Turbotax versus CPA

victory_tea2085January 9, 2007

We have a baby whom we love dearly. He has some health problems, medical bills are adding up, and childcare is costing us more than we have. My wife is a registered nurse making 45,000 and I work in the health industry, making 36,000 . My question- do you think we would be better off going to an accountant ( given our new status as "long form" taxpayers), or would we do as well with turbotax? My wife claims that, although we pay 7000 in childcare, we can only claim 3000 of it. We need to get the best refund we can get to stay afloat- man, things are getting tough for the working class. Thanks to all who reply. Paul

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My humble opinion is that TurboTax (or TaxCut, a competing product which I prefer) is a better bet -- if you're willing to put some time into it and if you get the package that includes your state tax, too (assuming your state collects income tax). The main reason why is that an accountant is going to be swamped and will only spend so long on your return, while, with a tax program, you can run the numbers as many times as you like, whenever you like. Trying different things, like filing individually, takes only a little time, while the accountant would (rightfully) charge you for the time it takes him or her to use his/her computer program.

The tax software also can prompt you for deductions or to check expenses and you can leave your chair to get the info you need. The CPA would have to ask him/herself if this could apply to you, decide that it does, call you for the info, and have you get it back to him/her for further processing. I simply think the tax software is much more flexible. You'd have to find a CPA with real expertise in your particular areas of interest before you'd come out ahead.

    Bookmark   January 9, 2007 at 10:14AM
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So sorry you are dealing with this. I'm sure it has been a stressful year.

I'll second steve_o's vote for software. We have a professional do our taxes now (because we are involved in an LLC with multiple partners) but I found software to be a great solution once we moved into the "long form" format.

Several years ago I did our taxes with the software and DH took issue, saying his friend had a great accountant who could get all kinds of deductions for us. I was confident that we had deducted everything we could but handed everything to the accountant anyway. We had to take an extension because the accountant couldn't do it before April 15. He didn't get to it until August (near the extension deadline) and his numbers were EXACTLY the same as the software's. Boy was I mad!

Good luck.

    Bookmark   January 9, 2007 at 10:26AM
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Another vote for Turbo Tax. I switched to tax software about 5 years ago. DH was concerned - he didn't trust it. So when I was done, I made an appointment with an accountant to simply go over the forms and make sure it was right. He spent less than 10 minutes - said everything was fine. Waste of money.
Turbo Tax updates itself frequently so that changes in the tax law are immediately incorporated into the software.

I just looked up childcare in Turbo Tax and your wife is only partially correct. It's not a deduction - it's a credit against the tax you owe. For example, if your total tax owed is $5000, you can deduct $3000 (the maximum). So even though there's a limit, it's much more to your benefit than a deduction.

    Bookmark   January 9, 2007 at 10:42AM
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"For example, if your total tax owed is $5000, you can deduct $3000 (the maximum). "
The IRS site differs with you!

"The credit is a percentage of the amount of work-related child and dependent care expenses you paid to a care provider. The credit can be up to 35 percent of your qualifying expenses, depending upon your income."

$7000 x .35 = $2450 maximum

And that's IF the 7K is all qualifying expense and IF they meet income guidelines.

Looks like TurboTax is wrong!

Here is a link that might be useful: Claiming the Child and Dependent Care Credit

    Bookmark   January 9, 2007 at 3:12PM
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If your company offers Dependant Care Savings Account (DCSA)and Health Savings Account (HSA), yon can put money aside as pretax dollars. For child care, it's up to $5000 per year per family. For tax purposes, you can EITHER set money aside with SA or take the credit at the tax time, not both. Use the Turbo tax to figure out which way may be beneficial to you.

For HSA, I am not sure of the limit. We set money aside for both accounts every year which essentially is the same as tax deductions.

With these accounts, you use or lose it. So you need to plan ahead, if you can, ie braces, hearing aids, glasses etc that are not fully covered by insurance.

For child care, many in the health industry look for shifts that allow them to work alternating shifts from their spouse so that they do not have to pay for child care. I know of many couples where one works two doubles on weekends and have weekdays off and the other spouse works weekdays. I know of an ICU nurse that works 3 12 hours shifts a week, mostly on weekends. Another combination is one works days and another swing shifts. Just a thought....

    Bookmark   January 9, 2007 at 3:30PM
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Actually, TT is right on - I can't cut and paste, so did an example of my own (which was incorrect). I stand corrected.

The maximum credit is $3000. The credit is a percentage of the amount spent on child care. TT figures it out. Again, the credit benefits you more than a deduction would since it's taken directly against whatever tax you owe.

    Bookmark   January 9, 2007 at 5:46PM
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I'm a reasonably informed, involved taxpayer. I run a sewing machine for a living. I work hard. I keep good records, but I don't care a FIG about farting around with a computer program. NO THANKS!

We use a CPA, and our organized approach to our taxes minimizes our costs. If we're audited, he will represent us. His fee is some of the best money we spend over the course of the year.

If you're willing to "work", listen to the others. I'm not! When I shut my Juki off and blow out the gravity feed iron I'm more interested in the gardens or walking the dog... . I feel the same way about paying the financial guy we've worked with for many years now. I'd rather do what I'm GOOD at and enjoy my leisure time.

    Bookmark   January 9, 2007 at 7:13PM
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My CPA charges a few hundred bucks and HE uses Turbo tax, or something similar. The last two years I have done it myself and I'm no rocket scientist. It's very easy, you just answer questions online and it calculates it all for you. No math involved, by me at least. Cost was $30, minus the rebate. Also- did you know you don't even have to buy the Turbo tax? There's a free website from the IRS that is the same thing. So try it, what have you got to lose?

    Bookmark   January 9, 2007 at 7:28PM
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If you use TurboTax and are audited what happens?

    Bookmark   January 9, 2007 at 8:45PM
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"So try it, what have you got to lose?"
Plenty! in fees, penalties and interest if something is wrong.

I'm with you chelone.... out tax return requires a 3" binder full of documentation. NO way I'd trust that to a computer program.
We use an accountant (not a CPA) who specializes in taxation laws. He is worth every dollar he charges. I keep costs down by having everything on Quicken and having documentation prepped.

AND, IF there is an audit, he represents us and justifies the return.
With TurboTax, you are on your own!

    Bookmark   January 9, 2007 at 10:25PM
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If you choose to use an accountant, maybe ask him/her first which software they use, or how you should prepare your info so that it'll be ready to run through their software easily.

In any case, have your info in condition that's easy to read/enter into tax prep. software.

Accountants, like other professionals, charge for their time.

If you can arrange your project in a way that reduces the time that they spend on your situation, you'll likely save fees.

Good wishes with dealing effectively with your problems.

ole joyful

    Bookmark   January 10, 2007 at 12:03AM
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Another option is to use the software and just have the return professionally reviewed. My DH is a CPA and his clients aren't a typical working couple. Most own business(s), have rentals, etc.

Go with the software.


    Bookmark   January 10, 2007 at 12:15AM
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If I ran a small business, I'd for sure use a CPA. If I were computer phobic, this would not be the time (or software) to start learning.

However, assuming that your return is not complicated and assuming that you and your wife are reasonably computer literate, you will save money going with the software rather than paying someone $200-$300 to do your taxes.

If you lie about your deductions and don't have receipts to back you up, you are on your own. However, TT does guarantee the accuracy of the software:
TurboTax calculations are guaranteed 100% accurate. We're confident and we want you to be too. In the unlikely event you are assessed a penalty based on a miscalculation, we'll reimburse you for the penalty and the interest.

What we require of you:

Register Your TurboTax Software.
Keep your contact information current.
Update your software regularly.
Enter and classify all information accurately.
File an amended return if advised by TurboTax to do so.
You must contact us within 30 days of your penalty assessment if you believe a TurboTax calculation error has occurred. Follow the link to Submit Your Case for Review online.

I was audited about 12 years ago. I received a letter from the IRS challenging one of my calculations. In a panic I took it to an accountant who told me my options.
1) Just pay the IRS what the letter demanded, 2) Contact the IRS and set up an appointment to show them my documents and how I had arrived at my figures. This wasn't a full audit, simply one particular (complicated) section. I had sold stock that had been split several times and I could not figure out my basis. I just paid the amount the IRS wanted.
One feature of TT is that if you take a deduction that is way out of line, the software tells you that it could flag an audit. If you have the receipts to back you up and are sure you qualify, you go ahead with it.

    Bookmark   January 10, 2007 at 9:23AM
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I know from personal experience that professional preparers aren't infallible. I had a tax preparer try to tell me I wasn't eligible for a particular education credit when I was in grad school several years ago. When he checked with his supervisor at my request, he learned that I indeed was.
I've used both Turbo Tax and Tax Cut. Although I'm not particularly computer-literate, both were a piece of cake. If you can read, you can navigate through either just fine. That said, I can understand the temptation to use a professional if you own a business or have an otherwise complicated return. If the OP's situtation is not more complicated than presented, I would think they'd be fine with either program and would save some much-needed money.

    Bookmark   January 10, 2007 at 8:58PM
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Just to clarify, the OP's wife is correct that the maximum child care expenses they can claim for one child is $3,000. The actual credit is a percentage of the expenses, and the percentage is based on their income, which is 20% for them.

So their child care tax credit is 20% x $3,000 = $600. The $600 will be taken right off the taxes due. TurboTax will calculate for you, as well as any available deduction for those medical expenses (which have to exceed 7.5% of adjusted gross income before you can deduct).

I like suggestion of using TurboTax & then paying for CPA to review or for questions.


    Bookmark   January 12, 2007 at 2:44PM
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Thanks to all for the valuable information. I'm thinking we'll stay with TT, just wanted your opinions as we will be doing the long form this year. Thanks Again

    Bookmark   January 14, 2007 at 11:04PM
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Would like to use TurboTax 'Business' and 'Individual' versions (1 for small 2-person LLC partnership, and other for personal returns... they dont appear to have one for all), and understand that it may be difficult to find a CPA who will work with us on that basis, ie taking a look at QBpro/TT setups (not trying to integrate the 2, but using them independently, trying to keep as simple as possible and almost prefer paper) and answering phone questions about tax return/s.
Have seen some online CPAs who sound like they may help with those types of questions.
Thoughts ?
Ps: Dont know if best to add this question to this discussion, or start a new '2009' question... guess we will see.

    Bookmark   February 25, 2009 at 12:46PM
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I'm a retired RN. For many years I had my own business and several rentals. From 1971 till 1991 we used accountants and towards the end CPA's. They were expensive and they made errors. During that time, we we audited about 3-4 times.
Since 1993, I have used Turbo Tax and love it!!! I also do my daughters for her. No errors and no audits! It's very easy to use.

    Bookmark   February 25, 2009 at 4:46PM
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I have used TT for the past 6 tax years. I'm 100% happy with the process.
The thing that I like best about it is that as I input the info I get to see exactly the impact it has on my tax liability. I feel like I get a lot out of it as opposed to handing someone a check and having them say "your refund is X" or "you owe X this year".
One of my co-workers was on the phone today with the CPA he has used for years. It seems that this year he keyed in something on the wrong line that caused his refund (which has already been deposited in his account) to be low by $1800. Now he has to take it up with the IRS.
If you are interested enough in your own finances to visit an internet forum titled "Household Finances" you should have no fear about using TT and learning more about your own finances. I have friends who treat tax time like a crapshoot-they dump everything on someone's desk and cross their fingers. The truth is that how you run your household has a profound effect on your tax liability, and why wouldn't you want to control your own fate?

    Bookmark   February 25, 2009 at 5:33PM
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I used to use it but reached a point where things became too complex for me to be confident in what I was doing with TurboTax. Maybe I also didn't have time for it to be a workable solution for me. I got a referral for a great CPA who is reasonably priced in my opinion and I'd never go back to using TurboTax unless my tax situation got a lot easier than it is now.

    Bookmark   February 25, 2009 at 8:05PM
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A CPA's prospective: I encourage those with simple returns (ie just a couple of w2's, interest etc) to do their own returns.

However anything more...hire an accountant. I am quite willing to do a return with w2 slips, itemized deductions, interest etc for about $80.00. including efiling. And I will provide tax planning advice too...I'll identify if you're eligible for the savers credit or perhaps recommend you defer that purchase of an energy efficient heat pump until this year..so you get a credit. You get the gist. I don't just plunk in the numbers...you get a real live person to assist you with minimizing your tax liability and maximizing the dollars that stay in your pocket. How much do I charge for you to call me and ask a question during the course of the year -Nil, Zip, Nada - it's included in your tax preparation fee.

I have high end tax software and still find instances where the results are not the way they should be but at least I can IDENTIFY when something is wrong and fix it. It's amazing one missed checkbox and the whole return can be wrong.

And a word of caution: No matter how simple the return is please review the output before submitting it. Step back and look at the figures and make sure they make sense. Look for typos, missing information etc.

Carolyn, CPA!

    Bookmark   March 3, 2009 at 9:41AM
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I work for a CPA, and we use a computer program that costs alot more than turbo tax. A cpa's knowledgebase is what you are paying for. Turbo tax can only tell you so much about your individual circumstance. When I took this job as office staff, I had no idea what a cpa did, and used turbo tax myself. Now, I will never go back. They know things that turbo tax, myself and google can't figure out. My parents got 3 years worth of SSA payments in one year. Turbo tax and jackson hewitt said they had to pay taxes on the whole thing b/c the amount was over the limit. (ssa is usually not taxable) The cpa fixed that. Even though my taxes are fairly easy, I will never go back. I have family members who have been burned by cpas, maybe I just happen to work for an extraordinary company, but I have never seen someone who HASNT gotten their problems solved, and come back for more.

    Bookmark   March 24, 2011 at 11:59PM
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I'm a member of a LLC with 19 other people, which software should I get to do my taxes. That is what version of turbotax? We just started the llc this year and haven't made any money yet.

    Bookmark   March 30, 2011 at 2:09PM
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