myself. But I became involved with my parents taxes during their final years and every one needed corrections. Even my 88 yo mother with dementia was able to find mistakes. I dumped their CPA, but she wanted to use another one "to be safe". Same problem.

Now my girlfriend's family business still uses an accountant. 9 years in and 9 years of mistakes. Sometimes just 1 or 2 little ones. Sometimes large ones. He doesn't bother to file anything without first sending me the returns and asking me to fix the errors. And the worst part is that you still need to fill in all the forms with correct amounts in the correct columns for his services. Also tax planning advice is nil. Absolutely nothing - nor would I trust any advice given.

Now some people may say, "Wow, that never happens with our CPA". But how would you know that without checking the work? Yes, after being audited several times you might come to that realization. My parents did have one audit and several IRS billings for under-reported income due to his inability to copy the numbers correctly. A waste of time and money.
It can happen with software as well; software is no substitute for knowing the tax laws. I have found several bugs in tax software, particularly with state taxes (because there are 44 different versions). And the interview process may also miss questions that need to be asked; I have encountered this issue several times when filing CA or NJ taxes with a Health Savings Account.
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Re: Do tax accountants add any value?

Post by michaelingp » Fri Feb 22, 2019 7:54 pm

SandysDad wrote:
Thu Feb 21, 2019 7:07 pm


For me the big value is risk mitigation. An experience enrolled agent knows what is a flag and what is not. They also know how to make sure you don’t mischaractoriZe somethingnthat increases risk of audit.
I agree, but I'd state it a little differently. For me, what the professional brings is *perspective*. They know what's important and what isn't. I remember after my wife inherited a lot of complicated assets from her mother I used an accountant because I couldn't make head nor tale of the information on the K-1's. It would have taken me hours of reading and countless nights worrying and I still might not have got it right. Actually, I don't know if my accountant got it right or not, but he didn't sweat it at all, and the anxiety I saved was well worth the $600 or so he charged (this was quite a while ago). At other times I know he would make estimates if I didn't have the exact figure, because he knew it didn't matter that much.

I do have a recommendation for people using TurboTax. Don't assume anything. Go through every single interview question, as tedious as it is. A few years ago, I knew TurboTax was handling my daughter's HSA wrong because it was counting something as income that it shouldn't. When I went through the forms and the cross-references, I realized it wasn't really a TurboTax error, but rather I had skipped over an interview question that seemed to me to be in an illogical place, but still, if I had answered the question it would have calculated the taxes correctly.

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