Tax Software vs. Accountants
Should you do your own taxes or do you need an accountant?
A few months before tax time, the internet chatter begins. Blogs blow up. And people huddle around the watercooler having fiery debates: should I do my own taxes or do I need an accountant? These days, the differences between the two aren’t so obvious. Why? The software keeps evolving. It’s adding new features and getting more specialized. Let’s revisit the debate so you can make the most informed decision when it comes to your taxes: DIY vs. CPA.
What are the different costs?
Some of the more popular brands of software include TurboTax, H&R Block at Home and TaxAct. The average tax software will cost anywhere between $0 and $179, depending on how complex or specialized you need the software to be.1 The average cost for a tax professional to prepare your return? Around $273.2 Even though software is getting more expensive, it’s still cheaper than a CPA’s annual fee. Bonus: If you end up saving money with software, open a savings account to use toward a vacation, new phone or start a rainy-day fund. Plus, if you earn a refund, you’ll have a great place to save it.
Cheapest option: DIY
Is one faster than the other?
With tax software, you can finish your taxes in a few hours. So, the clear winner is tax software, right? Well, not so fast. The IRS estimates you’ll spend 16 hours to complete the most common tax return.2 A half hour here looking up medical payments and a couple hours there filtering through business expenses can add up. While it may be quick to plug your data in the software, you’ll spend a lot of time tracking things down, tax planning, and filling out and submitting your returns. Not to mention hearing that tiny voice in your head that says, “Should I have splurged for the CPA?” With a tax professional, there are no little voices. You still have to track stuff down, but when you do, you just bundle it all up in a crisp manila folder and drop it off with your CPA. Now you have time to go outside and enjoy the spring weather.
Fastest option: CPA
What about tax planning?
When your tax situation becomes more complex, spending extra to hire a professional can actually save money on taxes in the long run. Even with the bells and whistles, today’s software still doesn’t help you plan for the following year. A good accountant will help anticipate and plan transactions before they happen. And not only that, you can call on them year round to answer any questions.
Tax planning option: CPA
Which will find a bigger refund?
Accountants and tax software both know how to save money on taxes. But technically, your refund should be the same no matter what. Whether you enter the information or your accountant does it, after all the numbers are crunched, the math should be the same.3 That’s great in theory, but in practice, it’s not always the case. Most tax software is intuitive and simply asks questions that apply to you. Unfortunately, the questions aren’t always easy to understand or you may not know the answers. Accountants, on the other hand, may take an off-hand remark you make and find a deduction you never knew existed—or realize you owe more. Honestly, it all depends on your situation and the accountant. With so many variables, it’s not possible to pick a clear winner. Either way, if you are bringing home a refund, consider saving the extra cash for a rainy day or a maybe well-deserved vacation once tax season is over.
Highest refund option: Depends on your situation
What if I get audited?
Several tax software brands offer a premium service called “Audit Defense.” This is where a licensed tax professional will help you plan, prepare documents and represent you in meetings with the IRS.4 Hmm…that sounds a lot like the service your CPA offers, but for a whole lot less. Still, you have an ongoing relationship with your CPA, and you may feel more comfortable with someone you know representing you.
Best option: Both
And the winner is?
If you don’t want to spend money on an accountant, tax software is a viable alternative. If you have a more complex tax situation, you may want to choose a tax professional. The question of doing your own taxes or hiring a professional will always exist. Both are viable options, so what does that tiny voice tell you? Chances are it already knows the answer.
This site is for educational purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.
The Cheapest Tax Software of 2017. (2018, January 30). Retrieved April 5, 2018, from: https://www.doughroller.net/taxes/cheapest-tax-software
Bell, K. (2017, February 06). Should you do your taxes yourself or hire a tax preparer? Retrieved April 5, 2018, from: https://www.usatoday.com/story/money/personalfinance/2017/02/06/should-you-do-your-taxes-yourself-hire-tax-preparer/97198816
Jensen, C (2017, February 03) Does TurboTax get you the biggest refund? Retrieved April 25, 2018, from: https://www.quora.com/Does-Turbo-Tax-get-you-the-biggest-refund
Turbotax vs. Accountant: When Should You Hire a CPA? (2017, May 15). Retrieved April 5, 2018, from: http://abovethecanopy.us/turbotax-vs-accountant