The Happy Rock Spends The Big Money For Tax Prepation
I mentioned previously how doing my own taxes last year almost cost me $350 in penalties and interest. Luckily I was able to get that down to around $90. This year I decided to shell out the big bucks and buy top notch tax advice and preparation, even though it goes against my frugal disposition.
Why would I do it then? Because I think it will more than pay for itself. It is one of those short term financial pain for long term benefits. FMF at Free Money Finance was the person that really got me thinking about using a CPA. Below is a list that expands on some of his great reasoning:
Time is Money. It would take me probably 10-30 hours to really do my taxes well and do enough research to feel like I wasn’t missing anything big. If my time was worth $20 an hour, that would about equal the price of a good CPA.
Our Taxes Are Somewhat Complicated. Some of the abnormal items are a self employed spouse, home based business(The Happy Rock), and an in-home babysitter(Nanny Tax). Professional advice on just those three items will more than pay for the increased fee.
Tax Knowledge Has Long Term Benefits. Any knowledge gained now will save us money on taxes for years to come.
“Peace of Mind”. No stress!!! No fear of audits. I won’t make common mistakes. Even more than lack of problems and stress, if I connect with a high quality professional I can be assured to get as much of my money back from the government as possible.
With that said, connecting with a high quality professional is the key to most of the benefits. I tried a tax service, Liberty Tax, which is just like H&R Block and other outfits a few year ago and felt like it was a total waste of money. Basically I was just paying for someone to enter my taxes, not for any real tax advice.
So, how did I connect with a high quality CPA? There happened to be a regular commenter on The Happy Rock named Thecpa. I was able to get a very good recommendations from a co-worker and made the leap last week. Thecpa works for Zarin and Associates in Pennsville, NJ and the cost of the accounting advice will be around $400. From just two emails I am confident that I will save more than I will pay just this year. A good accountant only needed to find an extra $1000 or so in deductions to directly make the fees worth it. For me, a properly done home office deduction were I can write off a percentage of my utilities and depreciate my house will be a huge tax break for years to come.
I may even get spunky and try to do my own taxes online and see what the difference is.
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Get proffestional advise , let risks ,
Good Luck
Tracy ho
Wisdomgettingloaded
In your column about spending the big money for tax preparation, you wrote: “Time is Money. It would take me probably 10-30 hours to really do my taxes well and do enough research to feel like I wasn’t missing anything big. If my time was worth $20 an hour, that would about equal the price of a good CPA.”
Your statement implies that using a CPA will relieve you of that 10 to 30 hours of work. This is not true. As you know, there are three aspects to tax returns:
1. Gathering tax records
2. Inputting tax data
3. Tax advice/knowing where to input information to minimize taxes
All taxpayers must do No. 1, whether or not they use a CPA. This sample tax organizer shows how much information taxpayers have to gather for a CPA. Anybody can do No. 2. But you are correct about No. 3 – it is worthwhile to obtain advice, as opposed to stenographer services at strip mall tax companies.
You also mentioned you don’t have to worry about anything. That is also not necessarily true. Taxpayers are ultimately responsible for the accuracy of their return. Many taxpayers – including celebrities – have filed inaccurate returns because their CPA was wrong.
Cheers,
Eric
Eric,
You are absolutely correct. I did have to spend time gathering records,
but it took about 3-5 hours. Since my CPA told me exactly what I was
looking for, and I keep all my finances in Quicken it was a breeze. I
even saved queries so it will be even easier next year.
#3 is were all the savings happens. I would have spent hours just trying
to research and understand the home office deduction alone, let alone the
nanny tax, and my wife’s consulting write-offs.
With #2 there is still stress in trying verify and understand what numbers
to put were.
Finally, I agree mistakes do happen, but I still do feel like I don’t have
to worry about anything. I get representation if I get audited, and even
if I get audited I know there isn’t anything to catch accept honest
mistakes or mis-calculations. I don’t lose any sleep over that at all.
Thanks for the helpful link and the thoughts.