Benefits of using CPA for taxes

[TreadLightly]

We pay our CPA $800 for our annual returns. I feel like I should be getting stellar service. We "inherited" the CPA as he always did my husband's taxes via his parents until he took over the responsibility. Before this i did Turbo Tax and I was pleased as punch (although my taxes were pretty simple).

This year I found out about the Saver's Credit on this forum. I wrote a note about it in our workbook for our return, and the CPA still didn't apply it (i'll have him fix it, of course). We never got it before, but have had 2 low AGI years. This year we contributed to our IRAs. Unfortunately, it's too late to get the credit for last year because we didn't contribute. I wish the CPA would've mentioned that we'd qualify if we contributed.

A few years ago before we were married, my husband had the CPA file an amended return for some very big vehicle purchase deduction/credit/whatever it was that the CPA missed and he learned about later because his dad had gotten it, but the law had changed by that point so he didn't get it. he paid for the service of the amended return, but still got screwed out of thousands of dollars because of their oversight.

Does a CPA usually extend the information on what credits/special deductions we qualify for? Should I have to find this out on forums, write it in our workbook, then still get it left out of the return? I feel like I'm not getting alot for the money. I spend a ton of time totaling all relevant items and sending everything filled out as applicable in the workbook they send. There should be no looking, guessing or digging for them. I make it really easy. Tax returns have always felt out of reach for me to do on my own, but if I'm paying someone $800 to miss a significant tax credit opportunity, what else are they missing? Should I do it myself? They are a highly respected firm in town. Our in laws are happy, but they don't returns their returns before signing to file.

Am I off base?

[Tachyon]

Sounds like you don't have an accountant. You have a glorified data entriest.
$800 sounds somewhat steep for a data entriest. It sounds somewhat cheap for a true tax-planning consultancy.

[Katietsu]

First of all, I will say I am surprised that you are sending the return back to add the savers credit. The software should automatically calculate and add that credit if you are eligible.

I do not get the impression that very many CPA's and preparers spend much time on proactive tax planning when you just hire them for return preparation. When they do in that setting, I would think it would more commonly focus on a narrow topic suggested by the return.

You should decide if you are getting a serice worth $800 to you.

[seawolf21]

Having a CPA does NOT necessarily mean a person specialize in income taxes.

If you want someone to do your books, go with a CPA. For taxes, you don’t need to hire a CPA nor are they necessarily the best person for the job.

If $800 is only for filing income taxes, then you might as well bring your return to H&R Block and keep the difference.

[Spedward]

I have a CPA (and even work in tax) but I am the last guy you would want preparing your tax return (or any for that matter).

Point being, a CPA does not equate to the right person for the job.

[dodecahedron]

A few years ago before we were married, my husband had the CPA file an amended return for some very big vehicle purchase deduction/credit/whatever it was that the CPA missed and he learned about later because his dad had gotten it, but the law had changed by that point so he didn't get it. he paid for the service of the amended return, but still got screwed out of thousands of dollars because of their oversight.

The professional tax preparers with whom I am familiar know that some mistakes are inevitable and they maintain Errors & Omissions (E&O) professional liability insurance to cover the consequences of their mistakes. The American Institute of CPAs (AICPA) recommends such coverage.

If it is too late to amend the return to correct his mistake, then the CPA should reimburse your husband for the consequences of his error--assuming it was the CPA's error. (Usually tax preparers have their clients complete a questionnaire, which should have asked about the vehicle purchase. If your husband answered that question accurately on the questionnaire and the CPA did not enter it on the tax return, then that's professional error on the CPA's part.)

[Shallowpockets]

Seems like you are doing a lot of work on your taxes. Second guessing the CPA, checking your return. May as well do the whole thing yourself.
Sure, your in laws are happy with this CPA, they never check so they do not even know if all is best on their tax return. They may be missing or have missed some important info that may have saved them some money over the years. They will never know.
If I had to essentially check my tax return, why am I spending $800 for someone to do it?
It is a case of absolute trust in your CPA, otherwise you may as well do it yourself.

[TreadLightly]

Seems like you are doing a lot of work on your taxes. Second guessing the CPA, checking your return. May as well do the whole thing yourself.
Sure, your in laws are happy with this CPA, they never check so they do not even know if all is best on their tax return. They may be missing or have missed some important info that may have saved them some money over the years. They will never know.
If I had to essentially check my tax return, why am I spending $800 for someone to do it?
It is a case of absolute trust in your CPA, otherwise you may as well do it yourself.

Is this something that I would use tax prep software to do? Is this typically as good as using a CPA?

[RudyS]

In your original post you said you used TurboTax and were pleased with it. Why would you not do that again, considering what you have already found out about your CPA?

[TreadLightly]

In your original post you said you used TurboTax and were pleased with it. Why would you not do that again, considering what you have already found out about your CPA?

I thought TurboTax was great for just me. Then again, my taxes were very simple. I always felt like to really do taxes in complex scenarios, you either need a CPA or to surround yourself with stacks of all the right forms and keep up-to-date with all tax law. Does TurboTax really do a good job for "complex" tax returns? Not sure what I mean by complex, just multiple LLCs, retirement accounts, investments, property transfers, etc. When I write that out it seems logical that TurboTax would do just fine...

[BL]

Why not pick up a 2017 tax program (Amazon often has them on sale, maybe after tax deadline) and run through the program with the info you furnished the CPA? Then compare results, and decide if it makes sense. As they say, No one cares about your finances as much as you do. Not sure which level you need for best LLC coverage. Do you get a k-1?

[TreadLightly]

Why not pick up a 2017 tax program (Amazon often has them on sale, maybe after tax deadline) and run through the program with the info you furnished the CPA? Then compare results, and decide if it makes sense. As they say, No one cares about your finances as much as you do. Not sure which level you need for best LLC coverage. Do you get a k-1?

no k-1, we have single member LLCs. i like your idea of seeing how tax software does our taxes once we have the results from a CPA. i'm going to do this!

i'll say this though, i really respect the work of CPAs. i want to be sure that i didn't lump my experiences with my opinion. the CPA preparing our return is different from the senior CPA reviewing our return, familiar with our family's financial situation, and the one contacting me when they have questions. so when i give information to the contact, there may be a break down in going back and fixing other things when updates are made.

[BL]

It does sound like there is value added to simply preparing your taxes here, so that is something to keep in mind. Still, it wouldn't hurt to spend a bit for the proper level program to see how it works and maybe get some clues or play "what if" on some business decisions that may affect taxes. Look at subjects of interest in Publication 17 and other pertinent IRS pubs available online (or maybe can be ordered in print). IRS has a lot of valuable info.

[TreadLightly]

Having a CPA does NOT necessarily mean a person specialize in income taxes.

If you want someone to do your books, go with a CPA. For taxes, you don’t need to hire a CPA nor are they necessarily the best person for the job.

If $800 is only for filing income taxes, then you might as well bring your return to H&R Block and keep the difference.

quite honestly, i never knew this. i always assumed H&R block type thing was "lesser," but good enough if you just want your taxes done legally. i also assumed going to a CPA was the ultimate way to get your taxes done best. if we're not doing anything else with them throughout the year, perhaps we are overdoing it?

EDIT: maybe over-spending and still not getting an income tax specialist. we "inherited" them from father-in-law who moves alot of money and i'm sure has them do the books, so what you're saying makes sense. if we don't use them for book keeping, maybe we should look elsewhere.

[TreadLightly]

It does sound like there is value added to simply preparing your taxes here, so that is something to keep in mind. Still, it wouldn't hurt to spend a bit for the proper level program to see how it works and maybe get some clues or play "what if" on some business decisions that may affect taxes. Look at subjects of interest in Publication 17 and other pertinent IRS pubs available online (or maybe can be ordered in print). IRS has a lot of valuable info.

i like the playing "what if" idea. i love the IRS website, it really is informative. but what i'm most concerned about is that "you don't know what you don't know," and if I happen to fail to read on a subject that I don't know to read on, I could get us in hot water.

honestly the whole "CPA isn't necessarily the best person to do your taxes" idea is rocking my world. so yeah i have a few options now.

[FoolStreet]

A few years ago before we were married, my husband had the CPA file an amended return for some very big vehicle purchase deduction/credit/whatever it was that the CPA missed and he learned about later because his dad had gotten it, but the law had changed by that point so he didn't get it. he paid for the service of the amended return, but still got screwed out of thousands of dollars because of their oversight.

The professional tax preparers with whom I am familiar know that some mistakes are inevitable and they maintain Errors & Omissions (E&O) professional liability insurance to cover the consequences of their mistakes. The American Institute of CPAs (AICPA) recommends such coverage.

If it is too late to amend the return to correct his mistake, then the CPA should reimburse your husband for the consequences of his error--assuming it was the CPA's error. (Usually tax preparers have their clients complete a questionnaire, which should have asked about the vehicle purchase. If your husband answered that question accurately on the questionnaire and the CPA did not enter it on the tax return, then that's professional error on the CPA's part.)

Honest question: if you have to fill out an accountant’s questionnaire (with a pen on a printed piece of paper), then what is the point of using them for the return as opposed to using tax software from which the questionnaire is derived or to which the questionnaire info is data entered. Said the other way, why not just give the user access to the software for data entry and have the cpa spend time on validation and strategy? Is that even possible?

What is the mark of a good accountant/cpa/tax preparer for the user who has a complicated return but not quite in the true corporate phase?

[FoolStreet]

Why not pick up a 2017 tax program (Amazon often has them on sale, maybe after tax deadline) and run through the program with the info you furnished the CPA? Then compare results, and decide if it makes sense. As they say, No one cares about your finances as much as you do. Not sure which level you need for best LLC coverage. Do you get a k-1?

Is there a respected tax software package for a simple k-1 for small real estate holdings?

[47Percent]

First of all, we need to separate tax-filing and tax-planning.

You cannot hire a CPA for tax filing and expect the benefits of tax planning. By the time you are ready to file the taxes, your tax liability is pretty much set. Of course, you can claim this credit or that credit and miss out on that. Most good tax preparers should be able to handle that.

But what you really need is to be able to understand the tax consequences while you are weighing the decisions and making the decisions. Whether to buy or lease a car, whether to buy a rental property, whether to sell a rental property, even buying and selling equities, contributing to HSA, choosing your insurance etc. etc. For that if you have he accountant who does your taxes also responded to your emails that would be great -- may be for a slightly higher fee. You don't want to be charged $100+ for each question, because you will never do it.

The super rich, when they employ accountants, that's the benefit they get -- Advise while they are making decisions.

For most of us, it helps to do your own taxes. If you work a whole year to make $70k, $100k, or $200k, you can certainly spend a day or two of your free time to save a few thousands. I am not talking about just the money paid to a tax preparer. Most of the money lost is lost because of inefficient financial decisions. You need to really get a feel for how the numbers affect each other and affect the taxes. On a$100k of income $2k savings is probably a conservative estimate. Tax preparation software nowadays are so good that self preparation is actually not that difficult.

Even if you finally go with someone for tax-preparation, you should actually understand pretty much every number in the return.

All that said, I have always suspected that the chance of an audit is slightly lower if the return is professionally prepared. But I have no proof to back that up.

[Sasquatch]

I have a good relationship with my CPA and for me it’s worth every penny. Dividends, RSUs, depreciation schedules on real estate, 1031 exchanges, too much for me to handle. Any time I have a tax impact question he is a phone call or email away and I never get a bill except the one time charge for the preparation annually.

[HIinvestor]

We like our CPA and his staff. They handle all our tax questions and do our personal and partnership returns. If they make a mistake, they file an amended return at no cost with apologies.

They also compare our amounts for current year with prior year and we discuss any discrepancies to figure out if there may be an error. They do keep up in the finer points and will even handle IRS inquiries, like the one we just received from IRS. We COULD do it all but we prefer to let the CPA handle it and not have it added to our plate.

(IRS claims we didn’t submit tax payment when we did and we gave online receipt and our bank statement that shows it was paid to IRS. We just needed to sign authorization for CPA to represent us and fax him the docs. We prepaid a modest amount just to handle such a possible issue.)

[BL]

As for saver's credit, I recommend you always save at least 2000 per person in a retirement account even if you don't qualify. Retirement sneaks up on us whether or not we are ready for it, and it sounds like you have barely gotten started. Perhaps you are investing in business or real estate, but it sounds pretty complicated if you can get it down to <60k AGI. (Since I don't know anything about your ages or business , this may not apply at this time. It is recommended that folks aim for 15% savings/year, usually in IRAs, 401Ks (individual or not), etc.)

I would agree that $800 is a lot of money for no guidance and simply preparing with your input.

I really think you could learn a lot and maybe get help making decisions by the things you learn by doing the tax returns yourself. You do get a better picture of your situation. By gathering the info, you have already done most of the work for the tax returns. It can get one thinking about how the business is progressing, what could be done differently and what works, and lets you do the "what if" ideas on other possibilities. Most programs seem to let you do the upgrading if you need it. Sometimes the forms are all there in the cheaper program levels, but the questions may be less useful for some forms.

[J295]

Based on your post it appears you are not pleased with the service, and your dissatisfaction seems reasonable, so the answer seems straightforward – – don’t use this provider.

[HJG0989]

OP,

Have you looked into Enrolled Agents? They specialize in taxes, unlike a CPA. I was able to find an EA who is also a CFP and charges a flat fee. If I like him, I may hire him to do my taxes.

I have a lot of individual stocks and a lot of capital gains and I want to work with someone who understands investing as well as taxes.

Just to do taxes though, I think an EA is who you want to hire, not a CPA.

https://www.naea.org/educating-america/ ... lled-agent

[clown]

I have used Turbo Tax since the mid-1980's, and the program just gets simpler and better every year. Full disclosure - our returns are straightforward.

I used to have a very high opinion of Enrolled Agents until I found that my in-laws EA had missed a deduction every year for several years. Because the in-laws lived in a Continuing Care Retirement Community, they were entitled to deduct a portion of the CCRC fee attributable to pre-paid medical expense. It is very clear in the IRS regulations. We dumped the EA, found the applicable opinion letter from the CCRC's actuary, filed amended returns, and got a good chunk of change for the in-laws.

Given the ease of using Turbo Tax and the opportunity for tax preparers to make errors, I prefer to do the return myself. Nothing else is quite like kicking the tires.

[Lucky Lemon]

Many CPAs do specialize in tax. Of those CPAs some will be very competent and others will be incompetent.

Some EAs are very competent and others are incompetent. Of the very small number of EAs I know, they all ended up as an EA because they could not pass the CPA exams.

When choosing any professional/service provider you must do your own due diligence and not rely on the letters at the end of their name.

LL

[gotester2000]

You dont need a CPA unless you have done some complex transactions. You can efile free - 800$ is very steep fee for a simple return.

[pennywise]

But what you really need is to be able to understand the tax consequences while you are weighing the decisions and making the decisions. Whether to buy or lease a car, whether to buy a rental property, whether to sell a rental property, even buying and selling equities, contributing to HSA, choosing your insurance etc. etc.

The super rich, when they employ accountants, that's the benefit they get -- Advise while they are making decisions.

We are closing in on retirement and this is exactly what I have asked that our accountant do for us. Although we are not and never will be super rich, our financial life has enough moving parts that I know I don't know enough to truly make informed decisions so that action A has the right effect on account B, which in turn should not affect tax liability C. As I told my spouse recently I need to know not just that we've got enough, but how to manage our financial life to maximize enough.

The accountant we work with offers financial modeling and advising well beyond preparing our annual tax returns, and is quite clear she does not recommend specific products or make commissions. That's exactly what I need since if I'm looking for investment advice I've got Bogleheads

[Retired2013]

As to the Savers Credit; Several years ago I thought my sister could use the credit. I had my mother give my sister $3,000 to open an IRA so she would get 50% back. When she did her tax return, she said she didn't get $1,500 back. Turns out it's only limited to the tax liability amount. I didn't go to the bottom of the form. I don't know how anybody can get the full $1,500 amount back since their taxable income has to be so low to qualify for the credit. Their tax liability will not be $1,500.

[CedarWaxWing]

Seems like you are doing a lot of work on your taxes. Second guessing the CPA, checking your return. May as well do the whole thing yourself.
Sure, your in laws are happy with this CPA, they never check so they do not even know if all is best on their tax return. They may be missing or have missed some important info that may have saved them some money over the years. They will never know.
If I had to essentially check my tax return, why am I spending $800 for someone to do it?
It is a case of absolute trust in your CPA, otherwise you may as well do it yourself.

Entry errors are made.. they tend to hire college kids and who knows what other kind of help.... for data entry... and they the CPA is supposed to check it.

[HIinvestor]

Our CPA has a staff of accountants but her personally checks every return that is filed and makes sure it is correct. He’s an enrolled agent and several of his staff are working to become CPAs as well. I have been happy with them. They are handling my squabble with the IRS, where IRS claims we didn’t pay our taxes despite proof via receipt from IRS.gov and our bank statement we DID pay before 4/15/2018!

[MikeG62]

...Am I off base?

No you are not. It should not be too much to expect things to be done right.

Unfortunately a lot of CPA's are just tax return shops. They blast through the returns so quickly that sometimes they miss stuff.

I'd either buy TT and try once to do it yourself - you'd be surprised how easy it is. Otherwise find a new accountant (tax preparer). I would certainly not go back to this person again.

[Timon0201]

If you use a CPA, you want to make sure you have a CPA that caters to your income level. High Net Worth taxes are complex in many ways, but CPA's that focus on this, don't necessarily know the credits available for low income people because that's just not something they deal with on the day to day. If you have a CPA that works mainly with low income people, they won't be able to handle complexities that some times come with HNW individuals.