During tax season, there are many different thoughts that go through the minds of taxpayers. Some examples might be:
- How much am I going to have to pay this year?
- What am I going to get back?
- What can be done to lower taxable income?
- You mean I have to work so hard, only to have so much taken from me?
- Ugh! Working on taxes is like getting a root canal!
Yeah, I think we can say that while some people might look forward to tax season, it’s not really a reason for excitement for most folks. It’s not like the annual ritual of getting together for a Super Bowl party. Tax return party, anyone?
Back to the list of examples above. What resonates with me, after writing that, is that preparing one’s taxes can be a different experience for different people. Some people have very straightforward, simple financial lives – and correspondingly simple tax returns. Others who have various income sources and investments, property, and different dependent situations – well, their taxes can be much more complicated.
For me, it boils down to this: I pay a CPA to do my taxes.
Now, as a reader of this blog, you might be wondering: “What? Don’t you really like to save money?” Well, even though I sure do like to save money, I will pay to have taxes done for me. When it comes to the question of DIY or pay, I think that it can often be a worthwhile move to pay someone to get something done for you.
There are a variety of reasons I think it could be worthwhile to pay a CPA to prepare your tax return. Here are 3 reasons why:
Saving Time on Taxes
I don’t know about you, but I have the belief that time is more valuable than money. We can have all the money in the world, but we can’t make more time. That’s not to say money isn’t important, as you’re not likely to have me go that far, anyway 🙂 But our time isn’t free, and there is an opportunity cost to it. If taxes will take you a long time to do, then it can be worth considering paying a professional instead.
Specialized Tax Knowledge
Tax professionals should, one would think, know more about the tax code than regular folks like us. If we wanted to get a root canal – you know, that fun procedure to which I compared taxes earlier in this post – we would go to a dentist or endodontist. It’s not like we would really know how to do that on our own! So why not hire a pro to do taxes? Sure, it may be more necessary for some than others. When looking at tax rates by country, some pay more than others. Some tax codes might be more simple that others. Here in the U.S., it’s often complex enough for a lot of people and their own situation to make it worthwhile to see a pro.
Fewer Mistakes on Tax Returns
There is something about the power of practice and habit. If you’ve never done something before, or only a few times, you may not be that great at it. If you’ve done something 1000 times before, you should be less likely to make mistakes, all things being equal. Along those lines, a professional might be less likely to make mistakes than someone not thinking about taxes for a living.
Bottom Line: There can be times when it might be worth it to pay a professional to do your taxes. I’ve decided that this is indeed the case for me. What about you?
My Questions for You
Do you get your taxes done by a professional, or do you handle it by yourself?
Why do you take the approach you do?
If you do taxes on your own, how low would tax preparation fees have to be to get you to have someone else do the work for you?
We always have someone do them for us. We don’t understand a lot of it, and it’s not a mistake I really want to have. It saves us a lot of time and stress. My stepmom does it for us, and she used to work for a company. She also does it for free! Even better.
Jules – having someone who knows how to do taxes can save time and stress, that makes sense!
I always did our taxes until 2009 when we relocated outside of the U.S. I can’t handle it now, and actually we’re switching tax preparers for the third time for 2012 because we’ve yet to find a professional who can handle our taxes! We have to file in the US and where we live, my wife does contract work in the US, we have a rental property here, I have a small business–it’s a mess! But worth it. 🙂
Kurt – with a complicated tax situation, it makes sense to use a professional. Must be complicated if there are some that can’t help!
I have used a CPA since the the 70s. I needed one when I started investing in income property and eventually my businesses. I still use one particularly since it is so cheap and I appreciate the counsel during the year if I need it.
krantcents – with that much going on, it makes sense that you would use a CPA. To get help with a taxes that will be more complicated than that of the average person, and to also get some general counsel – all for a low price – sounds like a good move.
We have 3 small businesses and there is no way we would even attempt to do our taxes.
With 3 small businesses, that makes sense
Back when I was married, the husband and I started working with a CPA. I continue using the same guy to this day. I thought it necessary to get his advice before I took on roommates and to talk with him about how that would affect my taxes. (I do the honest thing and claim roommate payments as income, but I also get to claim a portion of my house maintenance expenses as business expenses, too.) I understand some of the tax programs are very good if one’s situation is not very complicated. I prefer to use the professional, though. As a “bonus” I think that if I ever needed to get a copy of my taxes due to loss or theft, I could always get them from him, too. So he not only provides professional counsel and preparation services, he’s also provided secure storage of some pretty important documents.
Linda – that point you made about having the tax guy be an alternate source of storage for these documents is a good one. Just make sure the guy is in business for some time going forward!
I used to do my taxes myself but it was far too stressful much better getting a professional to do it, not worth the sleepless nights!
Agreed, avoid stress and gaining sleep are good things!
I have to use an accountant because he keeps things fair between my children’s father and myself. With two boys in university there are lots of tuition deductions to share (I am in Canada). The accountant uses as much tuition deduction per boy as he can then divides the rest between mom and dad.
Very fair and he charges me $200 plus 13% tax for the 3 returns of myself and the 2 boys.
Jane – yes, another example of how it can be beneficial to have a professional work on taxes.
We have used a CPA for a few years now mainly due to having a partial share in a rental property in another state and being required to file state taxes in two states. We also have a lot of itemized deductions in the form of medical expenses. We pay our CPA on average $400 a year for doing our taxes however this year I am probably going to just use turbotax and do them myself. We found out last year that our 2009 taxes that the CPA did were completely wrong and we ended up having to pay money in back taxes, fees, interest and on top of that we had to pay the CPA to do them again which was incredibly frustrating.
Tara – wow, that’s not good to find out they did it wrong AND got to collect money for redoing them. Seems like the preparer would should redo them without charge, if it was truly his/her mistake.
yeah we spent a long time arguing with them over that one apparently it was in the initial contract we signed with them – another reason to always read the fine print!
Great example of the concept of reading the fine print. I don’t blame you for arguing though!
The best money I spend each year is having my CPA do my taxes. It was taking me over 40 hours of my own time to get them done years ago. Now I have 2 more K-1 statements so I can only imagine it would take longer. The forms are close to 100 pages so you can imagine what it would take to do without professional guidance.
JT – once I saw the 40 hour number in your comment, I immediately thought of how painful that would be to do those taxes.
As a tax attorney who sees many returns done by the taxpayer and gets calls about tax problems, it is clear that having a pro help you is the way to go. There is just too much that can wrong. If you are audited your tax attorney or CPA will have put you in a better position then if you took positions on your return based upon your limited knowledge of the tax code. Also, any elections that have long range implications or just overall tax planning based on what the expert sees can be explored with your tax expert.
Also, tax preparers can make suggestions as to estate planning and if you have a tax attorney, he or she can actually implement your estate plan with the proper documents.