Do You Need an Accountant to Do Your Taxes?

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My AccountantWhen it comes to tax preparation, it can be tempting to just do it yourself with the help of some sort of tax software. However, as your taxes become increasingly complex, it might make sense to hire an accountant to help you sort through your taxes.

Back in the days when I had a sole proprietorship and no investments to speak of, I did my own taxes. Entirely by hand (this was before fillable forms from the IRS). Now, though, my business is a LLC, and we occasionally sell investments for gains or losses. Things are a little more complicated now, what with K-1 forms and Schedule D forms. And we recently transferred our Roth IRA from one custodian to another, and that means a paper trail needs to be established so that we aren’t hit with penalties.

Having an accountant has been a great time-saver for me, and I’m glad that I have one to do my taxes. If you have complicated taxes, it might help to hire an accountant, rather than rely on yourself, or even tax software, to get the job done.

How Complex are Your Taxes?

Think about how complex your taxes are. While companies like TurboTax or TaxAct offer you the ability to buy a business package for your S Corp, C Corp, or multiple-owner LLC, the reality is that this type of software package doesn’t include the ability to figure your state taxes without paying extra. On top of that, you might not be able to do your personal taxes with the same package. You’ll have to buy the software for personal taxes, and do them separately — after you finish the business tax return, of course.

If you have investments and/or rental property you want included in your taxes, whatever basic version of tax prep software you find is going to be inadequate. You will need to get some sort of premium version for your personal taxes, and that still won’t cover if you have a business beyond being a sole proprietorship. In my case, the accountant only costs $100 more than buying all of the versions of tax software I would need to adequately do my own taxes.

The more complicated your taxes are, and the more that needs to be done with them, the better off you are likely to be with an accountant. In many cases, tax software can’t take the place of a thinking human being who can look at your individual situation and personalize your tax solutions to your needs.

How Valuable is Your Time?

Another reason I like using the accountant is because I value my time rather highly. Paying a little extra to save my own time makes sense for me. The more complicated your taxes are, the more likely it is that you will need several hours to make sure everything is in order — even if you do use tax prep software. I figure I save about four or five hours by using the accountant. That’s well worth the extra $100 for me.

Only if you have relatively simple taxes should you consider using tax software instead of hiring an accountant. If you have only a few deductions, and your investments are fairly straightforward, and you have a relatively small amount of side income, you might be just fun zipping through the forms offered by tax prep software.

(Photo: billypalooza)

{ 16 comments, please add your thoughts now! }

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16 Responses to “Do You Need an Accountant to Do Your Taxes?”

  1. I do my own but I used to work for a CPA firm and do taxes a little bit. I can also call my old friends and they will answer any questions I have. I do agree that there is a lot of value to hiring an accountant if you don’t understand taxes. A couple ways to keep costs down are be very organized and submit your information as soon as possible.

  2. David S says:

    I do my own but I enjoy reading IRS publications and the instructions for each form.

    Of course mine are still pretty basic as well only need to fill out the Schedules A through D and a few other forms.

    Also even if your accountant does the taxes you still need to understand each form and line that they file as it is your money that is on the line if they mess up.

    Note: I also happen to enjoy reading the U.S. Code and congressional bills. And no, I am not an accountant or a lawyer.

  3. elloo says:

    If you are filing with itemized deductions, an accountant is worth the money. I bought TurboTax last year to compare how the software vs. my conservative and honest accountant did. TurboTax had me owing the feds about $1700. The accountant got me a $1300 refund. It was worth paying my accountant $400 in the long run.

  4. Bridget says:

    I say get an accountant. Filing taxes can get complicated, it is best to have someone who knows what they are doing.

  5. admiral58 says:

    I try to do taxes on my own to save money..

  6. freeby50 says:

    We’ve been using a CPA for a few years. Our taxes are pretty complex. We usually have schedules A, C,D,E and other forms and state taxes in two states. I could probably manage doing it myself with taxes but its a the point that its complex enough that I’d prefer to pay a professional. Also I used to do all my taxes myself but then one year I made a mistake and got a nastygram letter from the IRS. I was able to resolve that easily enough but now I like having a professional in charge.

  7. freeby50 says:

    Elloo, How could there be a $3000 difference in tax rate? That probably means you missed ~$10,000 to $20,000 in deductions? What made that difference?

    • elloo says:

      I think it had to do with taking a deduction for depreciation since part of my home is used for work. Don’t hold me to that since I am not an accounting type. I recall that Turbo Tax did not ask me anything about depreciation. Now you know why I am a fan of using a CPA. I don’t trust myself or software to do it correctly.

  8. Jerieth says:

    I used to do my taxes through an accountant, because my parents had, but for the past 2 or 3 tax returns, I have been doing it myself. I made about the same amount in tax refunds if I hired my own accountant. I think it really depends on your situation, if you are single or have a really simplied tax income statement (no complex tax deducations) then doing taxes yourself is a good option. They make it really easy nowadays with all the free online tax programs.

  9. taxea says:

    Accountant? Really Jim? CPA’s are looked at as accounting experts. So I say, no, you don’t need an accountant to do your taxes. You need an EA, Enrolled Agent. They are the ones that are recognized by the IRS as tax experts. CPA’s should not be recommended unless they have used their CPR time to keep up with tax law.
    I resent that those in the financial world keep recommending CPA’s when, properly, they should be recommening EA’s.

  10. Steph says:

    My taxes are so basic, I don’t need an accountant and I make little enough that I can often file both federal and state for free through certain online tax software providers. :-/

  11. admiral58 says:

    Also, it may be best to try to do as much of your own taxes as possible, then you can minimize accountant fees.

  12. govenar says:

    A lot of the time seems to be in collecting all the info needed as input for the tax forms, which you’ll have to do anyway if you use an accountant (or do you give the accountant passwords to your brokerage/bank accounts?). But if I had a business or needed to file taxes in a bunch of different states (vs. just one for me now), maybe I would use an accountant.

  13. Shirley says:

    I have used TaxACT for many years. Our taxes at this point are simple and I really appreciate the way that the software imports my info from the year before. I also like the way it explains what changes are made each year.

  14. K says:

    It depends on your circumstances, what you make and how complex your filing status might be.

    I used to pay an accountant to do my taxes for 10 years as he was good and he was not very expensive. I first went to him when I had a problem with my tax return I had filed myself and he ended up getting several hundred dollars back after a stock sale that I lost money on but the tax software I used for my simple return did not account for. When I had to pay the IRS for a tax situation where I could not pay back my 401k a loan, he asked about every other deduction I might have been able to take to try to mitigate the circumstances.

    I stopped going to his company one year after he retired and had to deal with the woman that bought his business as I felt could have done a better job myself.

    It comes down to the talent of the people you can find to do it versus what you want to put into it and do yourself and willing to pay for tax software (which I have now for several years).

    If you don’t make much money and have no special circumstances, especially if you have been on unemployment, you might be able to get free tax software.

    If you have the potential for a lot of deductions and keep all your receipts, you might be better to find a good but reasonable accountant.

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