Ok, full disclosure. We are a tax firm. We want your business and we are in the business of doing taxes. With that being said, I will try to give you an unbiased approach to the best method of getting your taxes done.
Let me start of by saying that I am not a big fan of most tax preparation software, but they do have some benefits and are the right fit for some people. First of all, they are fairly cheap! Tax time is usually not a fun time because it means we are giving away hard-earned dollars to the government. Spending a few dollars on TurboTax can help reduce a little bit of that tax liability. This is only the case up until you hit a certain level of tax complexity. If you are working multiple jobs, have a rental property, run a business or anything other than a straight W2 job, it is usually worth it to hire a professional. In theory, TurboTax asks you all of the questions you need to answer in order to complete your tax return and save the most money. But the reality is some of the descriptions can be obscure and without a full understanding of the tax code, you are leaving money on the table.
On the other side of the equation, you have CPAs and EAs that can prepare taxes. To learn more about what an EA is HERE. While hiring a professional to do your taxes can be pricier than a simple tax software, the benefit normally outweighs the cost. If I propose that you pay me $100 and I will earn you $500 in return, most people would say yes in a heartbeat. This is part of the value proposition of a tax professional. They may charge a good amount more than TurboTax to file your taxes, but they will often save you more money, time, avoid headaches.
It can be intimidating opening up financial data with someone you have just barely met. You may feel like you are losing control by not knowing how everything is calculated. This is very common, but also another benefit to finding a trusted advisor who can work with you and hold you accountable each year. Tax prep software is good for compliance but does nothing for tax planning. Thoughtfully planning out certain decisions can help minimize the total amount of taxes you will owe. An accountant or tax professional that understands your financial situation as well as the tax code can ask you questions and dig deeper to uncover tax credits and maximize your tax savings.
There is also a third option: filing your own taxes without the support of a software or professional. But there is a reason most people don’t chose this option. Taxes are tough.
There are different versions of TurboTax that offer differing levels of capabilities and cost, but the principles are generally the same. We sometimes have clients come in with a simple return and we tell them that they can do it on TurboTax and get the same result. We still offer more than TurboTax does because with our fee we educate them and allow them to ask us questions all year, but this added value may not be worth the cost for such a simple return.
Well there you have it! My thoughts and opinions on TurboTax vs. Tax Professional.