Reader Mailbag: Tax Filing Options


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Our Freaking Budget Reader Mailbag

Guess what happens when we get questions from readers? We answer them! So if you have your own question, click here and shoot it off to us. We’ll do our best to get back to you and give you an answer that isn’t totally incorrect.

The five seasons: spring, summer, fall, winter… and the worst of them all: tax season. And it occurs within the other worst season: winter (unless you live below the equator). So basically it’s the worst thing ever.

Maybe you’ve already done your taxes, and if you have, you’re not our landlord’s son. We’ve received three of his W-2s in the mail, and he hasn’t picked them up yet, despite emailing our landlord a few times. Up until this year, Johnny did our taxes in January or February. We have family members who are notorious for doing their taxes ON April 15th, or better yet, who ask for an extension on April 15th… Hi, Dad? We used to giggle at their slothfulness, but we ain’t giggling anymore. Our free time is limited with our darling 2-month old, and we’ve yet to have a free weekend to devote to our taxes. Sad trombone. When we get to it, we’ll post the method to our tax filing madness. Until then, we wanted to share an excellent question posed by an OFB friend and reader.

Hey guys —

I wanted to get your opinion on tax season. I’ve been using a CPA (that my family has known for years) for my personal taxes; however, he charges upwards of $300. Now that I’m in “full saving” mode, dishing out that sort of dough really hurts. Part of me wants to go to H&R Block and let them do it, but the idea of someone I don’t know doing my taxes just doesn’t feel right. Oh and one other thing, I don’t trust myself to do it with TurboTax.

Just wanted thoughts on what you guys use, and if you’ve tried different options, what were your experiences with those options?

Thanks and look forward to hearing back.

And here’s our answer:

You bring up a really good question. I think the answer differs depending on how complicated your tax filings are.

I’ll start with what we do.

Johnny and I use TurboTax. We’ve used it every year of our marriage, and it has always served us well. That said, our taxes aren’t too complicated. We both work for businesses full time, so we each have a W-2. And then we also do some freelance work, so we have 1099s as well. Our investments are limited, so nothing too difficult there. Our deductions aren’t too complicated with our career fields, so knowing what to write off has never been an issue.

That said, Johnny worked the first 8 months of 2012 as a contract employee only, so because our main source of income wasn’t as uncomplicated as usual, we have considered having someone else do our taxes this year. Still, if we did that, we would probably use a place like H&R Block. We don’t have investments or income in a lot of pots, so there’s not a lot of complexity there.

The day we would spend $300 on a CPA would be when we think he/she could find us at least $300 in tax savings that we wouldn’t be able to find ourselves… in other words, when it pays for itself.

So that’s what you have to ask yourself. Are your taxes complicated enough that your CPA will find $300 extra in savings that you won’t be able to find yourself? If using him will pay for itself in the long run, then I would suggest continuing to use him. Even if it hurts to spend the $300 now, it will be worth it if he saves you from giving Uncle Sam too much.

But if your taxes are fairly simple, be brave and give TurboTax a shot. The program walks you through every single step, and it catches all the typical write offs. And there’s something very empowering about knowing the process and seeing where your money goes. We’ve heard good things from friends who have used H&R Block, but we can’t personally speak to their credit.

Hope that answer helps!

Joanna (and Johnny’s input, too)

So what are your thoughts on the subject? What advice would you give? On a somewhat related note, I don’t think we’ll be trying out H&R Block this year after this happened. Yikes.

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20 Comments

  • Reply Brian March 14, 2013 at 7:53 am

    Depending on how easy/complicated your return is H&R Block might charge you around $300 anyways, so I would stick to the CPA in that case. Unless your taxes are super difficult you can use TurboTax (on any of the other software packages) and be fine. For the most part the CPA isn’t going to find most people anything they don’t already know about or hasn’t been featured on yahoo finance. Their real value comes for people with small businesses, lots of investments and/or a trust.

    I have a very complicated return and use turbo tax. I have to use two versions of turbo tax to get my return(s) done. If I can do it, then you can do it too.

    • Reply Johnny March 15, 2013 at 12:08 am

      Good point on H&R Block’s costs being comparable to that CPA’s cost. For as complicated as taxes can be, TurboTax/other software make it pretty dummy proof. Although I did run into some issues last year (and it will likely happen again this year) with filing in multiple states. And they hit with you multiple state downloads and filing fees.

  • Reply Mrs. Pop @ Planting Our Pennies March 14, 2013 at 8:05 am

    We used to use TaxAct, but starting last year we are now using a private CPA for our taxes. He charges us less than most of his other clients (mostly because we were referred to him by someone he charges a lot more to!), and for us, his work is really straightforward.
    But for us, it’s really complicated. We have multiple investment properties, have to deal with depreciation, basis adjustments, and other investments as well. So far he’s been able to save us about 2x what we paid him over the last two years, so we’re coming out ahead and will continue to use him until we get to the point that our money lives become less complicated.

    • Reply Johnny March 15, 2013 at 12:13 am

      That’s “hurts-my-brain” complicated. And sounds like you’ve found the right system. I’d love to justify the cost of a CPA right now for convenience sake, but I have no excuse to not do it myself with software.

      Just a hunch, but I doubt the PoP money lives become less complicated all that soon. You two are too busy hustling and making that green stuff. :)

  • Reply Laurie @thefrugalfarmer March 14, 2013 at 8:18 am

    We hit the jackpot as our very knowledgeable CPA runs a little mom and pop shop that his dad started decades ago, and he only charges us $125. We took him up on a whim one year early in our marriage, and he got us a much bigger refund than we’d gotten ourselves doing Turbo Tax the prior year, even though our situation was relatively the same. I don’t know why, and I don’t wanna know why :-), but now we just go to Bob, give him $125 and 20 minutes of our time and it’s a done deal. LOOOVE IT!

    • Reply Johnny March 15, 2013 at 12:16 am

      That’s so awesome. We got to find ourselves a Bob! $125 is an awesome deal. That’s probably what I’ll end up spending this year on federal and state (2 different ones) software and e-filing this year. And it’s going to take me a whole lot longer than 20 minutes. You guys got yourself a keeper.

  • Reply Johnny Moneyseed March 14, 2013 at 9:05 am

    If we did our own taxes this year we would have been audited. Our tax situation is so complicated, since we are in the military. We live in Maryland, but my home of record is Rhode Island (so that’s where I pay income tax to) and my wife’s home of record is Illinois (no state income tax). We also own a home, and receive a ton of money from grants (for school) and investments. It was totally worth the $300 for a CPA to not have to deal with the IRS firsthand.

    • Reply Johnny March 15, 2013 at 12:27 am

      Yep, sounds like you’re perfect candidates for an audit. I would be happy to fork over $300 to a CPA for the headache you just described. And with your situation, it sounds like you’re making him/her work for every last dime of that $300.

  • Reply Emory L. March 14, 2013 at 9:32 am

    My husband and I got married in June and we spent the first half of 2012 in school. But since we both worked the last half we had W-2s and thought we would free file online by ourselves. This would have been wonderful if we hadn’t run into the extra complication that someone filed taxes under my husbands name last year and this was never resolved. Oops. But, had this not been the case I found using H&R Block online quite simple. I spent much time on the phone with my dad making sure I was doing everything right, but our taxes were fairly simple and straightforward. There was a space for everything we needed and the program calculated all of our deductions and withholdings. All in all, if you don’t have the added complication of a stolen identity or owning your own business using a program was wonderful and very user friendly. Using a tax professional in an office like H&R Block worked well for us too as we had them help us figure out what to do next with our identity theft problem.

    • Reply Johnny March 15, 2013 at 12:30 am

      Ugh, that’s the worst. I had to deal with a similar situation about six months ago. And it’s STILL not fully resolved. Nothing is more obnoxious.

      But I agree on its simplicity. I was a complete tax/finance novice when I first gave TurboTax a spin. And six years later, I’m still a novice and TurboTax is still working like a charm.

  • Reply MomofTwoPreciousGirls March 14, 2013 at 10:09 am

    I had done our taxes with turbo tax for years, but the year we had a sale of one house, purchase of another and a child it was too complicated (read: I was too freaking tired) to do it myself. I went to hr block and their price was ridiculous. They charge according the number of boxes they have to fill out! Most of the people they hire have little to no experience (I know this bc when I looked for a job they had postings everywhere for seasonal workers and it did not ask for experience in taxes! A professional CPA is a better choice…

    • Reply Johnny March 15, 2013 at 12:32 am

      Interesting info on H&R Block. I had no idea that’s how they structure their pricing. I knew about their seasonal worker hiring, BUT I trust that they train them well. But I would still trust myself equipped with TurboTax over one of their preparers.

  • Reply My Financial Independence Journey March 14, 2013 at 10:53 am

    It all depends on how complex your tax situation is. Right now, mine is pretty simple so I use TurboTax. But if I got married, or started buying real estate, or opened a small business, I would invest in a CPA.

    There is also the time issue. So long as taxes are something that I can do on a Saturday afternoon, then I’m okay doing them myself. If they become more labor intensive, then I’ll outsource them.

    • Reply Johnny March 15, 2013 at 12:33 am

      The time issue is a good point. If you’re spending anything more than an afternoon or 3-5 hours, it’s probably in your best interest to dial up a CPA or tax preparer like H&R Block. Because odds are if it’s taking you that long, you’re doing something wrong. :)

  • Reply Rob March 14, 2013 at 3:34 pm

    Years back, when we were first married and living in Quebec Canada, I used to prepare our income taxes by hand – two of them for each of us, one Federal return and one Provincial return. This was before the days of computer tax programs. What a pain in butt ! :-)

    Not only did I do my 2 returns each year but I also did my wife’s, her mom’s, as well as her dad’s. Fortunately time passed and computer tax software appeared on the scene, saving all that manual writing. As well, we eventually moved out of Quebec and so only then had to prepare one Federal tax return each year for each of us.

    We never used outside help. I figured that I could read up on the tax prep instructions and carefully prepare it all myself. From year to year our tax returns never varied all that much in format so all I needed to do usually was to compare them to how I had prepared previous yearly tax returns, using the past tax copies that I kept on file. That way it was pretty easy to figure out where to enter all the information in the correct places on the tax form.

    That said, I finally lucked out and eventually our “Baby Girl” grew up, got her Accounting degree, became an Accounting Firm senior executive, and now uses her company’s tax software to prepare our tax returns each year. Karma is great, eh? :-)

    • Reply Johnny March 15, 2013 at 12:37 am

      Hah! That’s incredible karma. Maybe we’ll start lining our Baby Girl’s crib with tax documents and invoices to try and plant that seed early. :)

      I remember always seeing my dad in his office around tax time punching things out on a calculator and penning in numbers in boxes. Crazy to think how much easier the process has gotten. And we only have technology to thank. Because, unfortunately, government only makes the process more and more complicated every year.

  • Reply JMK March 14, 2013 at 5:02 pm

    To the reader who doesn’t trust themself, maybe do a test. Get the Turbo tax for the 2011 tax year – it must still be available for those who are late filing? Redo last year’s taxes and see what you get compared to the CPA’s results. Now you’ll know if you are missing anything by using the software. If it’s the same or very close, you’ll feel more confident doing your 2012 taxes yourself.

    • Reply Johnny March 15, 2013 at 12:44 am

      Awesome idea, JMK! No better way of finding out your competency with tax software than comparing it with numbers from a professional. Now I want to find a CPA that will take the challenge to beat my numbers for this year. If he finds more savings, I’ll give him half the difference or something. Eh, I’m not sure the specifics, but it sounds like a fun challenge.

  • Reply Melissa March 14, 2013 at 7:10 pm

    I’m 26, and this is the first year I’ve done my own taxes, because my mom LOVES that crap and always did them for me. I own my condo, have student loans, and I had zero problems with TurboTax. It took me about an hour to do, and that’s only because my paperwork wasn’t super duper organized. It tells you exactly what information to enter from which box on your W2, and if you use the guide, it will take you through all of the claims you could enter. I skipped through most of them. Unless you have some super complicated return to do, I would highly recommend $50 TurboTax over a $300 CPA.

    • Reply Johnny March 15, 2013 at 12:46 am

      That’s always been my experience with TurboTax. And in my case, your mom is my dad with loving tax filing. It’s kinda weird. But I’d be lying if I didn’t say that there’s some level of enjoyment clicking through all the different boxes and screens in the software. Is that weird? Probably. Oh well. :)

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