How do you file your taxes? TurboTax? Use a large company? Hire an accountant? When it comes to taxes, an accountant is well worth the small difference in price. Find out why in this week's edition of Savvy Saturday.
First, let’s look through the various options for filing so you can make an informed decision come tax time. An accountant may be just what you need! Hopefully, in reading this post, you are already ahead of the game. But, if you haven’t filed yet, you’ll want to FILE NOW!
Now, let’s examine our options and look at the costs. Take into account the following examples are based on a standard 1040 filing with no itemization. There is a lot of variability to the tax code, so this is just a baseline example for you as a reference point. TurboTax costs approximately $95, based on a combination of the state filing fee of $40 and the federal filing fee of $55. HR Block, Liberty Mutual, and Jackson Hewitt’s fees range between $147 and $191. Now, the fee difference depends on which company you choose but covers a standard tax filing. In comparison, an accountant completes the same standard tax filing for approximately $176 according to the National Society of Accountants. Not bad, huh?
Is cost all that matters? I don’t think so. So, let’s take a look at experience. What kind of experience does TurboTax offer? The answer is simple. None. TurboTax is a piece of software. Of the accountants I’ve talked to, 14 out of 15 say their clients came from TurboTax. TurboTax makes mistakes and doesn’t catch things we otherwise might. Now, HR Block/Liberty Mutual/Jackson Hewitt are doing good things, but they are tax preparers. Their employees most often haven’t been to school, at least for a degree. It’s just not the same experience an accountant may provide. An accountant went to school for accounting. They have the degree. They are skilled and doing this full time in most cases, which makes the option all the more appealing.
This is an area often overlooked. When you file your taxes, depending on how you file, there could be one or two lines for you to sign. Essentially you are responding to two things…
The distinction between these two statements is important. You are ensuring what you stated is accurate and what you filled out is also correct. That’s a lot of pressure! With TurboTax, you are taking the liability upon yourself. You are self-filing and the program is a tool helping you do just that. HR Block/Liberty Mutual/Jackson Hewitt are not taking any liability upon themselves either. They are simply assisting with the drafting of your return. Now, they may be willing to reimburse the cost of penalties and fees based on errors in filing, but that is an area you would have to spend time pursuing. Either way, the liability is still on you. Now, with an accountant—those two lines will exist. However, you sign the first line, regarding providing accurate information, but an accountant signs the portion stating its been correctly filed. They take on the liability. So, is it worth the small difference in price to use an accountant? I think so. There may be a small cost difference up front, but using an accountant can help you avoid owing Uncle Sam and filing incorrectly which, in the end, keeps your wallet heavy and your heart light.
Question: So, what will you decide? Will you spend a little more and trust someone with the experience who is willing to take some of the responsibility for something so important? Need help? Reach out to me if you need a reference.
Just a couple pieces of information and we'll have you on your way to saving an average of $200/mth!