Your Opinions on My Tax Questions

[Life_is_Simple]

Do you do your own taxes, or have a professional do them?

Do you worry about audits?

If you had an audit, would you go it alone, or have the professional go with you? (do they even do this for people)?

Background:

I am self-employed, and have had someone else do my taxes in previous years. For about 7 years, I went to one Tax Guy until his health failed.

Then last year, I went to a different person, and she did a terrible job - I had to keep having her recheck things until she got the right answer (since I always do the taxes myself first).

So the question is: Do I just rely on TurboTax and myself?

Or do I try to find someone new?

As my friend says "Life_is_simple, you are a perfectionist. You are going to do them better than these people anyway." On the other hand, maybe there's peace of mind having a "professional" bless them?

Who knows? :shrug:

[Tradd]

In my opinion, it would depend on how complicated your tax return is. Are you taking lots of business-related deductions? Would paying for the services of a CPA give you some peace of mind?

[Life_is_Simple]

I have deductions, but they are not difficult and are pretty much the same every year.

The weird thing is, I've never had a tax person who I've had complete confidence in. With the aforementioned Tax Guy, sometimes I would get him, or sometimes I would get one of his employees. And no two would do things the same way. A certain deduction would go in one category one year, and in a different place the next, making me think their motto was "as long as it goes somewhere it is ok."

My relatives in another state have tax people who they really like. But I've never met any like that here.

SO I guess what I'm saying is, I would like to have peace of mind and have a competent person do my taxes. I would like to delegate to someone the job of keeping up with new tax laws so I don't have to. But I don't know any body like that.

[Rogar]

Having a tax person gives me peace of mind that things have been done right. It hopefully eliminates any error flags that might arouse the IRA. I'm probably about breaking even with accountant fees vs. tax savings things that he has pointed out. I've used the same fellow, a CPA, for several years. If he quit for some reason and I had no leads on a good replacement, I'd be tempted to try Turbo Tax as long as my taxes were pretty simple and I did't have any burning questions about things.

[Tradd]

I have deductions, but they are not difficult and are pretty much the same every year.

The weird thing is, I've never had a tax person who I've had complete confidence in. With the aforementioned Tax Guy, sometimes I would get him, or sometimes I would get one of his employees. And no two would do things the same way. A certain deduction would go in one category one year, and in a different place the next, making me think their motto was "as long as it goes somewhere it is ok."

My relatives in another state have tax people who they really like. But I've never met any like that here.

SO I guess what I'm saying is, I would like to have peace of mind and have a competent person do my taxes. I would like to delegate to someone the job of keeping up with new tax laws so I don't have to. But I don't know any body like that.

Have you asked those you know (anyone from dentist to hair dresser to people you know from a church, community group, etc.) for recommendations? How did you find the last people?

[bae]

I do my own taxes, and they are rather complicated.

I'm not particularly worried about audits.

I use my own custom spreadsheet, Turbotax, and frequent consultations with my-wife-the-lawyer.

[rosarugosa]

I do my own, but they are pretty simple. I've never worried much about being audited because I am meticulous about keeping documentation.

[Float On]

We lived through a state sales tax audit. It did make me glad that I use an accountant to do our year end tax stuff but I do all the tax forms for the quarterly reports due for federal and 8 states. I was so worried about the audit but it was pretty easy, infact when she walked in the door the first thing she sais was "relax, I'm not rude, and I'm just here to review your books and make sure nothing has been missed". She reviewed that year's tax forms, the quarterly forms, and my checkbook printout from QuickBooks Pro.

[Life_is_Simple]

... I've used the same fellow, a CPA, for several years. If he quit for some reason and I had no leads on a good replacement, I'd be tempted to try Turbo Tax as long as my taxes were pretty simple and I did't have any burning questions about things.

Rogar - Yeah, this is my situation. I may try to check out 1-2 CPAs I've seen in the local paper. One writes a column occasionally, and one was highlighted in an article, so I am able to see a little about these two people. Otherwise, I have no leads.

[Life_is_Simple]

Have you asked those you know (anyone from dentist to hair dresser to people you know from a church, community group, etc.) for recommendations? How did you find the last people?
Oh gosh, I know so few local people here. In fact, I am in search of a local hair dresser too! :laff: If I see anyone, I will ask them. But I am truly a hermit, which is part of my problem.

On edit: Oh, how did I find the last people? The Tax Guy was found through a friend who used them, and she also has a small business. I'm an hour away from there now though. I could ask her who she switched to, but I was only luke-warm about the Tax Guy anyway and her new person would be an hour away from me. The woman last year, I knew her from something else, and didn't take into account how unseasoned she was.

[Life_is_Simple]

I do my own taxes, and they are rather complicated.

I'm not particularly worried about audits.

I use my own custom spreadsheet, Turbotax, and frequent consultations with my-wife-the-lawyer.
I don't have a wife/lawyer. But I might be able to GET one, given I am in MA and women can marry women. ;)

Maybe my concern about audits is that occasionally, previous tax people did weird things that I didn't understand (and to some extent didn't trust). So I'd want someone to help me figure that out if we had to go back years. That also highlights that I would want someone to keep things simple, and not do anything "elegant" that saves me $2.

[Life_is_Simple]

I do my own, but they are pretty simple. I've never worried much about being audited because I am meticulous about keeping documentation.
I guess I am pretty meticulous myself. I might just want to put some of my records in a safe deposit box, which I never get around to.

[Life_is_Simple]

We lived through a state sales tax audit. It did make me glad that I use an accountant to do our year end tax stuff but I do all the tax forms for the quarterly reports due for federal and 8 states. I was so worried about the audit but it was pretty easy, infact when she walked in the door the first thing she sais was "relax, I'm not rude, and I'm just here to review your books and make sure nothing has been missed". She reviewed that year's tax forms, the quarterly forms, and my checkbook printout from QuickBooks Pro.
That is good to know. I guess one time my Mom went through a tax audit, and she did all the financial record-keeping for my Dad's business. The auditor said he never had seen such organized records. So I guess I shouldn't worry, because I inherit those skills from her.

[Float On]

My accountant is over an hour away but he is worth keeping. He was an accountant turned artist turned back to accounting so he understands our business. While he was an artist he took a temp job helping out at a sale barn and was run over by a water buffalo - no kidding. Injured his shoulder to the point that his metal work was something he couldn't continue to do.....so back to the accounting. I can't imagine having to look for someone else. Most of the time we just mail or email or fax things back and forth. I like it when he says "Hey, I'm never going to do anything to your paperwork that could put me in jail." I figure if he is looking out for himself, then he is looking out for me too.

[Midwest]

Do you do your own taxes, or have a professional do them?

Do you worry about audits?

If you had an audit, would you go it alone, or have the professional go with you? (do they even do this for people)?

Background:

I am self-employed, and have had someone else do my taxes in previous years. For about 7 years, I went to one Tax Guy until his health failed.

Then last year, I went to a different person, and she did a terrible job - I had to keep having her recheck things until she got the right answer (since I always do the taxes myself first).

So the question is: Do I just rely on TurboTax and myself?

Or do I try to find someone new?

As my friend says "Life_is_simple, you are a perfectionist. You are going to do them better than these people anyway." On the other hand, maybe there's peace of mind having a "professional" bless them?

Who knows? :shrug:


CPA's and attorneys can and do represent clients under audit. I've done it myself. That being said, your chances of being audited are fairly low unless you make an obvious mistake. If you make an obvious mistake (such as missing a 1099), the IRS is going to contact you.

Many people either unwilling or unable to do their own taxes, hence the need for professionals to assist them. Others, such as some of the respondents in this thread, are more DIY types.

If someone has a somewhat more involved return, such as schedule E or C and itemized deductions, a CPA can often help minimize tax through their knowledge and assisting the client in arranging their affairs.

You'll have to decide if they can be of assistance to you or not, but fear of an audit wouldn't be the deciding factor in my book (assuming you are properly claiming income and deductions).

[rose]

I worked two years in a local CPA firm as a seasonal employee during tax season. Made me glad I do my own and wasn't paying for that kind of service. They were into volume, not quality. It is really not that hard with tax software. IRS publishes tons of publications for you to read if you have questions on something.

Since you have past years to follow, I'd consider doing it yourself. You can compare for reasonableness. It would be good if you could do it yourself and just have an accountant review it for you if they would agree. Less cost to you. And would give you confidence.

[junkman]

Life,

I’ve been doing my own taxes since 1967 when, as a newly-married couple, I had to file for the first time and, overwhelmed by the process, I let my brother-in-law, an accountant and comptroller, do them for me only to discover he had made several easily-spotted mistakes. So that was Lesson #1. No one knows the tax filer’s situation better, nor cares more about getting it right with the IRS, than the tax-filer her or himself.

Yes, I do worry about audits, not because I try to cheat, but because tax-law can be complicated, and because mistakes are easy to make in how income is reported and/or income can be reported in ways which are obvious and honest from the viewpoint of the filer, but not to the IRS. This happened to me in 2004. I had been actively trading the previous year, and the broker had reported my Gross Sales to the IRS without netting out profits and losses on each of several hundred trades. Plus, I had also had a couple dozen complicated bond transactions due to Chapter 11 workouts in which the basis had to be traced through multiple transactions. I submitted what I thought was a clear, honest return. They replied that I owed them $265,000 in back taxes and penalties. In a letter, I explained what I thought were their mistakes. They countered and said I now owed them $485,000 (four hundred and eight-five thousand).

At that point, I could have panicked. But I just laughed at what I thought was their misunderstanding and went to the regional office to obtain clarification. The guy took one look at my letters of explanation and returns and said, “Do it item by time, line by line, and not as the summary you did. Our computers (and people) can’t understand what you are telling them.”

It took me a month of spare time to build my case in which I discovered I had made dozens of mistakes, some in my favor, some in theirs. But in the end, and in a timely enough manner to meet their deadlines, I sent them 236 pages of documentation and explanation. They countered by saying that I now owed them $17 (seventeen dollars) beyond what I had already paid them as part of my first return, which I didn’t contest, because this time, they really had caught a mistake I had made. So that experience created Lesson #2. This tax stuff is doable if you are persistent. In other words, if your records are impeccable, and if you present the info to them in the manner in which they expect to see it, you will end up paying only what you really owe.

That was my only audit. But my returns have been questioned several more times since then, and every time, it was because I had made a stupid, careless mistake. So that creates Lesson #3. It’s isn’t the IRS who is your enemy. Your worst tax enemy is a filer’s typical unwillingness to read directions carefully and then to comply fully with them.

So, my advice to you would be this. If you see a long-term benefit in learning how to prepare your own taxes, then prepare them yourself this year and every year subsequently. Otherwise, pay someone to do it and move on to the other things in your life that would give you more satisfaction. Me? That audit was an invaluable experience, because it forced me to understand in mechanics of how to properly file Schedule Ds.

Charlie

[Life_is_Simple]

My accountant is over an hour away but he is worth keeping. .... I can't imagine having to look for someone else. Most of the time we just mail or email or fax things back and forth.
Yeah, this is the kind of person I would LOVE to have! It sounds like your process is easy, and the guy is dependable.



I like it when he says "Hey, I'm never going to do anything to your paperwork that could put me in jail." I figure if he is looking out for himself, then he is looking out for me too.

:laff: That's a good criteria for a CPA - one who wants to avoid jail for everybody involved! ;)

[jp1]

Personally I've always done my own, the last several years with turbotax. My taxes are very simple since we don't own a home and don't have enough deductions to do other then the standard deduction. My thoughts are that 1) the IRS won't necessarily do a full blown audit if there's a problem. For instance I got a letter from them that I hadn't included the sale of a stock on my 2010 taxes. Oooops. It turns out that Etrade never did a 1099 for it. The company had gotten bought by another so Etrade just deposited the money in my account in february 2010. By March 2011 I'd forgotten about it and since I had no 1099 from etrade I didn't think of it. I just had to submit a corrected return. 2) The best thing about having a 'tax guy' besides the fact that they do the work is that it's their work, as the professional, so if there's a huge gaffe that causes a penalty (unlikely) you can certainly go after them for the penalty (but not the tax that you actually did owe.) Most accountants and lawyers have E&O (errors & omissions) insurance (concept very similar to medical malpractice) for just this type of situation.

[Life_is_Simple]

Charlie,

Thanks for giving me such detail on the audit. It sounds like that even though people say to keep so many years of tax documentation in case of audit, you are only asked about certain specific things.

It's not like they put you in a small room and shine a bright light on you, and say, "Explain to me every last deduction for the past 7 years, and show me all the documentation.":0! Instead they will ask one or two specific questions, where there are uncertainties or appear to be holes in your logic. And some of it is done through letters, so you have a chance to investigate things on your end. For some reason, I really did think it was the "shining a bright light on you" scenario. ;)

I did email a potential tax guy, and got a response from him. I may go over and check him out. I would rather have a tax guy do this, if I could actually find one I was comfortable with. I tend to like to go through the numbers myself, and then have someone else finalize it and complete the mundane details.

[Life_is_Simple]

I worked two years in a local CPA firm as a seasonal employee during tax season. Made me glad I do my own and wasn't paying for that kind of service. They were into volume, not quality. It is really not that hard with tax software. IRS publishes tons of publications for you to read if you have questions on something.
You know, this explains why I felt a little uneasy about the Tax Guy I went to for 7 years. It was a little bit like that. That's probably why every year, the same deductions were put in different places. So maybe what I need is one person, and not a little shop that rotates a client through to different employees each year.


Since you have past years to follow, I'd consider doing it yourself. You can compare for reasonableness. It would be good if you could do it yourself and just have an accountant review it for you if they would agree. Less cost to you. And would give you confidence.
Yeah... If I could do it myself, then have someone else review it, that would be ideal. A potential tax guy who emailed me back yesterday, sounded more flexible with his clients than people I have previously had. So maybe I just tell him how I think it will work best for me, rather than having him dictate the rules. :thankyou:

[Life_is_Simple]

...
If someone has a somewhat more involved return, such as schedule E or C and itemized deductions, a CPA can often help minimize tax through their knowledge and assisting the client in arranging their affairs.
....
I don't have schedule E or itemized deductions. But I do have schedule C, but my stuff is not that complicated.

One question I have is: Which forms and backup forms do I actually send in? Or if TurboTax files it electronically, does it automatically know which to send in? It looks like TurboTax fills out a bunch of forms, but I can't tell which are official

[Midwest]

I don't have schedule E or itemized deductions. But I do have schedule C, but my stuff is not that complicated.

One question I have is: Which forms and backup forms do I actually send in? Or if TurboTax files it electronically, does it automatically know which to send in? It looks like TurboTax fills out a bunch of forms, but I can't tell which are official

Assuming you e-file, you typically don't have to send in anything except the payment (if you owe). I would suggest you print out the return and look at it before e-filing. If it looks ok, you go ahead and e-file and turbo tax should know which forms to send (the same ones you printed out and looked at).

[Life_is_Simple]

Assuming you e-file, you typically don't have to send in anything except the payment (if you owe). I would suggest you print out the return and look at it before e-filing. If it looks ok, you go ahead and e-file and turbo tax should know which forms to send (the same ones you printed out and looked at).
Thanks! I went through TurboTax to the point where I could create PDFs out of what would be filed. I also asked a TurboTax person online a question that I had.

I feel rather elated, in that I can actually do my own taxes!

I may still follow up with the local potential tax guy, but now I am torn. Do I want to hook up with him, or just go solo?

At least now I have options!:+1:

Thanks everybody who contributed to this thread!