When it comes to choosing options for tax preparation and filing, you can either do them yourself, use TurboTax® or hire an accountant. Fewer people are choosing to do their own taxes, so most likely, the choice comes down to choosing a tax software or a CPA, so which one is the right option for you so you get the most accurate return, minimize your payment, and get the best return on your investment? Our CPAs in Raleigh are breaking down whether you should use TurboTax® or hire an accountant.
Advantages and Disadvantages to TurboTax®
TurboTax® is a popular software program that walks you through your tax return, asking questions related to your income, dependents, property, and other income and possible deductions. Based on the information you provide, it will recommend possible deductions, but you are liable for any claims or representations you make so it’s important to be accurate and ethical.
What are some of the benefits to using a tax preparation software program like TurboTax®?
- Low out of pocket costs;
- User-friendly software that even a beginner can navigate;
- Complete and file on your timeline;
- Uses simple questions to walk you through the return and an algorithm triggers potential deductions you may be eligible for;
While it’s inexpensive and easy to use, let’s consider some of the disadvantages to using a software program:
- An algorithm is not always accurate, and it may recommend deductions you aren’t eligible for, leading to a costly mistake;
- Can’t provide tax planning advice or guidance;
- Small business taxes, investments, and other complicated tax issues are difficult to navigate;
- Chat-bot assistance but little personalized guidance or service;
- You are 100 percent responsible for filing along with any errors related to your return.
Who Should Use TurboTax®
If you have a simple tax return, such as you are a W-2 employee with no other sources of income and few deductions or investments beyond a 401k or student loan interest, tax preparation software is probably right for you.
Advantages and Disadvantages to Hiring an Accountant
Working with a Certified Public Accountant means you’ve got someone who is taking a comprehensive and personalized look at your financial information. They have the experience and knowledge necessary to navigate even complex financial data, and can partner with other financial professionals you may work with, such as an estate planning attorney to not only minimize your existing tax burden but to help you make choices related to tax planning moving forward.
- Experience and knowledge about the state and federal tax code;
- Can navigate complex financial dealings related to investments, inheritance, property, and both incoming and outgoing funds.
- Human interaction and someone who can think “outside the algorithm,” so to speak.
- Available to answer questions and provide financial advice related to tax planning;
- Will look at every aspect of your financial data to look for deductions and do what they can to ethically reduce your tax burden;
- Saves you time by allowing you to turn your taxes over to a professional;
- Hiring an accountant is more expensive;
- You need to make an appointment and block out time to sit down with your accountant;
- Potential for human error (though rare);
- Have to share personal financial information;
Who Should Hire an Accountant?
Hiring an accountant to work on your taxes is the best option for people with complicated financial holdings such as owning a business, having a stock portfolio, multiple income streams, or an inheritance. You’ll have an improved likelihood of getting the most deductions while ensuring your return is more likely to be accurate.
Questions to Ask Before Choosing a Tax Preparation Method
It’s important to note that while both options have their pros and cons, there’s not a blanket response to the question as it really just depends on your circumstances. That’s why you should ask yourself the following questions before you make the choice:
- Can I confidently use a tax preparation software program and know it’s completed with 100 percent accuracy?
- Which method is the best way to avoid being targeted for an audit?
- Do I have the time necessary to sit down and complete my state and federal tax returns?
- Am I comfortable sharing my financial information with a licensed CPA?
- Am I familiar with any changes to the tax code that may impact my return?
- Should I begin focusing more on tax planning to ensure I’m minimizing my payments through the year?
- If I’m using software, do I have a reliable source to turn to should I have questions or concerns?
- Do I have complex finances, such as multiple streams of income, own a business, or have an investment portfolio?
Weighing the pros and cons and answering your questions will help you choose the best option for how you choose to complete your tax return.
Schedule a Consultation with Our CPAs
If you’d like to hire an experienced CPA to help you with your tax preparation and tax planning, we can help. We work with clients in and around the Triangle including Raleigh, Durham, Wake Forest, Wilson, Apex, and Cary and offer telephone and video conferencing, as well as in-person meetings. Call (919) 872-0866 or fill out the contact form below to get started.