Why Should I Choose a CPA for my Tax Return?
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In this day and age, everyone is money-conscious and looking for alternatives to services that have traditionally been provided for by professionals. Money management and tax preparation are often some of the things deemed “disposable” by many who want to save, causing them to seek out the lowest costs, including self-preparation, but that can often be to their detriment. This can be especially true for individuals or businesses that have need for complicated returns with many forms and schedules that need to be completed.
What is a CPA?
Gone are the days when Certified Public Accountants (CPAs) were specifically number crunchers and tax preparers. These days, CPAs are not only specialists in these areas, but also need to be able to strategize for specific types of business needs. Consultations can be for a variety of services, including establishment of a new business or venture, helping to determine profitable new product lines, helping to diversify investments, and provide auditing and financial statements. Your CPA can also be a great resource for bookkeeping and payroll services as well as an educational partner with help handling Quickbooks.
For individuals, a CPA can be an invaluable resource for not only tax and financial planning, but also investment advice and estate planning.
A CPA is also able to represent both individuals and businesses, given the proper authorization, if issues arise with the IRS. Often times, the web of technicalities woven by the IRS can be complicated and fighting a letter of owed back taxes, missed filings, and letters of penalties are hard to navigate. A CPA is trained to get you through the difficulties and is often the best line of defense against these. This is something that a non-CPA bookkeeper or tax preparer are not legally able to help with.
The Cost of DIY
While you may think that your return is simple and the most cost-effective way to file your taxes this year is through a do-it-yourself tax software, you may be surprised to find that it’s actually more of a hit to your wallet and your time.
The initial price of most DIY software tax programs can range from $29.95 to $104.99. While the price sounds like an initially small investment, it’s only the beginning of the total costs you pay to prepare your own taxes.
One of the largest expenses of preparing your own taxes is your time. On average, according to the IRS, it takes tax filers 13 hours to prepare and file a simple return. The average hourly wage in the United States is around $25 per hour, which means, if you make that median wage, you are spending about $325 to do your own taxes. That doesn’t include cherished time you don’t get to spend with your family creating memories. Typical time spent with a CPA can be two hours or less, depending on the complexity of your return.
In addition to these caveats of not doing it yourself, your CPA is educated on all current tax codes and exemptions and may know of deductions based on your situation that your tax software is unable to see. A recent survey showed that, of 2000 people surveyed, the average refund of tax software users was $1,824, while the average refund using a CPA was $2,615.
Pop-Up Tax Preparation vs. CPA
Another way people think of saving money is by visiting a pop-up tax preparation business to prepare their taxes. In these places, the person who does your taxes is usually not trained in the nuances of the tax code, but in the operation of their own tax program. What this means for you is that things pertaining to your specific return and items required by the IRS may be overlooked, resulting in less of a refund, the possibility of paying even more in taxes, and even penalties assessed because of the omissions. Often, in these cases, the filer pays dearly to attempt to correct these issues. In addition, many people choose these businesses because they promise an “instant” refund. This promised refund, however is a loan that is contingent on your refund getting approved by the IRS. In some cases, the IRS may take some or all of the money from your refund and apply it to outstanding federal debts such as school loans or may even take it for back child support. In those cases, you are required to repay the loan, often at a steep interest rate. Additionally, the IRS may correct the amount of your refund to be more than you initially expected. When this happens, the tax prep businesses usually do not notify you, nor do they offer you the rest of the money owed to you. Instead, it’s taken as part of their service fee.
Choosing a CPA means that you can establish a relationship with your professional. Your CPA will look at each individual circumstance and assess what needs to be filed with your taxes. Because of this working relationship, your CPA will have records of what they did in previous years on your returns and work with you to procure and prepare all necessary documents. Because your CPA has your best interests at heart, they are dedicated to your success. In this respect, it is beneficial to you to make sure you keep your CPA updated on all your important life events. If there is anything that may help increase your refund or decrease your tax debt, your CPA will ensure it gets used and that your income and deductions are maximized.
In short, while it may seem a good idea when you’re downsizing your expenses to swap out the cost of a CPA for a DIY tax program or a pop-up tax preparation business, in the long run, you shouldn’t sacrifice your financial well-being.
Give our experienced and trained CPA’s a call! You’ll be happy you did.