Comments on: Why You Should Hire a Tax Professional

By: Alex Fernandes

Alex Fernandes — Wed, 30 Sep 2009 05:09:51 +0000

Great post, it will surly help many people to know benefits of tax professional, I totally agree that tax professional will help us to know that tax code. .-= Alex Fernandes´s last blog ..Best Books You Could Read This Fall =-.

By: Miranda

Miranda — Mon, 28 Sep 2009 12:44:34 +0000

Thanks for stopping by! @Jason: I agree with Eric that with the software you can get a cheaper tax return filled out. However, I tried it once, and have never been as satisfied with it as with my accountant. This is because as you get more complicated taxes, the version you buy becomes more expensive. My needs, for state and local, plus my home business, cost fairly close to $200 in tax software. Plus, as Eric pointed out, I don't have the ability to do regular tax planning with the software. In the end, for my situation, it's worth it to pay the extra. The time it saves, plus the tax planning I get, more than make up for it, in my opinion. .-= Miranda´s last blog ..Saturday Staples: Personal Finance Reading =-.

By: Eric J. Nisall

Eric J. Nisall — Fri, 25 Sep 2009 00:48:14 +0000

@Jason – You are correct about the pricing, but the tax software is only useful as an after-the-fact tool. The software, nor the developers, are available to provide support year-round, and they also are not as intuitive as a live, experienced professional. They cannot give you guidance on tax matters throughout the year that may affect your tax standing and they certainly cannot keep you up to date on law changes that will be newly applied.

An example of the lack of intuition – I did an amended return for a client who used preparation software last year because they received a notice from the IRS stating that they owed additional taxes. What had happened was they had health insurance taken out of their paycheck under a cafeteria plan each period. The software not only accepted the input on the W-2 screen, but also allowed the same figure to be used on the client’s Schedule A as an additional itemized deduction. A seasoned professional would never have allowed the deduction to appear on the return, but the software is not programmed to recognize such mistakes, and therefore allowed the return to be submitted as is.

Examples of year-round availability – Say real estate taxes are going to be a stretch to pay this year. A professional would know that it can only be deducted on the current year’s return if it was paid in the current year. The professional would be able to advise the client to make every effort to ensure that it is paid in order to take the deduction. Or questions regarding effects of stock sales in the current year, or real estate transactions, or any number of events that could result in either gain or loss of deductions. That is why professionals-at least good ones-get with clients during the 3rd quarter and do projections, so that the clients would be able to make any necessary adjustments in the final few months to out themselves in the most advantageous tax position possible (particularly having to make extra deposits in order to avoid potential underpayment penalties once the year is over)

By: Jason

Jason — Thu, 24 Sep 2009 22:01:33 +0000

Miranda,
What are the benefits to using a tax professional compared to yearly tax software? Software (I believe) is cheaper than $450 even for the more complicated fillings and is suppose to automatically find or fill out all of the deductions you are entitled to.

By: Anthony

Anthony — Thu, 24 Sep 2009 21:21:54 +0000

It is crazy to think that you can keep up with tax laws and do a better job than a professional. In my experience, the deductions you will get by using an accountant will outweigh any money you pay them. Not to mention the cost of your time away from your business as opposed to doing what you are an expert at.

If you don’t feel your accountant is working well for you always feel free to get a second opinion, you might be surprised.

By: Eric J. Nisall

Eric J. Nisall — Thu, 24 Sep 2009 21:13:35 +0000

Excellent points, Miranda. Luckily you realized what many have not been able to: that sometimes you just have to give someone else money to do something for you. I never quite understood the hesitation, especially with so many tax laws being implemented as well as expiring recently. Especially when I see so many articles and blogs discussing overlooked deductions, and errors due to inexperience/lack of knowledge it confuses me even more.

You do bring up some very interesting characteristics that I have always believed were almost as important as education and experience. When it comes down to it, how can you work with the smartest most capable person if they never listen to you, or you simply clash personality wise. That doesn’t make for a very productive working relationship, even if is temporary (which, by the way I don’t think it ever should be a once a year relationship. Your accountant/preparer should communicate with you periodically throughout the year to keep abreast of your current situation and to help steer you in a positive direction no matter what month it may be)