Filing taxes is one American pastime that many Americans dread. With so many complicated forms, rules and tax rates, most taxpayers need assistance to complete their returns. While some use software like TurboTax to file returns on their own, others turn to tax professionals to handle the process. We’re comparing the pros and cons of using TurboTax versus hiring a CPA, to help you decide which one is right for your taxes. If you need help tax planning or making the right financial decisions then you may want to speak with a financial advisor.
Why Investors Use TurboTax
Investors that handle their own investments typically also choose to file their own taxes. They are intimately familiar with their finances and the details of each transaction. Relaying all of that information to a third party can be a challenge and make take more time than preparing the returns yourself.
Today’s tax preparation software is intuitive and user-friendly. And, in some cases, it’s just a consumer-friendly version of the same tax software that your CPA uses. Purchasing software like TurboTax is affordable and available at many online and in-person retail stores.
Why Investors Use a CPA to File Taxes
While tax prep software makes it easy to file tax returns, many investors don’t have the time, energy or desire to do their own taxes. For some investors, their tax returns are challenging due to the complexity of their finances. Between household income, business ventures and trust strategies, their taxes often need the expertise of a certified public accountant (CPA) to maximize their tax deductions.
Using a CPA to file taxes is a wise choice for investors who are willing and able to pay for their advice. In many cases, CPA strategies are able to save more in taxes than the fees that they charge. CPAs have intimate knowledge of the tax code, understand confusing tax language and can easily fill out forms that take others hours to complete.
Pros of Using TurboTax vs. Hiring CPAs TurboTax CPA Simple user interface for people of all skill levels CPA license requires rigorous education and testing Low-cost, fixed-price option Adjustable pricing based on the complexity of returns Different versions are customized based on taxpayer needs Handles the completion of all forms A guided process that completes forms based on questions Represents you in case of IRS audit Import feature automatically pulls entries from financial institutions Available to discuss tax strategies throughout the year Cons of Using TurboTax vs. Hiring CPAs TurboTax CPA Time-consuming to prepare taxes yourself Prices vary widely by complexity, location and company Have to decide which version suits your situation best Have to explain finances and reasons for actions May not understand all forms, may miss deductions, credits Not all CPAs specialize match your needs No personal relationship with experts Other clients’ needs may take precedence over yours Which Is Right for Your Taxes?
When deciding between TurboTax vs. CPA, there isn’t a single “right” answer. According to the IRS, about 80 million e-filed tax returns were prepared by a CPA versus 72 million that were self-prepared. The choice should be based on your budget, comfort in preparing tax forms and how much time you have available. Some investors have the ability and knowledge to create their own tax returns, but their time is better spent creating more income.
For people with simple tax returns or more time than money, it makes sense to use TurboTax or some other tax preparation software to file their taxes. And some DIY investors may enjoy preparing their own returns over working with a CPA.
Investors with complicated tax returns generally are better off working with a CPA to file their taxes. And those with simple tax returns may prefer the comfort of working with a CPA over preparing their taxes themself. When you work with a CPA, their knowledge and expertise can provide valuable guidance during tax season and throughout the year. This gives investors a chance to make adjustments during the year to lower taxes versus waiting until the year is over when options are limited.
The Bottom Line
Tax returns are due April 15th every year. The choice between TurboTax vs. a CPA when preparing your returns is often based on time, money and financial complexity. Both are good options, but most investors favor one or the other based on their personal needs and comfort level. For many, hiring a CPA is a wise choice to ensure that you take advantage of every tax deduction that you’re eligible for. If you fall into that category then you may want to consult with a financial advisor to help you make the right tax choices.
Tips for Tax Planning
-
Making a tax plan for your entire financial picture can be complicated and, at times, frustrating. It’s important to involve a financial advisor who can help take care of the details for your whole financial picture. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
-
Estimating your income and taxes impacts many of your financial decisions. These include how much to save, invest and contribute to retirement plans. Our income tax calculator forecasts your tax burden based on your answers to simple questions. And you can use these variables to guide your decisions on steps to take to reduce your taxes owed.©iStock.com/fizkes, ©iStock.com/Vladimir Vladimirov, ©iStock.com/fizkes
The post TurboTax vs. CPA: What’s Right for Your Taxes? appeared first on SmartAsset Blog.
