Comments on: Hiring Our First CPA

By: Jaylin

Jaylin — Mon, 10 Mar 2008 15:47:00 +0000

I don’t have a $100k household income, but recently met with a tax preparer (ex-IRS auditor now tax-season freelancer). Though my tax situation is pretty straight forward (2 W-2s, purchased property last year, donated to charity, and have interest on CDs), I did not want to mess up the $5,000 first time homebuyer credit. As the CPA commenter above mentioned, the tax advice for the upcoming year was the best part of our hour long meeting. I agree with the commenter (John N.) that the internet is a great tax resource, so I pulled together my upcoming financial plans and ran them by my tax preparer. Since she’s not with H&R or Jackson Hewitt, she spent a lot of time answering my questions and charged $50 to e-file my fed. and state return. As a recent college grad who is just now dealing with financial matters, it was really helpful to go step-by-step through the tax return process with my tax preparer and next year I will feel confident in doing the return myself.

By: kitty

kitty — Mon, 10 Mar 2008 01:36:41 +0000

Agree with JD. I also think that 100K income is not a reason to hire a CPA. Complicated income – e.g. owning a business could be a good reason, but if you work for a company there is not much you can do. At really large income you start hitting limitations on deductions and other bad things, but tax software can handle these and at only 100K per family you are nowhere close to this amount. Nor are you close to AMT unless you exercised incentive stock options. Owning a home isn’t that complicated either: mortgage interest is tax deductible, real estate taxes are tax deductible. Just following the instructions on forms thoroughly gives you enough information even without tax software. The only place where deductions can be overlooked is miscellaneous deductions, but for most people who work for a company it’s difficult to get more of those than 2% of income limit. Besides, most of the work is gathering all of the documents together, and this you have to do anyway.

I earn over 100K alone, and I’ve always done my own taxes. Sure, I can get credit for replacing my windows – why is it complicated to subtract money from taxes? Besides, TurboTax specifically asks for it.

I’ve been doing my own taxes for over 20 years, including during the years I rented out a property and had to fill out schedule E and figure out depreciation. For most of these years I simply used the calculator and read all of the instructions thoroughly including a full publication about residential rental property. The year I sold this property was the first year I used TurboTax – I kept getting different results when I was adding taxes on all the worksheets: capital gains raised my income to the point where the deduction limitations and other nasty things kicked in. I narrowly avoided AMT thanks to patch, but I had to fill out a form. Which was a useful exercise since I learned a lot about AMT for the future. Still, since then I started using TurboTax exclusively and the amount of time it takes me to do my taxes went down from a day for federal and half a day for state to a single afternoon for both.

I do understand not wishing to spend time reading long publications like what I did when I was renting out; so I can see how someone might want to hire a professional when one deals with rental properties. But just working for a company isn’t that big a deal.

As to future advice – when you work for a company there isn’t much you can do for future. (With some exceptions – e.g. ISOs, or expected high capital gains that could raise income to where AMT exemption starts to phase-out). 100K per family just isn’t that high that you have to worry about it. I don’t know how you could end up owing $6000 but my guess is that what the politicians call “marriage penalty” (and what being single I think it is actually fair as the expenses of singles are more than half that of couples, but I’d imagine most married people disagree).

By: JD

JD — Sun, 09 Mar 2008 14:28:31 +0000

People need to get a dose of reality and realize that an income over $100K these days is squarely in the working/middle class, especially when it is the total household income. I’m in my late 20s and I don’t think there is a single working professional I know that doesn’t make more than $100K. To think you need a CPA just because your household income is over this amount is beyond ridiculous.

By: moneyandpf

moneyandpf — Sat, 08 Mar 2008 20:20:00 +0000

The best part of going to a professional is as mentioned getting tax advice for in the future. After the year is done very little can usually be done to fix whether you owe or get a refund. I think personally that most people that don’t mind using the tax software and keep somewhat up to date can do taxes themselves. However, for a lot of people it is not worth it to spend their time to complete their taxes which is why a CPA can be helpful. If your going to pay someone though go to a CPA rather than just an H&R Block or other corner tax store. A CPA should help you avoid taxes in the future and develop a plan that fits with your financial needs.

By: avidphotog

avidphotog — Fri, 07 Mar 2008 20:47:24 +0000

Smithee… You’re not the only stubborn one out there. As an engineer by training and mathematician by trade, my reluctance to get a CPA for tax prep was through the roof. However, once we started into real estate last year (rentals, flips, and tons of deductions) it started to become a consideration. The tipping point was when I did the Turbo Tax thing this year and got introduced to the AMT (which I think is just plain evil). Long story short, we hired a CPA ($400) and he proved to be tremendously helpful. The difference in his bottom line and mine covered the $400 plus some, and as you mentioned we also cashed in on some valuable advice.

As for your financial future, given that you’re teamed up with this website, I suspect your savings will be plentiful in no time. Best of luck!

By: aa

aa — Fri, 07 Mar 2008 20:38:48 +0000

I did my tax in 2 hours and verified the result with HRBlock online.

In general, we don’t get a CPA unless the tax form’s more complicated than married jointly+interest+capital gain/loss+deductiblemortgage tax…

By: John Newman

John Newman — Fri, 07 Mar 2008 18:52:24 +0000

I have been filing taxes for some 30 years and have been urged by well intentioned advisors to “take your taxes to a professional.” I’ve done it a couple of times and go through the exercise of comparing my results to the CPA’s. Each time – no difference or my result is marginally better. Last time through was quite complex w/ rental property, a business, a second house, a boat, investments, and more.

My advice is to keep your eye on the stories about what’s changed from last year and become intimate with tax software. Then research those niche questions where something doesn’t seem right. The web makes it possible to drill down on very specific corner case questions.

By: Chad Bordeaux

Chad Bordeaux — Fri, 07 Mar 2008 15:57:47 +0000

Great post, Smithee. As a CPA in private practice, I will be one of the first to admit that if all you have is a W-2, you can easily complete your return yourself. What most people do not realize is the valuable advice and planning that you can receive to save you time, money and energy in future years. I see a lot of people every year that pay a lot of extra money in taxes because they did not plan properly or get the proper advice up front. Once the tax year is over, there are only a few things you can do to lower your liability. The time to lower it is before December 31st – not when you are getting the taxes prepared. Unfortunately, far to many people ignore this fact.