TAXES - Turbo Tax or Professional?

Question

I am looking for a good tax accountant here in Phoenix, Arizona.

Last year after talking to an older couple who are RE investors with over 10 properties, they gave me the confidence to use Turbo Tax. I have a pretty good understanding of taxes, or so I believe. Nonetheless I'm sure I left a couple bucks on the table, but in the process I saved 700 bucks by not using my accountant.

Currently I have 6 properties, 2 of which were purchased this year. My question is how much should I be paying for a good tax accountant here in AZ?

And does anyone have any recommendations?

Brandon Hall · Answer

@Richard Michael while I have no idea what your situation is, I'll tell you what I tell my prospective clients.

TurboTax is an excellent solution for those with simple tax positions - simple being a W2 job and a few trades per year.

If you have one or two properties and not much else going on, you *may* be able to get by with TurboTax. Why *may*? Because unless you answer the questions TurboTax prompts you with in the correct order, you will either leave money on the table or do something wrong. TurboTax uses algorithms to determine the subsequent questions and fill out your taxes respectively.

I've had several clients come to me where their operation is getting too large for them to handle on TurboTax. They, like you, didn't see the point of hiring a CPA and wanted to save $700. Unfortunately, approximately 7 times out of 10 we've had to go back and review their prior tax returns, file amending returns, or file Form 3115. Sometimes (hopefully) this results in additional savings that I've been able to find, but other times it's resulted in penalties due to low quality self-prepared returns and the underpayment of tax.

On top of that, after TurboTax prepares your return, the software won't tell you about different strategies you can implement in 2016 to save additional money on tax. That's where the true value of a CPA comes in.

Two services I strongly recommend people penny up for are tax and legal services. Both are complex and highly specialized, and doing it yourself can really get your burned. At the very least, have a CPA review your returns prior to e-filing.

Daria B. · Answer

@Richard Michael

From my own personal experience I sought advice from a CPA and plugged in that information into the software. Less cost but....looking to have a CPA do my taxes from this point forward. Of course getting advise from a CPA you can still do your own using the software.

I have 3 properties and I believe with 3 or even many more, the complex situations that can arise for any number of properties warrants getting a professional involved.

Recently I had to get the advise of a CPA to correct something "started" by another CPA years ago that was incorrect. I continued using that same incorrect information as a basis throughout the years using Turbo Tax. If plugging in incorrect information produces the wrong results, it just gets to be a mess.

I started using that software in 2000. I an finding it to be limited for what I need to do for my properties.

Last year I used HR Block due to cost savings and additional state return that I needed (1 of my properties is out of state from where I live ). While this was a cost savings, I still could not file electronically because neither software supported filing an election for which I needed to do. So for me that was just useless.

If you feel comfortable getting the advise of a CPA that would not cost as much as that person doing your taxes, then that may be the route to go and you can still input your figures to Turbo Tax.

Also, the money you pay a CPA is a tax deduction.

Steve Vaughan · Answer

I've been using TurboTax since I started owning rentals in 2003. My Sch E alone is 3 pages now because only 3 or 4 rentals fit on each. I also self-prepare my partnership returns for my LLC , my 1120s for my S-corp and all the k-1s.

Before I grew so much, I wish I had run things by a competent CPA like @Brandon Hall.  I buy the Audit Defense plan every year.  I wouldn't bother if I wasn't a little nervous.  I hope I'm doing it all correctly, but am nervous to start with a professional now. May be too late for me to.  Have someone review before you get too large @Richard Michael!

Steve Vaughan · Answer

Thank you very much @Daria B.! This year I also had a liquidity event in one of my entities so I am leaning more towards taking your advice and seeking a pro even more.  Happy Holidays!

Daria B. · Answer

It's never too late, believe me. After my predicament I'm glad it happened because it opened my eyes even more. I've never been against using a CPA, it's just that like you mine started off easy and I would consult with a CPA and then make what ever appropriate changes in the software.

Given the recent corrections that I am doing (yes amending) I don't think I really want to continue down the path of consulting and then doing myself. Last year I couldn't even electronic file because of the lack of support in the software, lack of support not only in the inability to do in the software but the inability by the software manufacture to accurately give me guidance in the software. I wasn't asking them tax questions. I was asking them how do I perform this basic functionality and where is it. They couldn't answer so the CPA that I have been using the past couple of years did help me out. The end result was that I had to mail in my taxes. I was nervous doing that since I had not done it in many years.

What I look to have a CPA do my taxes for now is not only doing them but also talking to me about them and explaining why and what is being done. I consider myself pretty savvy and I read a lot and do a lot of research. At this point though, for me, it would be prudent to get someone on board now.

Chris Soignier · Answer

I used to be a loyal Turbo Tax user, until I received an IRS demand letter for some taxes on restricted stock that I missed reporting on.   I could not for the life of me redo the return in TurboTax (using the cloud version at the time), so I hired a CPA friend to fix the error.   He asked me a bunch of questions, and instead of having to pay ended up refiling and getting me refund than more than covered his fees!    I always felt competent doing my taxes previously, but I've now seen the light regarding the value of having someone who eats, breathes, and sleeps taxes doing my returns.    Yes, I pay more, but I also get better advice, more complete deductions, and someone to represent me should the IRS contest my returns.     I'm a big believer in using a CPA (at least for my situation) now!

Samuel R. Harden · Answer

Since you're just looking at a Schedule E, I don't see why you couldn't get away with filing through TurboTax, though the main concern is how you're differentiating between repairs (deduction) and improvements (capitalized and depreciated) expenses. The IRS has been changing a lot in this field lately, and this year is no different, with changes to the safe harbors. The problem is not how little/much money you're leaving on the table now, but how much it will cost if the IRS challenges your filing. Again, at your stage I think it is a coin flip to decide which path is better for you, but I'd definitely suggest an accountant if you continue to grow. If you do it yourself, IRS Publication 527 is a "good" read.As far as cost, I think $500-750 would be reasonable in my market for your first year filing, but it will probably be more in your market. Subsequent years should be easier, unless you continue to grow, but that's a good problem to have.

Account Closed · Answer

I would still find a good accountant to do your taxes and use QuickBooks.

I used Turbo Tax one year and got audited. Had to hire an accountant anyway to straighten it out.

Now, I use Quickbooks and that a tax accountant.  I keep my books in Quickbooks, and give my accountant a copy of the "accountant" file at year-end so they can run the reports they need and "drill down" as needed.  They give me the necessary adjustments to my books to keep me on track.

Interview several accountants and pick one that seems to fit your style and philosophy. Some are conservative and some are aggressive.  You have to decide where on that spectrum you want to be.

Some accountants, in fact most, are just glorified bookkeepers.   Find one that knows the law, knows accounting, and will actually give you advice not just do the returns or help you keep the books.

Linda Weygant · Answer

**Disclaimer** : Former Intuit/Turbo Tax Employee

As @Brandon Hall said, Turbo Tax is a great product for simple to minimally complex returns.  The issue that happens, time after time (as the person on the other end of the phone support, I can promise this is true), is people who read a question, think it doesn't apply to them and click through it.  If you don't 110% understand exactly what a question is asking, why it might be asking it and how it might impact other forms, you can find yourself in a situation where you can't back up enough to get that question back.

The software also has some algorithms built in to suggest other deductions that you might be eligible, but it can by no means take the place of a great CPA with critical analysis skills.

TAXES - Turbo Tax or Professional?

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