Posted: 2/29/2016 3:41:38 PM EDT
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Okay GD, learn me on the merits of having someone else do my taxes
Long and short of it because TL;DR... Complicated part is the wife has a 1099 and has a home office, thus we qualify for the home office deduction. We have moved twice this year. I have run everything through turbotax and its projecting we owe about $5k, which is the number I expected running estimates prior to actually having all the proper documents. For what it's worth, we don't have many big write offs, no business car, just a computer, some furniture, and then obviously the home office deduction portion. So, I can file my taxes for roughly $90 with turbotax, or I can pay some professional (maybe CPA, maybe H&R Block) to do it for me... The question is, what benefit can I get from them? I doubt they will be able to significantly lower my tax bill and if they don't, I'm on the hook for $300-500 in prep fees. The only angle I can see is maybe some audit protection, but I don't think that will be an issue for us at our income level (roughly $100k). What I mean is we don't have that much to mess up, relating to the point in the previous paragraph about our write offs. What to do? Thanks for any and all legitimate responses. |
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Does your wife's business make money (1099 - expenses)? If so, a CPA or Enrolled Agent may be able to offer some value added suggestions that will save you money going forward. They can also tell you whether or not you've been preparing your returns correctly.
Some tax preparers will take a look at your situation free of charge and let you know what they can do for you and how much it will cost. They might even look at one or more of your prior-year returns to see if they can amend those and get you any money back. FWIW, I've turned away quite a few 1040s because I didn't feel I could add value. My hope is that people will remember me if/when their situation becomes more complicated. Here are a couple links that might help you find someone in your area: http://www.naea.org/ (Enrolled Agents take a test administered by the IRS and have to fulfill CPE requirements.) http://www.natptax.com/Pages/default.aspx As to "audit protection" - read the contract carefully--often they provide more protection for the tax return preparer than for the taxpayer. Caveat emptor. |
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Yes, business makes money. She only stared this job in May, prior to that was on a regular W2. As to the complexity of the job, she works as a contractor for a company and has few write offs. I personally wish she would be on a w2 so I didn't have to go through this, but she likes the flexibility.
So I guess it really comes down to...do they add significant enough value to offset their charge? I feel like turbotax put me in the ballpark and I am not too worried about an audit. Most I have talked to will give me an upfront estimation of cost, but once they start preparing, I'm on the hook. Meaning, if they don't beat the figure that I see with turbo tax, I still have to pay them. Understandable really, I don't expect them to work for free. But then I'm still paying more than the alternative. I think I just need to take the plunge with Turbotax this year, but set up a consultation with a CPA going forward to see if they can help us with structuring perhaps. I'm not too concerned about an audit; even if we were, there's not much more to mess up (in my uneducated eyes) and so anything I missed would likely have a small financial penalty. Turbotax has accounted for the home office and business equipment purchases already. I'm just uneasy with the whole situation because it's our first year with the 1099 and home office deduction. Thanks for your input Essayons. |
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It used to be----before tax prep software became so good----that tax prep firms and CPAs provided real value in navigating taxes and the IRS. That is not the case now, if fact, I bet that you'll find that your local CPA is using the exact same (sometimes "upgraded" for professional applications) software that you can buy to do your taxes.
Try buying the software of doing it yourself online-----and if for some reason that doesn't work----then head-off to see a CPA. |
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Just make sure you report the 1099-MISC income correctly. See IRS Link. TurboTax will probably walk you through doing it the right way, but reporting 1099-MISC income incorrectly is fairly common.
A CPA or EA may also be able to tell you if your wife is really an independent contractor. The last thing anyone wants to do is start a pissing match with the person writing them checks, but classifying someone as an employee or independent contractor isn't as clear cut as it should be. Here's another link. |
| The time to prep for taxes is BEFORE the tax year. So yes, see an accountant and plan your spending for the remainder of this year. As part of that, they should do the prior year's taxes. It is less about messing up than it is planning to expense wisely. And if it turns out that you have nothing to expense, well, now you know. |
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Thank you all for the advice. I feel pretty good about the turbotax product and the figure it has given me. That's the nice thing about it... I haven't paid for the software service yet, but I know exactly how much I owe. Not so with a CPA without the financial commitment. I agree that we may need the CPA in the future, however. I'm leaning towards filing with turbotax and then lining up a consultation with a local CPA in order to prep for this current tax year.
Really, I think my nerves all come down to owing about $5k to the government on top of what we have already paid from my jobs and her previous job. Sucks writing a check, as I'm sure many know... And I'm sure it places in comparison to many of you. As to her relationship with her employer, as Essayons mentioned, my wife basically requested a lot of schedule flexibility with the guy she works for. All other people that work for him are on w2s. I would love for her to go that way eventually and I'm sure it's on the table. |