I mentioned last year that against my frugal intuition I shelled out the big bucks to hire a CPA to do my taxes. I wanted to follow that post up and share my insight after another year of experience and knowledge to answer the question is it worth getting a CPA to do your taxes. Here are six reasons you should consider hiring a good Certified Public Accountant:
- Your taxes are somewhat complicated. Complicated can mean any of the following: extra income from say blogging or contracting, investments, child care expenses during work hours, mortgages or refinancing, energy efficient home repairs, adoptions, rental income, numerous charitable donations, gambling income, job related moving expenses, etc. A good CPA will be able to advise you on the best way to handle your current statement and they will probably even ask about things that you never thought were deductible. Even if your taxes aren’t complicated it may still be worth you time. The Happy Boulderette made below the poverty line during the last year of volunteering and had about the easiest taxes you could ask for, but she saw over a $1,000 difference between online tax preparation software and bartered CPA services.
- They are good at what they do and they usually like it. The CPA certification requires them to learn about the tax code and requires them to seek continuing education. The tax code in the US is quite ridiculous and overwhelming. If we are honest with our selves, most of us despise doing taxes and have only a cursory knowledge of the tax code. Let them focus on what they do best and you use your energy for what you do best.
- CPA will make suggestions for cutting your tax bill for years to come. Things like keeping receipts for energy bills or other home based business expenses. Maybe charitable donations that you didn’t know were deductible or energy efficient home repairs/upgrades. Those tips will have a compound effect every year you implement them. Just one $500 change would be worth $15,000 over the next 30 years.
- No Stress! I have used both online tax software and a CPA and I can’t begin to tell you how good it feels to use a CPA. No nagging questions of whether you understood the tax code. No questions of did you get the most deductions. You still have to prepare the information for them to process, but they are their to answer any questions and guide you the whole way. It is that wonderful.
- Computers aren’t humans. They can’t talk you. They don’t reassure you. They offer a one way flow of information, not a conversation. The software might not even be intuitive to you. One skipped or misunderstood check box and you could miss out on a big deduction. Tax software is generally pretty good. I have used Turbo Tax and Taxcut and even a local tax service(like H & R Block), but the they don’t hold a candle to a CPA for me. Did I really have to claim my babysitter as an employee? Can I deduct my home office even if my laptop sits in my living room? Those were not easy questions for me to answer with any degree of confidence while using software. They were answered thoroughly and reassuringly in minutes with a CPA. Computers and software also don’t do a good job of answering tax questions after your taxes have been filed, or when you buy a new house, or lose your job, or any host of other reasons that raise questions in your mind about taxes.
- It doesn’t cost as much as you think. Last year’s taxes cost me double what a regular tax service charged me and about 8 times what software charges, but we are only talking a few hundred dollars in most cases. It sounds like a lot, except that for most of us one small tip can easily recoup that cost. Also the bill is usually quite small when compared to the amount of money we are handing over to the government throughout the year. Lastly, if you don’t like the outcome you can resume your favorite tax preparation system the following year without any long term commitment.
All I can say is that I am a cheap frugal stick in the mud, I am not even giving a second thought to shelling out a few hundred dollars this year. For me, it is unquestionably worth the money and this is coming from a guy that would jump through hoops to save 5 bucks.