Why Should I Use a CPA for My Taxes?

September 7, 2016

Author: Santino Sanabria

In the world of Do-It-Yourself tax returns via easily obtained software, one might ask why anyone would visit a Certified Public Accountant (C.P.A.) for tax preparation. Many likely have reached the conclusion that they can save time and money by “letting the software do the work”. Certainly, I have a long way to go before I make my first million and I can appreciate the value of saving a buck to make a buck. With that said, however, using in-home software to complete your return may actually cost you more, both in the short-term and over the long-haul. Consider these important points about the do-it-yourself approach:

  • Don’t be fooled by promises that the software will allow you to complete a “Free Basic Return”. Simply put, this means that the software will file a 1040-EZ free of charge. Sounds great, right? Well if you have dependents (a.k.a. your little rugrats) or any adjustments to your income, you don’t qualify! If you want to file anything other than “Single” or “Married Filing Jointly”, you don’t qualify. Trying to claim some credits other than Earned Income, guess what, you don’t qualify! The vast majority of tax payers will either use the the 1040 or the 1040-A, which you will need to purchase the software to complete.
  • Guarantees of an Accurate Return do not provide the assurance you think. Basically folks, the software guarantees that it will correctly calculate the return based on the information you have included. This does not guarantee that you completed the return correctly or entered information into the right spots. Heads up, the IRS wont accept the excuse that “You entered the numbers in where you thought they went” when the auditor comes to say hello.
  • Questions designed to guide you to a correct return may confuse you. I see this one quite regularly in the world of tax preparation. As someone who has used multiple platforms from various software programs, I can tell you that the questions may cause you to miss some very big deductions based on the answer you give. This often rears its ugly head in terms of State & Local Income/Sales Tax Deductions on the Schedule A. The default software settings seldom compute your local tax rates for sales tax and many dollars you should receive as a refund finds its way into Uncle Sam’s Pocket. Depreciation Expense for Schedule C (Self-Employed Income/Expenses) and for Schedule-E represent another missed opportunity that the software does not make easy for those doing their own taxes. Long story short people, individuals trying to save money via the Do-It-Yourself approach often cost themselves more money by not fully taking advantage of credits, deductions, etc.
  • Even when you do find an error, you will still have to pay more. Often times, people visit me and bring several prior returns that they completed for me to use as a reference for the current return. I take this as an opportunity to conduct a quick scan of common items that get missed by taxpayers. Often times, I will find opportunities to take an additional credit or deduction that produces less tax liability on a prior year return. The IRS does provide a mechanism for this in via the 1040-x. Good luck trying to do this one yourself, even I don’t enjoy them. A 1040-x requires a paper filing that takes about 6-8 weeks on average and they often cost more than the standard forms.
  • Keeping your information secure varies by provider. Recently I read an article that confirmed a long-held suspicion of mine about the level of protection regarding security measures employed by various tax software providers. While I wont mention any names, I can tell you that some providers did far better in this area than others. While some scored very well and deployed appropriate levels of safety, others did not. With identity theft on the rise, each year more and more people come into my office about how someone stole a prior year refund and the nightmare than ensued to try and get it back. In some cases, this process took years.
  • Education and Credentials go a long way! CPA’s must meet very stringent guidelines set forth by each respective Accountancy Board within the state where they practice. In addition to completion of a very difficult test, boards usually require significant educational requirements and work under a CPA (for an aspiring CPA) before they will grant the designation. CPA’s must maintain a level of professional competence and adhere to the highest of ethical standards to serve the public. Simply put, CPA’s bring a level of expertise that software simply cannot match. Also, unlike software, a CPA can ask probing questions designed to help understand your personal circumstances in order to identify opportunities for credits and deductions you did not even know about!

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