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Your Take: Professional Tax Preparation or a Box?

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I’ve been working full time for five years now and have used TurboTax for the last four (I did it by hand the first year, I have no idea why!). I’ve never walked into a tax preparation store like an H&R Block or a Jackson Hewitt but my friends have and walked away with experiences that hardly warranted the $300 fees they paid. On one hand, my tax situation had been fairly simple for the last four years. Single income (one year I had two W-2s but that’s hardly rare), standard deduction, twenty minutes in TurboTax and I was done. I went to an itemized deduction two years ago because of the mortgage interest but that hardly registered. Two years ago I even added on a Schedule C for income generated from side ventures, again that wasn’t much of a curveball for TurboTax. I don’t have a complicated situation… why would I pay $300 for someone to ask the same questions a box would ask?

What’s your take on tax preparation? Worth it? Not worth it?

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26 Responses to “Your Take: Professional Tax Preparation or a Box?”

  1. GBlogger says:

    If your tax and earnings situation is relatively straightforward, I don’t see any reason to pay $300 or similar fees, given the cost of most tax-prep software. I used tax-prep software for years. My mother in law uses those walk-in services — but I think she may not feel comfortable or facile with the software…

    My wife and I do use an accountant now and even moved from one accountant to another to get a little more concentrated attention. Two incomes, had a nanny for part of last year, one modest investment property, and so on — I think it’s worth it for us.

  2. Jason H says:

    It really is situationally dependant. Up until this year I always used tax prep software, but this year I had a very complicated stock sale and I paid foreign taxes. I tried to use the tax software and it just couldn’t handle it. Thankfully my sister-in-law is a tax accountant, so I just sent everything to her, but if you have simple taxes (is there really such a thing?) I don’t see a reason to go beyond tax prep software.

  3. I usually have 4 or 5 W-2′s, a schedule C with itemized deductions (including health care), mortgage interest, a K-1 or two, dividends, etc, etc, etc.

    I have always used TaxCut right out of the box and have been thrilled with the results. I also used it for state taxes and have never been disappointed. Been using it for about 10 years.

  4. Beatrice says:

    I used Turbo Tax Deluxe two weeks ago for the first time to do my federal and state taxes and loved it. The software was incredibly user friendly and churned out my taxes in a only a few hours. Last year I had H&R Block do my taxes and even though it saved me lots of time, I now think that was a waste of money since my taxes are not that complicated and I could have just done it on Turbo Tax (it just asks you the same type of questions that the H&R software does) and saved myself some money. Before that, I used to do taxes on my own with paper and pencil but will probably never go back to that now that I’ve discovered the benefits of Turbo Tax.

  5. Trisha says:

    The last time I used a box to do our taxes was 2003. It was Turbo Tax Deluxe, as I recall. We only had one rental at the time.

    The following year, we bought a bunch more real estate, which made going it without a CPA impossible! The CPA found all kinds of deductions that were missed for our rental when I used the tax software the year before!

    So, if you own investment properties, I really am convinced that using an accountant is an absolute MUST! He’s more than paid for himself every year (except this one, but because we made a big profit last year) with thousands in tax refunds. This year, though, we just about broke even after his fees.

  6. kelly says:

    I work full time and coach figure skating. Through figure skating I am a rink employee and also a contractor. I’m sure that I could do my taxes myself, but I feel better knowing I have the accountants work backing them up. I have a great accountant and only pay $125, so to me it’s worth it.

  7. Fred@OPC says:

    TurboTax makes it so easy to fill out personal returns – they’re even getting better at business returns. I used the partnership version to prepare my parents’ business’ return for the last two years and that worked really well too. I think JH, H&R and the rest will be hard pressed in the next 5-10 years to keep up with the softwares’ capabilities.

  8. Honestly, I hate places like H&R block. The time it takes to read Publication 17 (Federal Income Tax Instructions) for simple returns (aka: no flow through entities or huge stock conversions) and to then do your return is so much cheaper! PLUS: usually you will learn a few more things you could deduct (Sales tax, property tax, etc) and/or recieve a credit for (child care expenses)!

    I do 1040s for work, and I love them – but I would never charge a simple return $300! This is H&Rs way of getting profit and hoping you will ask for an ‘advancement’ on your tax refund – leaving them with even more income in the form of loan interest!! GRRR.

  9. MonkeyMonk says:

    My taxes can get somewhat complicated due to owning my own business and having a number of varied investments but I’ve used a certified tax preparer for years now and absolutely love it. He’s cheaper than services like H&R Block and he’s virtually paid for his fee many times over in finding tax breaks and helping prepare for the future year’s return.

    What used to be a 2-3 days ordeal now takes me about 4 hours to pull everything together for him and he does the rest.

  10. Kristin says:

    I’ve used Turbo Tax for years, but was disappointed this year when it couldn’t handle a rather common stock merger that included share conversion, cash payout and cash in lieu.

  11. Glenn Lasher says:

    Despite being a technology buff, I prefer to use the professional service. The reason for this is that my wife and I run a 100% Linux household, and I don’t feel like dumping out the cash for a piece of non-returnable software that *might* work under WINE.

  12. CPA in NY says:

    Please do not mistake the H&R Blocks et al of the world with the services of a Certified Public Accountant. Most of the H&R etc employees have a 6 week training course and work part time during tax season. CPA’s are licensed by the NYS Education Department and are required to have continuing education each year.

    Also, the box programs aren’t able to ask you every questions that might generate tax deductions or credits. You may even innocently answer a question in error that will allow the software to take a tax position that is incorrect.

    Dollar for dollar, you are much further ahead to consult a CPA with anything other than a very routine return.

  13. Billy Watkins says:

    Software is good for most simple returns but in 2006 there was a common deduction that was missed. The “telephone tax refund” was not huge but is another example of deductions that software in a box may not catch or may be released before congress approve the deduction. I also know a lot of “professionals” that missed this deduction also as it came right in the beginning of the 2006 tax season.
    I do however recommend the taxes out of a box over the H&Rs and the JHs of the world because they are not doing anything you can’t do. They read the prompts on their screen and enter what you tell them. The people doing your returns have 20 hours of training and it’s mostly on how to navigate the program and very little about Tax LAW. If your preparer isn’t at minimum a college graduate with an accounting degree, do the return yourself.
    No matter who does your return know that you have to have the comfort to know that you are signing the return and taking responsibility for what it contains no matter whor prepares it.
    file_your_taxes at yahoo dot com

  14. Billy Watkins says:

    To CPA in NY:

    CPAs are also not the “et all of the world” either.

    To start out, I would not lets say that I would not allow a foot specialist operate on my brain and yet I call them both Doctor (DR.). A CPA can be looked at in the same aspect. If the CPA is not concentrated in the area of Tax then use your judgment. Are you paying for a service greater than what a box may provide? Often times they learn how to do taxes much like you or I did. Trial and error or copying what someone else has showed us and then once comfortable started brainstorming ways to apply the law. I am not saying CPAs aren’t intelligent because I truly believe they are. I am telling you to ask yourself. Is “my” CPA moonlighting to make an extra buck and charging an exorbitant (sp?) fee because they studied hard and have the monogram to prove it or am I getting my monies worth.

  15. Anonymous says:

    I work for H&R and would just like to say that we spend alot more than 6 weeks on a course before being allowed to prepare taxes. Personally, I work part time for them during tax season. After April I spend anywhere from 20-30 hrs on additional training in TAX LAW not software application or navigating software. We don’t even go near a computer during the off season. All training is done on paper and pencil the old fashion way to make sure we understand the tax code we are applying. I have worked for them for 12 years and have many loyal clients that return to me year after year swearing that I save them money.

    While I will agree we are expensive and not necessary for everyone, I believe I am providing a valuable service to many of my clients.

    I too hate the loan products we offer, but they are demanded by some clients, albeit the ones who can least afford it.

    While I may not be a CPA I do have extensive education and specialize in taxes and spend many hours reading up on the changes passed by Congress and the IRS.

    Eventually I will take the enrolled agent Exam, most likely this year, which will make me equal to any CPA or tax attorney, at least in the eyes of the IRS by being allowed to practice in front of them.

    The problem with us storefront services is that there are so many of us and we do have varying amounts of experince. That is why we do try and steer clients with more complicated returns to more experienced preparers.

    Before working for them, I too prepared by own taxes. This was before software was even available!I have learned so much in my 12 years about the tax code, that I never would have learned on my own and have saved myself alot of money.

    It is not just about asking questions, but also explaining the results, why the results are what they are, how to better prepare for the coming years and how the tax code applies to each client’s particular situation. No one concept can fit everyone.

  16. Deb says:

    Maybe I’m weird, but every year we put everything into turbo tax online, find that it’s giving me some kooky huge amount of SE tax, print out the forms and do them with a pencil, and wind up paying half as much.

    We should probably get an accountant to do our taxes: we both have schedule Cs, own a house, have a home office deduction…

    …but it’s soothing to put all the numbers in and it’s not that hard. It’s that late-winter weekend tradition that nobody in this household likes, but nobody’s willing to give up either.

  17. Anonymous says:

    Before I started using software (TaxAct Deluxe) I used to do my own taxes. I used H&R Block once when I was unsure if I filled out the Schedule C and handled the roll over of a 401K correctly. Once I saw where the amounts went, on what form, etc I was able to do it myself. Then when I started using the software, TaxAct allows you to fill out the forms directly if you want to after going through the questions.

    I suggest going to a preparer the first time you have unusual circumstances. Then once you see how that person did it then use the software.

  18. Enrolled Agent in NYS says:

    I have been in the tax field for over 15 years and am an enrolled agent. My license comes from the IRS and I am licensed to practice in all 50 states. My specialty is tax and yes I have an accounting degree as well. Along with that designation comes the requirement of a minimum of 24 hours of continuing education specifically in the field of tax. I do no advertising and many of my new clients each year are former “box” clients. Generally, I get them once they have been issued a notice because they did not handle things properly or they weren’t sure how to answer the questions from the “box”. I have always told my clients that you are not paying me for my data entry skills. You pay me for my tax knowledge. It’s not about answering some questions correctly, it’s about getting the lowest liability allowed by law and knowing that you can hold someone accountable if it is wrong. I have had several people receive notices (prior to being a client) and they would have paid the monies even though the notice was incorrect. I know the “box” won’t help you with that!!

    This also is about efficient use of ones time. Generally speaking, I can complete a tax return from start to finish in less time than it would take someone to go to the store and buy the software, come home, load it, proforma last years info, and then start preparing the return.

    As far as cost justifying myself. No problem. My fees are reasonable and based on the time that it takes. A simple return is obviously substantially less that a complicated one. All of my clients know that this is my full time job and they can reach me year round if something changes. They definitely like knowing that I have their backs.

  19. TaxTester says:

    I used to do mine by hand, and then i started 10 years ago doing them with TurboTax, loved it. This last year I took HRBlock training, and spent last tax season as an HRBlock tax worker, loved it, learned a ton about my taxes and how to take advantage of more options.
    I tested last year doing my taxes with the HRblock inhouse system and with my knowledge and showed a nice 800 buck return, then tested using a free online site and at the end I knew that it forgot to ask me a question or 2, and it only showed about 300 dollar return. I will test this scenario out again this year but probably with TurboTax.
    I believe after that test that it is good to at least go every few years to a tax pro, learn a little, have them help you find more ways to get more of your money back, and ensure you are doing it correctly.
    See, the websites and the TurboTax type applications have to ask you tons of questions but keep the questions to a minimum otherwise normal people would die doing their taxes, so sometimes their questions don’t get you into an area that you need to be to take advantage of more return!
    my2cents

  20. Janet Stotler, EA says:

    First of all, I hear everyone talking about CPA’s and nothing about enrolled agents. Do you people know that CPA’s don’t have to take any continuing education in tax at all to be considered “qualified” to prepare taxes. Most of them do but they have lots of other continuing ed choices to meet their licensing requirements.

    On the other hand Enrolled Agents, must take all of their continuing education in the field of tax. And speaking of the big box software you all think is so good. Does it explain how you have to track your refinancing to determine how much of your mortgage and mortgage interest relates to Home Acquistion versus Home Improvements versus personal expenses for money just pulled out? Just because its a first trust deed doesn’t make all your mortgage interest deductible if you have rolled into the first mortgage over $100,000 of credit card debt, car purchases, etc etc. Not to mention nothing not used for Home Purchase/improvements are deductible for AMT. How many of you use the box people know about AMT. And the list goes on.

    The program only knows how to produce based on your answers. If you don’t know how to answer the question, you have a bogus return. Either way it hurts you. At audit if you took too much deduction, or now if you didn’t take enough because the program didn’t ask questions about your particular situation. A program can’t pick up the ball and ask the deep probing questions a practitioner can.

    And yes I agree that H&R is much too high and your results a crap shoot depending on who you get. They got to pay for those year round/part time use leases some way.

  21. prior preparer says:

    As a professional tax preparer for HRBlock, I have had more than 500 hours of tax training over the past 13 years, and have also taught classes in my specialty. I am required to take at least 24 hours of continuing tax education each year, but typically take well over 30 hours. If you are confident that the ‘box’ will ask the right questions and that you understand what the questions are and what the answer should be, then, by all means, use the ‘box’. But Congress has a habit of changing/adjusting/tinkering with the tax code each year, and many tax items are adjusted or change each year. If you are confident that the ‘box’ is up-to-date, and you are knowledgeable about tax law and tax consequences, please buy the ‘box’. If not, then find a qualified professional, be it a CPA or a seasonal preparer in a Block office. Ask questions about your preparer’s qualifications, and ask about ‘guarantees’ provided by the preparer/company. The box guarantees that the arithmetic is correct, that’s all. Happy filing!

  22. stanley Rein says:

    I am familiar with both Turbotax and Taxcut and both are fine programs for many types of tax returns. However, the average taxpayer is unfamiliar with many of the tax exceptions and methodologies needed and required to maximize tax deductions and credits when preparing their tax returns.
    Both my wife and I are tax preparers for H&R Block. While she’s an Enrolled Agent, I am an accountant, retired auditor, and an Attorney. We bring to our clients a comprehensive amount of knowledge in taxation. As previously mentioned above by another HR Block employee, we are required to complete 30 hours of tax training each and every year with a passing grade of at least 80%. I, personally, have attended courses, outside of H&R Block training classes, that were designed for CPA continuing education purposes, but did not require any examination at the conclusion of the course. This is not, in my opinion, effective training, but it does satisfy state and or required continuing education requirements.
    To many taxpayers H&R Block prices seem high, but not more expensive in most instances to CPA’s and other preparers. A question one should ask is whether other preparers and or CPA’s stand behind their tax preparations and pay penalties and interest of their clients if so assessed by IRS and also if they offer for a very nominal price, PEACE OF MIND, to protect taxpayers up to $5000.00 of tax liability if audited and subsequently found liable by IRS.
    Both my wife and I know that we have a vast array of support mechanism avaialbe to us and our clients on any tax issues that arise. Many of us are trained in not only personal tax returns, but corporate, partnership, and estate returns as well. We have a company whose sole business is TAX PREPARATION and has been for about 40 years or more. Those of us preparing tax returns do this not as a sideline but as an occupation. We have a wealth of knowledge and experience second to none. When a taxpayer comes into our office they are getting the best tax return that money can buy and it’s generally prepared in front of them while they wait. Are we worth the money we charge you bet! Where can one get this type of expertise and education other than at H&R Block. Maybe this is the reason H&R Block is and always has been the number one tax preparer in the country.

  23. TaxMan says:

    I have been in the tax field for over 20 years and specialize in difficult individual returns and small businesses. When I started my practice, most of my clients were those dissatisfied with the large “chain” preparers. What does that tell you?
    Whether you should use a “box’ or a pro depends on your situation. Many of my clients are those who thought they could do it themselves and found that even with the “box”, neither they nor the software could handle it correctly. Or worse, left important stuff out. Remember, the box will compute what you put in. Remember, garbage-in, garbage-out.
    I have a simple rule on when you should use simple software: if you are computer-savvy, are familiar with the tax rules, file the short form or do not itemize, and/or have a very simple tax situation, then the software may work for you. If you are not sure, that is reason enough to use a pro.
    Which kind of pro is a very important question. If you use a seasonal preparer, make sure you get references from clients who used that same person that year or a prior year, NOT THE FIRM! If you have a full-time activity which is not a wage or salary (i.e. a business, rental property, etc.), then you need a full-time (i.e. non-seasonal) preparer who can handle your situation. With such an activity, you WILL (if you are smart) use them during the year. Ask them how long they have been preparing returns like yours. If only a short time (say under 5years or so), do you want the preparer to charge you for “on-the-job training”? Whether they have initials after their name (i.e. CPA, EA, ESQ. etc.) may (or may not) be important to you. IMHO, such initials do NOT prove they always have greater knowledge or ability of the tax rules than others. Maybe they do and maybe they don’t. Should you use them? That depends on whether you think you have a high likelihood of being audited or you can justify their fees. Some folks can; many find they cannot.
    One very important item to remember: the software will NOT replace the experienced preparer’s judgment.
    What do you think? I would be interested in reader feedback.

  24. Amy says:

    I work at H&R Block. The folks paying 300.00 are the ones who are going with one of the rapid refund products. These products are loans, and do have additional fees attached. Fees which H&R Block do not get. And, these folks usually make in the $ 15000.00 range and are getting a huge earned icome tax credit, and have paid no federal tax at all. Their mentality is they don’t care how much it costs, they just want $ 5000.00 tomorrow. So, don’t blame tax prep offices for high prices. People are willing to pay it to get money they most certainly did not earn and do not deserve.

  25. stephanie says:

    I was a very faithful Block employee for a couple of years. I had a decent clientel and didnt have any audits or amendments that were my fault. I do know that some people in the company didnt know what they were doing. I dont know how many preparers I helped out as a first year. Its hard to say bad things about a company but I know that the district I worked in was not properly ran and they didnt seem to care that the ones that needed to be let go were best buddies with the District manager. I know that within the first three years as a preparer I did almost 500 returns and helped with probably another 200. I had about 200 hours of classtime to prepare me for the more complex returns. Its not always about what company you deal with its whom there you deal with


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