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Outsourcing Tax Preparation: Admit Your Limitations

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SVB had a post on Thursday about how she would be outsourcing tax preparation this year, beginning with the motivations and then an essential questionnaire you need to go through to find the right professional to work with. I won’t go into how you select the right accountant or accounting firm, she does a great job, but I will go into why I considered and opted to outsource tax preparation.

Several years ago, a friend told me that she paid H&R Block $350 to prepare her taxes. I was shocked. I felt her tax situation was straightforward (she owned a home, had one income, nothing else noteworthy that I was aware of) but she was drawn into the idea that it was a professional doing her taxes and that she was safe against the horrors of an audit. To me, $350 is too much for tax preparation for her situation but she was buying “peace of mine,” and there are many cases where I’d overpay for peace of mind.

That being said, I’m still pretty stubborn, something my beautiful wife can attest to, and as a typical alpha male I feel like I need to be in control and do things myself. I’m also a personal finance blogger. I feel that I should be well versed in the arts of personal finance and that I should be doing my own taxes. Lastly, I’m frugal, why would I paid hundreds of dollars to do something I can do on TurboTax for a few bucks? I will be outsourcing tax preparation this year.

The motivations for outsourcing tax preparation were very much like my friend’s. The biggest concern is an audit. It’s my belief that audits are only absolutely horrible (they’re still horrible and a headache, it’s a matter of severity) for people who are disorganized or not 100% honest on tax returns. So, since I’m 100% honest, I’ve outsourced accounting services for the business in order to handle the disorganized part. I may be organized compared to normal people, but I’m not organized compared to accountants or IRS agent! Tax preparation is a component of the service the CPA provides and one I’m happy to take advantage of.

There comes a time when you have to recognize your limitations and let professionals do the job. For each person, that’s different for different jobs. I may be well-read about tax information but I’m certainly not qualified, or interested in, managing the day to day accounting affairs of any business, let alone mine. When it comes to replacing a roof, something that will happen this summer, I will gladly outsource that job unless we have roofers in the area who think we can do it ourselves (that’s the frugal in me coming out, not the stubborn!).

{ 6 comments, please add your thoughts now! }

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6 Responses to “Outsourcing Tax Preparation: Admit Your Limitations”

  1. Stngy1 says:

    Don’t forget you’ll get a tax break (on the tax prep fee) next year if your preparer is liscensed!

  2. My tax prep fees have grown steadily over the years, but we’ve got erratic income and things have just gotten so much more complicated over the years. If I could only pay anything close to $350, I would jump with glee. Wait, the last time I paid that was somewhere in the mid-1990′s! Gah.

  3. Todd says:

    Currently, my wife and I spend about $250 per year on tax prep fees. Granted, I think I could do our taxes with a software program, but, what is the real cost of that ? $50 each year for the software + time trying to assess any changes in tax law that affect us + worrying that I’ve missed something + any refund $ that a true professional might be able to get us (that we don’t know about).

    If my tax prep cost $500, I might reconsider, but, at $250, I’ll let a real pro do it for me.

  4. Rob Carlson says:

    This last year my wife did a few hours of work for a cooperative and got $69 of FARM INCOME. For the uninitiated, this is a 1099 that must be filed on a totally separate form from other 1099s. I probably would have spent an hour or two just figuring out this one form and worrying whether I got it right (or not knowing about it at all and doing it wrong). My accountant of 4 years now invoiced me $20 for the extra form and saved me a ton of worry.

  5. AndyS says:

    Peace of mind is one of the main reasons I pay the extra accountant fees. Also as I have some overseas income, it helps to have a pro deal with some of the tax laws. However it is important to choose the right accountant, but that is a seperate post and one that I will be looking to do in the near future.

  6. Mike M says:

    I am a tax preparer. Don’t be fooled… I’ve caught many mistakes from H&R Block because people don’t have everything they need and it’s just easier to plug a number to save time… at the cost of the client. I’ve also had to fix clients mistakes from Turbotax. Unless you know taxes, even with the most user friendly software, you have a good chance of missing things or doing it wrong. I hired someone to help me this year. She took a course from H&R Block and passed with flying colors. The first four returns she did for me had to be re-done by me due to errors.

    Think twice about “trying it” yourself… it could pose headaches down the road if done wrong. Not to mention the fact that you don’t know IF you cheated yourself. One return I fixed got the person back $300 more! So much for saving $100 to do it on your own huh?

    Let a qualified independent professional prepare your return. Ask around to your friends and family. There a many private preparers (many are CFO’s of small businesses that came from CPA firms) out there that charge a reasonable rate for tax prep. Personally I think H&R is very expensive.

    You should pay $125~175 for a standard return, including stock sales, itemized deductions, and e-file.

    Mike


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