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When do you need a tax professional?

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  • When do you need a tax professional?

    How does one know when a tax professional will help them pay a lower tax bill?


    I've always done our taxes using TurboTax, and each year it has gotten progressively more complicated going from W2 (2013), to W2 and 1099 (2014), to W2, 1099, K-1 and We Borrowed Interest-Free From the IRS to pay the school loans (2015). We're still renting so have no mortgage deduction, and it's always been a standard deduction.


    This year we simply have W2 income, but of course this is the year my better half is finally in a post-residency place where she has time to learn about finances and suggested we get a tax professional to make sure we're not over paying.  I'm open to the idea, but taxes seem really straight forward at this point...?


    And is a tax preparer who will do your taxes and you only have to pay him if you like the result and have it filed normal? Does that seem odd? Although I guess that's technically how TurboTax works...?

  • #2
    When I started in practice, I asked a couple senior colleagues/partners to recommend an accountant for my taxes. They laughed and told me I did not need one. So I learned about W-2s, 1099s, Schedule H (nanny), K-1's, etc. It was not until I bought state tax credits that I needed to get a CPA involved (TurboTax could not accommodate it). Based on what you have written here, I think that you would be okay without professional help. I know that I understood the tax code much better when I was doing the taxes myself. I also have learned that I am much more likely to catch a mistake that the pro has made (usually an omission) than I am to get a credit for something that I have missed.

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    • #3
      Last years return took me a lot of time with the K-1 and three forms of employment, but I don't hate the process, almost like a puzzle.  I was thinking I might find more value having a review of my previous two years to catch any mistakes, because this year is only W2 income.  I actually had a quote from a CPA to do this year for a few hundred and he said he'd look at last years to see if there were any mistakes for free. He didn't ask how complex it was. Since I feel paying for this year is money wasted, maybe that's money well spent if I redefine the service as this year is free and he'll review last year for a few hundred. But did I make a mistake, I really don't think so

       

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      • #4



        How does one know when a tax professional will help them pay a lower tax bill?


        I’ve always done our taxes using TurboTax, and each year it has gotten progressively more complicated going from W2 (2013), to W2 and 1099 (2014), to W2, 1099, K-1 and We Borrowed Interest-Free From the IRS to pay the school loans (2015). We’re still renting so have no mortgage deduction, and it’s always been a standard deduction.


        This year we simply have W2 income, but of course this is the year my better half is finally in a post-residency place where she has time to learn about finances and suggested we get a tax professional to make sure we’re not over paying.  I’m open to the idea, but taxes seem really straight forward at this point…?


        And is a tax preparer who will do your taxes and you only have to pay him if you like the result and have it filed normal? Does that seem odd? Although I guess that’s technically how TurboTax works…?

        Click to expand...


        This blog post will answer a lot of questions, including how to know when you need a CPA.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Thanks that blog post was helpful.

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          • #6
            really go through your 1040 if you never have and start to learn the parts of the tax code.

            the IRS really wants you to:

            - save for retirement

            - buy a house

            - have kids

            - donate to charity

            - lose money in the stock market

            - spend a TON on medical care

            - move to a state with no taxes

            - etcetc

             

            short of those big sections, theres not much else. i vote no CPA. unless you pay them a ton, then you deduct part of that as well...

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            • #7
              When you have a tax problem

              At some point it's just nice to be able to know you can point the finger at your CPA if you ever face an audit.  Also someone to point the finger at when you find out you've been missing out on deducing X or getting Y credit or not knowing about Z for all of these years.

              But if all you're doing is plugging in your W2s, kids SSNs, deducting your mortgage interest and charitable gifts then you can probably do that yourself.

              When you are depreciating real estate or equipment, trying to deduct a lot of vacations and meals and entertainment, your home office, etc. you probably want a CPA.  If you're just getting a K1, you might be alright but if you're sending out K1s you probably want a CPA.  When you're trying to report your auto dealer sales on a LIFO basis and you still have that Buick Skylark with a cost of $8,300 on your books, you probably want a CPA.

              When I was a tax accountant I recall doing many returns that would have been easier and less costly on turbotax.  The client assembled all the paperwork, we just had to plug it all in.  And, well, ask for the right stuff in the first place

              Even if you have a simple return, a good, honest CPA should be charging you accordingly.  You shouldn't be paying $2k for an accountant to plug and chug the aforesaid W2s and mortgage interest.  But it might be $500, for what you could do with a $50 copy of turbotax and a couple few hours of your time.  And a few hundred more if you send a shoebox full of receipts.

              With enough time, you can make yourself an expert in anything. Is it worth it though?  Up to you.

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