Follow On TwitterOutcome Of Hiring An Accountant To Do Our Taxes Vs Using Turbo Tax Or Tax Cut
In this article I present the conclusion of my experiment on whether hiring an accountant to do your taxes is better than using turbo tax or tax cut. If you missed part one of this experiment, please check it out here first before reading on.
Photo Youssef Abdelaal
So the results are in! The good news is that our accountant fulfilled his promise and delivered our tax return way ahead of the April 15th deadline. The bad news is that our experiences with our accountant weren’t exactly positive.
Before I continue, I just want to emphasize that the conclusions I’m making in this article should be taken with a grain of salt and are not indicative of accountants in general. There are thousands of CPAs out there and our experiences represent just a single data point.
To provide some background information, my wife and I have worked with this accountant for a little over a year now to discuss tax strategies for our small business. But this is the first time that we have used him to actually file our taxes and it will probably be our last. Here’s why.
We Got Off On The Wrong Foot
Because our accountant works about 40 minutes away by car, it’s not very convenient for us to talk face to face or to drop things off at his office. During the weekdays, my wife is with the kids and I’m at work. On the weekends, our accountant is not in the office. Pretty much the only convenient way to send our accountant information is through email or snail mail.
For those of you wondering why we chose an accountant that works so far away, it’s because he came highly recommended by a coworker of mine. In any case, since we didn’t want to make the drive up to his office, we decided to scan all of our 1099′s and other tax forms into pdf format and emailed encrypted versions to him for review. That’s when the trouble started.
Because we emailed him an archive of about a dozen password protected pdf’s, his assistant got fed up because she didn’t feel like opening each pdf up and printing them out. So she called and asked us to mail a physical copy of our tax forms to their office instead.
Personally, I thought this was ridiculous. We wasted more time on the phone than she would have spent printing out the forms. Even though I offered to condense all of the forms into a single pdf, she said that she would have to charge us $200 an hour for her to take the time and print out our pdfs.
Needless to say, this left a bad taste in my mouth from the start. But what could we do? We ended up sending her copies via certified mail, but I was pretty annoyed (mainly by the $200/hr threat).
He Was Difficult To Get Ahold Of
Once our accountant received our tax information, things proceeded much more smoothly but what annoyed me was that it was difficult to reach him to ask even the most basic of questions. Since it’s tax season, I completely understand that he’s probably swamped working on many other tax returns outside of ours but it would have been nice to receive quicker responses.
Perhaps it’s because I’m impatient and am used to doing everything on my own, but I like knowing what is going on and I need reassurance that everything is proceeding smoothly. With our accountant, after dropping off our tax forms, we basically didn’t hear from him again until he was done with our return. Outside of a brief questionnaire in the beginning, there was no feedback loop and no additional questions asked.
He Made Errors
Not providing us with feedback during the process was all fine and good as long as he did a good job. But as soon as we received our tax return, we immediately noticed some errors.
For one thing, there was a typo and the cost basis for one of our stock transactions was completely off. Granted, it wasn’t a straightforward transaction, but it should have been entered correctly. To provide some background, the discrepancy was with a stock that I had purchased in several lots which had undergone a reverse split and then finally was acquired by an overseas company. With Turbo Tax, I simply imported everything in directly from Schwab. But my accountant completely missed one of our buy transactions which resulted in a lower cost basis. In short, even though we took a loss on the stock, his return showed that we had a gain.
The second thing he missed was an energy tax credit provided by the government. Because we recently added insulation and drywall to portions of our house, Turbo Tax said that we were eligible for a 1K tax credit. However on the return filed by our accountant, this credit was nowhere to be found. The status of this discrepancy still remains unresolved and we are trying to get ahold of our accountant to discuss whether this credit truly applies. But based on what Turbo Tax is telling us, we should be able to take it as a tax credit.
The final discrepancy that we noticed was that information from one of our 1099′s was not entered at all. We currently leave some of our money in Paypal’s money market fund and there was a minuscule dividend(around 20 bucks) that we were paid during the year. However, we could not find this amount anywhere in the return. Once again, this is something we are in the process of clearing up.
Most Of The Work Is In The Prep
My wife and I went into all of this thinking that using an accountant was going to save us time in filing our taxes. But instead, we discovered that we had to do most of the prep work. In fact, we ended up spending several hours collating our business numbers and gathering all of the tax data for the accountant.
One of the reasons we spent extra time was because our accountant wanted our business numbers in a different format than we had them in. In the end, all of our numbers tied out the same way but massaging them into his format took a good chunk of my wife’s time.
In any case, once all of the data was ready to go, entering all of the numbers into Turbo Tax took hardly any time at all. And this prep work was required whether we used an accountant or not. Arguably, using our accountant took more time because after finding the initial error, we went through his return line by line to check for additional discrepancies.
Benefits Of Using Our Accountant
I don’t want to come across as completely negative towards our accountant because we actually really like working with him and will continue to use him as a tax advisor. It’s just that my wife and I were very disappointed with the results.
That being said, one of the benefits of using our accountant to file our taxes is that we now know the right way to file our LLC paperwork. One of our motivations for using an accountant this year was that we converted our business to an LLC midway through last year and it was unclear how to indicate this properly in our tax return. Because we used an accountant, we now know how to do this ourselves from now on.
The other benefit is that our accountant is currently working with us to avoid having such lopsided tax returns in the future. A lopsided return is when you either have to pay a large amount or receive an abnormally large refund during tax time. To provide you with some context, I’ve done a bad job in the past in regards to estimating our income and our accountant is helping us do a better job. This year, we are getting a 10k tax return whereas last year we had to pay 30k in taxes. Clearly, I need some help in this department.
Conclusion
Once again, please take these conclusions with a grain of salt because they reflect only my experiences with a single accountant. But here’s what I have to say about using an accountant to do your taxes versus using Turbo Tax or Tax Cut.
- An accountant can’t change the past. Therefore, using an accountant is probably not going to save you much money versus Turbo Tax for just filing a tax return. In our case, Turbo Tax did a better job of finding extra deductions.
- It’s good to use an accountant if something has changed with your tax situation and you are not sure how to proceed. We recently switched to an LLC and needed guidance.
- An accountant can help you improve your future tax situation by suggesting things to look out for in future returns.
Even though we had a bad experience with this tax return and shelled out $550 in the process, we will continue to use our accountant as an advisor to plan for next year. For those of you with a relatively simple tax return like ours, I doubt that an accountant will make much of a difference. In addition, if you are anal like I am, you’ll end up checking up on all the numbers anyways which means you probably won’t save that much time either. The true value of having an accountant on board is to provide future guidance and answer your tax questions going forward.
Did you like this article? There are many more articles like this on entrepreneurship, kids and money and how to open an online business on this website. Read about our journey how we went from earning 0 to 100 thousand dollars in 12 months with our online business. Looking for some laughs? Read about some of our crazy customer stories.
Ready To Get Serious About Starting An Online Business?
If you are really considering starting your own online business and quitting your day job, then you absolutely have to check out my guide on How To Create A Profitable Online Store In 5 Easy Steps.In this guide, I reveal the steps that my wife and I took to earn 100 thousand dollars in the span of just a year. Best of all, it's absolutely free!
Stumble!
Reddit!
Digg!
Del.icio.us
Facebook
Get Free Updates Via RSS
Get Free Updates Via Email
Follow Me On Twitter
Similar Posts
- Hiring An Accountant To Do Your Taxes Vs Using Turbo Tax Or Tax Cut
- How To Find The Right Accountant For Your Small Business
- Small Business Resources And Where To Find Help- The Ultimate Small Business Startup Guide Part 7
- How to Deduct Your Home Office on Your Taxes
- The Ultimate Small Business Startup Guide – Introduction
Have you read these?
- Do You Feel Stuck At Your Job Because Of The Economy?
- What Your Customer Really Wants – Lessons Learned From Taking Customer Support Calls
- What Does It Take To Get You Off Your Butt?
- Beware Of The Business Filing Division Scam When Registering For An LLC
- How Giving Up $70,000 a Year is the Right Financial Choice
[...] Similar PostsOutcome Of Hiring An Accountant To Do Our Taxes Vs Using Turbo Tax Or Tax Cut [...]
I love having my taxes done by an accountant. I think your statement of it won’t save you much the first time through, but will help prepare you to save more is accurate. The accountant can only enter what you have kept track, but they should be actively telling you things to look for and the best way to approach things. They can also answer questions throughout the year, which can help shape your plans. The other thing to keep in mind is that in March and April you won’t get much attention, but once tax season is over they are willing to really sit down with you.
The main thing that I like is the lack of stress. Taxes, especially when you have odd situations like business or consulting in home child care and the like are stressful because you don’t know what you are doing or if you are doing it right. For me the peace of mind is maybe the biggest benefit.
Time wise, the prep time is still there, so it only saves me tax law investigation time(which can be hefty).
The other thing to note, is the CPA usually like what they do. I hate doing taxes, probably because of the stress and lack of experience and knowledge, but I hate it nonetheless.
Money well spent in my opinion.
Thank you for sharing your experience with us. I had my taxes done by an accountant and don’t regret it for one minute. Since I was filling returns for two states, I really needed the assistance. Fortunately, my accountant was wonderful. I hope you’re able to find someone better next year.
Wow, I could’ve written this post! Except my experience was much less positive. Our accountant charged us $1500 to do taxes and quarterly preparation, gave us NO guidance whatsoever unless we wanted to spend $200 an hour for a phone call, would not deduct anything, ANYTHING, not even home office or mileage or medical expenses, and refused to explain how they were doing things as far as tax preparation. Absolutely horrible experience, especially since our taxes are dead simple. Back to Turbo Tax for us, never again will we visit an accountant!
My experience with accountants is that they really pay off after a year or two of working with the same one. You need to work with them as much during the year as you do during tax time, feeding them info and numbers as they come in. That way, the accountant gets everything and has time to put it in whatever format he needs BEFORE crunch time. Sending a boatload of PDF’s during tax time may not be the best approach for either of you.
Take time to build a relationship with your accountant during the year and they will prove to be VERY worthwhile…alleviating the pain and pressure of tracking everything during the year. You’ll also learn the quirks of that particular accountant (best communication methods, preferred document formats), and he will learn your quirks, so that when the pressure is on, you both know where each other are coming form.
Of course, there are good and bad accountants out there so you should not hesitate to fire one if he doesn’t perform to your liking…there are plenty of other ones out there who will be happy to bend over backwards to make you happy.
Fascinating! Did I miss the portion about how much more in taxes did you save btw?
Nobody cares more about your own finances than you, is a general trend I’ve found.
Best, Sam
Social comments and analytics for this post…
This post was mentioned on Twitter by mywifequit: New At MWQHJ: The Outcome Of Hiring An Accountant To Do Our Taxes Vs Using Turbo Tax Or Tax Cut http://su.pr/6lo73X...
From reading your post, it didn’t appear as though you and your wife had a formal face to face office interview with the accountant before entering into an engagement? Is that correct? I know you said that you received a recommendation from a coworker but that initial interview really is important to determining if it’s a good fit. What may work for your coworker may not work for you.
I have to say that for most people, spending the money on a qualified accountant would seem a great move. There are limitations in having a software try to emulate expertise. You have to have the knowledge to fill out the answer correctly and for me, there is no substitute. I have used an accountant for well over a decade and if I had to do it myself, I would have a serious problem.
It sounds like you all got off on the wrong foot for many reasons and I don’t think that sending them password protected files helped.
Most accountants I would expect want either Excel files, hard copies, or both. This is something that should be discussed in advance (how they want the data). My old accountant told me “if you ever send me a shoebox full of receipts, you can expect it back”.
I see my responsibility as maintaining receipts and categorizing them to make the process smoother. In the end, I get the best of both world; a professional accountant at a very affordable price.
As you reference, if someone has a business entity such as a corporate or LLC, it is probably even more reason to use a professional as there are lots more rules that apply.
This is a great post and outlined some of the common problems with accountants that we’re working on solving at TeaSpiller:
1. “We got off on the wrong foot”. It looks like the problems were around convenience – the accountant being available at your time (off business hours), securely transmitting your information, bad customer service from the accountant (extra charges because of tech phobia on the accountant’s part).
SOLUTION: Teaspiller would have allowed you to pick the expert that was convenient for your schedule, made sure the expert could access your files securely (via SSL), and made sure to get a flat price for the tax return. We also integrate with partners like Freshbooks and Shoeboxed so that you can share your receipts or financial transactions from you LLC more easily with your accountant.
2. “He was difficult to get ahold of”. It looks like you wanted to email and schedule calls.
SOLUTION: Teaspiller allows you to see the expert’s schedule to setup a conf call and you can email basic questions back forth with your expert.
3. “Human Errors”. So typo on a stock transaction, missing energy credit, missing 1099 information.
SOLUTION: Similar to Turbotax, the Teaspiller platform would have allowed you to choose the energy tax credit before and communicate that information to your expert directly –even if you were unsure if you qualified. On the typos and error checking, we’re still working on this. We’d like to offer the same bank transaction downloads to accountants that you find in tax software packages like Turbotax next year. BUT we do have the ability for customers to leave public user reviews – and I think that creates the right incentives between the accountant and the customer to make sure that a high-level of quality of tax return (and service) is always given.
4. $550 for your return. This seems a little high? Did you get this quoted before the work began or at the end?
SOLUTION: We believe in upfront flat pricing – and most of our experts in our network with great reviews start around 50% that price for your return.
But would love to get your feedback on our site? Definitely want to see if we can make Teaspiller better — especially if there were any other problems you didn’t outline in the post.
Thanks!
Amit
http://www.teaspiller.com
“Taxes suck…Let a certified tax expert do ‘em”
Thanks so much for this follow up report. I had been wondering what happened since your first post. I guess taxes are like children – even if you hire someone to help care for them you have to be involved and know what’s going on. The level to which you have to be involved sometimes dictates whether it’s worth hiring anyone at all or just doing it yourself.
@Happy Rock
As you have reiterated, the true value of having an accountant is that they can help you plan your taxable finances. Once you know what you are doing though, the actual act of filing your taxes can be done by anyone thanks to software like Turbo Tax or Tax Cut. May as well save some cash and enter it in yourself.
@Carla
I actually really like working with my current accountant. Everyone makes mistakes but I felt that he should have been more careful with my return since it was our first time. Do you review you return with a fine tooth comb every year or do you just trust your accountant that he entered everything in correctly?
@Wendy
Wow, sounds like you had a really bad experience. I never got charged to just speak with our accountant. I just wished that he was more available during tax season because I had a lot of questions to ask.
@Matt
I agree with you. We’re going to stick with our accountant for another year and see how it pans out. Like I mentioned in the article, my wife and I really like his personality but were just disappointed in finding mistakes in his return.
@Financial Samurai
Because of the mistakes the accountant made, his return indicated that we were getting about 3K less with our return. This discrepancy was mainly caused by the stock error and the tax credit. I’m pretty anal about checking over my work so I think I’ll be doing my own taxes from here on out and use the accountant as just a tax advisor
@Ryan
We’ve been working with this accountant for a little over a year so we’ve had a couple interviews face to face already. He knows about our business and our general finances. What was disappointing was that the tax questionnaire we filled out was completely generic and was not very thorough. I think Turbo Tax’s questionnaire does a much better job of finding obscure deductions because it’s being pulled from a database.
@Anthony
What is ironic is that we’ve sent this accountant files electronically in the past so he usually doesn’t mind taking pdfs. I think his assistant just got riled up when she saw all of the files in the archive. For a corporation, I agree that an accountant should probably file for you at least once. But a pass through entity like an LLC is pretty straightforward to file once you’ve done it once.
@Carmen
I think that’s a good rule of thumb. Nobody is going to be more careful than you are going to be. If taxes weren’t so important, I wouldn’t have been so anal. Unfortunately, it’s one thing that I’m having trouble outsourcing effectively.
I am very upset with your accountant for not representing the profession well but thanks for doing this study and following through with us. The receptionist not working with you was a little ridiculous as that is the way information is sent nowadays.
I wish all my clients were as diligent as you in preparing their information! Of course, if they were they would probably end on doing it on their own like you do.
@Tyler
I was actually waiting for you to provide your feedback. This is only our second accountant that we’ve ever used and the first time having one do our taxes. Do you go through a full blown interview to find the hidden deductions or do you use a questionnaire? From a client perspective, I would have never known about the energy tax credit for our home had we not used Turbo Tax. What was nice about having the accountant though was that he did the follow up to make sure that we qualified though he didn’t find this deduction the first time around.
My husband and I found the same to be true with regard to our visit to H&R Block. We did the exact same tax return on TurboTax and ended up getting a refund of over three thousand. While the pros had us owing several hundred.
Not going that way again.
We had a similar experience with a tax accountant. We didn’t catch a math mistake and got a letter a few weeks later from the IRS saying our return was miscalculated by $1,400 and we were getting an extra $1,400 back. Good of the IRS to catch it, but that left a bad taste in my mouth. Ever since then I have done my taxes on my own. What you learn through the process helps you maximize your tax return.
Wow, that is insane. You are too kind to your accountant in this review!
Thanks for this article! I’m planning about becoming an enrolled agent and offering booking keeping services to small businesses next year. I was a little afraid this was a blanket “always use the software”, but it’s definitely a primer on how to do business taxes better. I’m planning to offer the gather and prep bit of the work you had to do.
@Krista – you maybe totally right on your refund, as I know how H&R Block folks are trained (took the class 2 years ago). On the other hand, you might have legitimately owed money and didn’t quite use the software correctly. Tax prep folks have every reason to find you a refund.
What I’m saying, I guess, is that I might take my taxes to a third party or do some research (irs.gov) and find out why there’s such a wild discrepancy between your version and H&R Block’s effort. The IRS gets really testy when you get a refund you weren’t supposed to get.
Great article. I try to do my small business taxes on my own once every few years just to make sure I still understand it and double check the work from my accountant. The thing I love about Turbo Tax is that it gives you examples of each deduction that you can look through to see what might apply. I’ve found deductions that my accountant has never bothered to ask me about…
As an income tax preparer here in Canada .. this should have tipped you off:
Because our accountant works about 40 minutes away by car, it’s not very convenient for us to talk face to face or to drop things off at his office. During the weekdays, my wife is with the kids and I’m at work. On the weekends, our accountant is not in the office.
What accountant/income tax preparer doesn’t work weekends during tax season?!
I think this is half down to bad experience and half down to just finding the wrong person. Maybe try it one more time and see how it goes? You never know. Personally I would try again but your time is probably a lot more valuable than mine.
After the assistant lodged the $200 threat, I would have been in the market for another accountant. You demonstrated much more patience in regards to the situation then I would have.
@Mark
The reason that we stayed was because the assistant made the threat. We’ve been working with the accountant for well over a year so we like the accountant but don’t care much for his assistant.
[...] Outcome Of Hiring An Accountant To Do Our Taxes Vs Using Turbo Tax Or Tax Cut [...]
[...] results with Turbo Tax. In case you missed it, I reported my results in my article entitled the outcome of hiring an accountant to do our taxes vs Turbo Tax. Unfortunately, the accountant didn’t do so well. But in the back of mind, I couldn’t [...]