Apr 4, 2008

Human accountant vs. Tax prep software

Judging from comments I've gotten when I've mentioned my accountant, I'm not the only one who wonders whether paying a substantial fee to have another human prepare my tax returns is worth it, especially in this day and age of tax prep software. Gina over at Lifehacker wondered the same thing. Only this year she used both to do a side by side comparison.

It turns out that TurboTax came up with a smaller total of tax owed, but her accountant caught a mistake by one of her employers that TurboTax didn't (apparently it didn't affect the amount owed, though). And she doesn't know yet why TurboTax reached a different result.

The best thing about Gina's report, at least for me, was this sentence:
There are always questions inside TurboTax that you respond to with just a tinge of doubt, and just a few of those can mount into a larger sense of uncertainty.
It's precisely this feeling that causes me to pay between $500 and $1000 to have my tax returns prepared for me. (Did that number make you cringe? Me too. I haven't received my bill for this year yet, and I'm praying it's on the lower end of that range.)

So I guess whether you should hire a human accountant comes down, at least to some degree, to your risk tolerance. Mine is fairly low - primarily because of the potential consequences (all of my hair would probably turn white if I received an audit notice and I wasn't sure I'd done everything right). So I'll stick with an accountant for the foreseeable future.

What about you? Do you think it's worth paying an accountant?


sugarcreekfarm said...

We did our own taxes until we started our farm. At that point it was worth it to hire a professional, because of uncertainty over what we could deduct or not and also so that we were getting all of the deductions possible. However ours only costs $100 - that's small town Iowa for you!

Anonymous said...

We have always used an accountant for our taxes. We have been told we keep good enough records that we could take care of preparing the returns ourselves. But I don't want the anxiety of it and prefer that someone else take care of the tax details. Last year we paid around $300 to have our personal taxes prepared. We changed accountants and am expecting it to be much higher this year.

Chief Family Officer said...

Hm, maybe I should consider moving to Iowa! :)

I am, unfortunately, expecting a somewhat higher tax bill this year due to our accountant's increased rates and the increased complexity of our taxes.

Rachel said...

After this year, I'm definitely avoiding accountants when I can. We paid to have our taxes done as hubby had a complicated business venture involved. I figured that while I've always done them myself, I'd go with the pro on this one. Bad idea. After he finished our taxes, I double-checked them. And found 4 mistakes, which added up to him having understated our liability and overstated what our refund should be!! Yikes, I am SO glad I checked before he sent them off. And then he still overcharged us. And this was the guy who came "well-recommended." I guess I'm just going to have to keep myself more up to date with tax law!

Chief Family Officer said...

@Rachel - Yikes! That's great that you caught the errors, though. If you're confident doing your own taxes, by all means! Otherwise, just find a new accountant, maybe one who specializes in the kind of business venture your husband is involved in?

Anonymous said...

My general advice is that if you have a complex tax situation (e.g. multiple personal and business incomes, moved a lot or have complex investments) then go with a accredited professional tax preparer. If you have a relatively straight forward tax return go for the easy to use tax software and if you are in a low income tax situation use the IRS free e-filing option.