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Financial Freedom => Taxes => Topic started by: Hayden on September 11, 2018, 10:59:43 AM

Title: Is having a tax professional worth it?
Post by: Hayden on September 11, 2018, 10:59:43 AM
Hi,

As I begin in my career and start looking to build my team around me, I am curious to know if having a tax professional is worth it? I have heard good situations where a strong tax professional has created much more wealth for people and I have also hearth opposite where a tax professional has ruined families finances. If you support having a tax professional on your team, how did you find them and what do you recommend to someone looking?
Title: Re: Is having a tax professional worth it?
Post by: rtysmith on September 11, 2018, 12:17:29 PM
My recommendation, before you hire anyone, is to educate yourself.

There is nothing you can not learn about online, and you may decide it is not worth your time to do the work, or your time to gain the expertise, but you should never be at a disadvantage where you could be taken advantage of.
Title: Re: Is having a tax professional worth it?
Post by: Sam on September 11, 2018, 12:42:41 PM
Quote from: Hayden on September 11, 2018, 10:59:43 AM
Hi,

As I begin in my career and start looking to build my team around me, I am curious to know if having a tax professional is worth it? I have heard good situations where a strong tax professional has created much more wealth for people and I have also hearth opposite where a tax professional has ruined families finances. If you support having a tax professional on your team, how did you find them and what do you recommend to someone looking?

If your taxes are complicated with multiple K-1s, a small business, and rental properties, I say yes. You still have to gather all your paperwork and go through the accountant's work.

But if you have somewhat simpler tax work, then I say do it yourself. I've done my own taxes since 2000 and it's worth all the knowledge you learn by doing them. You learn how to better optimize your income to minimize your tax burden. You get more up to date on the tax laws too.

Doing my own taxes really motivated to STOP trying to make so much W2 income. Taxes pushed me towards early retirement, and I feel blessed because of it.
Title: Re: Is having a tax professional worth it?
Post by: defomcduff on September 11, 2018, 02:20:07 PM
Quote from: Hayden on September 11, 2018, 10:59:43 AM
As I begin in my career and start looking to build my team around me, I am curious to know if having a tax professional is worth it? I have heard good situations where a strong tax professional has created much more wealth for people and I have also hearth opposite where a tax professional has ruined families finances. If you support having a tax professional on your team, how did you find them and what do you recommend to someone looking?

If you just have primarily W2 income, I'd say no.  Do your own taxes or use TurboTax.  Once things get complicated (K-1s, asset income, high income), then it's worth it.
Title: Re: Is having a tax professional worth it?
Post by: jekamom on September 12, 2018, 05:47:41 AM
I have a tax professional as a double check, as a sounding board and as a backup in case of my early exit from this world.  I am more comfortable having a team who knows how it is done. They are CPA's not running our business, and can't be expected to know all the ins and outs of everything.  We have two S Corps, one of which is operated by dear jekadad, and I have always taken care of back office for him. He does what he does VERY well.  I would be expensive to replace, and I don't want stress on him left because there wasn't a path for a competent team to follow.  Our income and expenses don't line up during the year, so cash flow management is important.  Our employees are awesome, but missing a payroll would not be acceptable.  Now, I am careful to have a firm (and a specific person in the firm) I respect, and who knows I know my stuff.  We actually both stay on our toes looking for areas we can improve on.  I delegate depreciation, record storage and access (through a portal), reminders, updates in tax law and assembly to them.  It is  worth it.

Compare it to having an architect design a home renovation. His bill might be 5% of the total cost.  It seems like a big bill if there are no issues but the mistakes AVOIDED by having a professional are not monetized if they are avoided.



Title: Re: Is having a tax professional worth it?
Post by: Jon Sharpe on September 12, 2018, 05:58:18 AM
I second the opinions expressed above. Nothing beats doing your own taxes to really understand the ins and outs of it and keeping tax optimization strategies top of mind. I've been doing my own taxes since I had my first job at 16, I'm now 48. I have primarily wage income and only one small LLC to worry about, so they are pretty straightforward. If I had multiple businesses and multiple properties or other complicating factors, I would probably hire a professional as a double-check, but would still keep myself educated on the latest tax strategies in order to stay informed and be able to ask them good questions.
Title: Re: Is having a tax professional worth it?
Post by: Hayden on September 12, 2018, 07:47:04 AM
Quote from: jekamom on September 12, 2018, 05:47:41 AM
Compare it to having an architect design a home renovation. His bill might be 5% of the total cost.  It seems like a big bill if there are no issues but the mistakes AVOIDED by having a professional are not monetized if they are avoided.

I agree with this totally. Sometimes I laugh when I hear how people won't dare have a real estate agent help them sell or buy their home because of the evil commission that they charge. However, you do not see the mistakes avoided when you have a team behind you because they are not realized in the equation due to them being avoided.
Title: Re: Is having a tax professional worth it?
Post by: PDXOregon on September 16, 2018, 06:32:06 PM
Good discussion!!  I took the H&R Block income tax course after college years ago and it increased my confidence to navigate taxes more easily.  Even though I hire a professional to do them each year, I can engage my tax professional on developing better tax strategies than if I had never taken the course.  Having a second set of eyes makes all the difference in addition to a person who keeps up on all the changes that happen with tax law.  A cheap investment in time and $$ with big savings for years to come when person takes such a course.
Title: Re: Is having a tax professional worth it?
Post by: Hayden on September 16, 2018, 07:22:26 PM
Quote from: PDXOregon on September 16, 2018, 06:32:06 PM
Good discussion!!  I took the H&R Block income tax course after college years ago and it increased my confidence to navigate taxes more easily.  Even though I hire a professional to do them each year, I can engage my tax professional on developing better tax strategies than if I had never taken the course.  Having a second set of eyes makes all the difference in addition to a person who keeps up on all the changes that happen with tax law.  A cheap investment in time and $$ with big savings for years to come when person takes such a course.

I would love more information on the course you took. Also, where in Oregon are you from? I grew up in Corvallis, Oregon and now live In Arizona.
Title: Re: Is having a tax professional worth it?
Post by: myamnesia on September 21, 2018, 10:27:28 AM
I'm a big proponent of knowing when to ask for help and finding the best person to suit your situation. I used Turbo Tax for years, I moved to the US 11 years ago and having no prior knowledge of filing US taxes, this gave me a sufficient basic education for filing W2 income. One year I saw H&R Block's advertisement for a 3 year free review, I figured this was a good idea to see if I'd missed anything...which I had! As our investments and real estate holdings grew I decided it was time to find a CPA. They are expensive, but I truly believe I'm getting the best tax advice I can find for our situation. Not only do they file our annual tax returns, but they are available for tax advice as we make investment decisions throughout the year. This is somebody you definitely need on your personal investment team!
Title: Re: Is having a tax professional worth it?
Post by: Orphan on September 21, 2018, 10:39:46 AM
Turbo tax is great. My kid used the free tax filing on credit karma and it worked just fine , although hers is not complicated..
Title: Re: Is having a tax professional worth it?
Post by: KAT1809 on September 22, 2018, 11:16:06 PM
One year a long time ago I did our own taxes to save money. My result showed additional taxes owed.  Before writing out our check and mailing it to the IRS, we decided to pay H&R Block to do our taxes.  Lo and behold, not only did we not owe additional taxes, we were due a refund!  Ever since that time we've had H&R Block do our tax returns every year.  Prior to our appointment, I run our data through numerous free tax return software programs to have an idea of what to expect total tax liability wise.  What I can never figure out is why these tax return software programs give different answers for the same inputs. *sigh*
Title: Re: Is having a tax professional worth it?
Post by: Bonsai on September 23, 2018, 09:04:30 AM
At some point, when you have accumulated enough "stuff," i.e,, you are beyond the W-2 world, you will have not a choice but to have an accountant.  We have a PC, an LLC for real estate, a company pension plan (8 employees) and the typical day-to-day revenue/expense issues.  All of this "stuff" has separate accounting and tax issues and the tax planning must consider the entirety.  My 1040 tax filing exceeds 100 pages.  I can't believe I am sophisticated enough to process all this "stuff" through Turbo Tax, and even if wrong on this issue, I don't want to do it.  For example, does Turbo Tax advise the business owner the appropriate ratio of W-2 income versus bonus (you don't pay the 15% FICA tax on bonus but then your Social Security retirement benefit does not include bonus money).  Periodically we get a notice from the IRS that some filing item was not correct.  We send the notice to the accountant.  The IRS is usually confused/wrong and with the accountants explanation, the IRS issue goes away.  I would hate to have to do this myself.  Back to your questions:  Since you are starting out, start by getting your family estate documents in order (Will/trust, Powers of Attorney, Medical Authorizations and Advanced Directives) by a local attorney (avoid the mills, e.g., a trust for $999).  Not only is the attorney a fiduciary but this type of attorney works with a clientele that has lots (and lots) of "stuff;" folks where you are now but 20-30 years ago.  They deal with the professionals (accountants, tax professionals, pension/profit share professionals) that also deal folks with lots of stuff.  This person could easily give you 2-3 professionals to interview.  Good luck
Title: Re: Is having a tax professional worth it?
Post by: jekamom on October 07, 2018, 07:41:49 PM
One year a long time ago I did our own taxes to save money. My result showed additional taxes owed.  Before writing out our check and mailing it to the IRS, we decided to pay H&R Block to do our taxes.  Lo and behold, not only did we not owe additional taxes, we were due a refund!  Ever since that time we've had H&R Block do our tax returns every year.  Prior to our appointment, I run our data through numerous free tax return software programs to have an idea of what to expect total tax liability wise.  What I can never figure out is why these tax return software programs give different answers for the same inputs. *sigh*

Ok.  if it was your first time doing turbo tax, I'm glad you went to a semi-pro.  I wouldn't settle for just H&R Block. You need a professional if you have a sole proprietorship business, have K-1's,  owe AMT, have changes in your  income streams  or have anything on a depreciation schedule.  Really.  For a pro, expect to pay what they are worth, but expect them to be around year round and continuously trained.  Like a real estate agent, you get what you pay for.  I can take out your appendix, but you might bleed to death.
Title: Re: Is having a tax professional worth it?
Post by: chitown-2020 on October 30, 2018, 06:04:10 PM
I agree with most everything said here, including knowing when to get help when your return gets more complicated.   But buyer beware... just like different tax software applications yield different results, so will different preparers.    Get references, and check the quality of work when they give you your returns back.   

I've been with the same small firm for a very long time -- and so far there's been only one really minor mistake, but that mistake took a year (and lots of painful phone calls) to fix.

Having a professional who gets to know you / your situation and sticks with it year after year is definitely the way to go, if you can find it.
Title: Re: Is having a tax professional worth it?
Post by: deific on October 31, 2018, 06:43:56 AM
I have quite a bit of education in taxes, but there is a lot to be said about having a professional.
1. I am stress free come tax time, without fear that I completed the return incorrectly.
2. My CPA is up to date with all the newest tax law.
3. My CPA alerts me to strategies to use this year, due to changes affecting next year (ie, real estate tax cap)
4. Through out the year I email him for advice, ie. what is the benefit of funding a dependent care FSA vs just paying for it and including it on my taxes.
5. I chose him as multiple people at the top of my company were utilizing him, and his view of tax was similar to mine.
6. The time I would have spent preparing my own return was worth much more than the difference between Turbo Tax/ Tax Slayer and his fee.
Title: Re: Is having a tax professional worth it?
Post by: toocold on November 11, 2018, 05:54:59 AM
I do my own taxes for similar reasons in that I get to learn the nuances of impact of rental properties and exercising stock options, and RSU vestment.  Eventually I may have someone else do them for me.
Title: Re: Is having a tax professional worth it?
Post by: piarluozno on November 13, 2018, 12:52:35 AM
I did an A/B test... twice. In both cases I used the online tax tools to the best of my knowledge and compared it to the returns with the tax expert. The first time it made a huge difference especially considering that he charged us only 150$ while boosting the return about 5500$. In the second case, it made small but large enough difference that when factored in with the savings in time, I concluded to go with the tax expert going forward. Now, I believe in both situations the main reason tax pro did better was that our tax situation were complex (two income with multiple employers, grad scholarships, tuition, mortgage, consultancy income, home office etc). So if your situation is not very complex, then most likely it won't matter.  Indeed, my former manager who suggested me to do the A/B to begin with, reached the reverse conclusion in his case. It makes sense because his tax situation was not complicated compared to ours.

In summary, it depends but if you are not sure do A/B test: your mind will be in peace and you will possibly learn new stuff on taxes, which never hurts. Indeed, there were times I found issues with my returns prepared by the pros thanks to the literacy I gained through playing with online tools.

Title: Re: Is having a tax professional worth it?
Post by: ManInAVan on November 29, 2018, 03:32:00 PM
Quote1. I am stress free come tax time, without fear that I completed the return incorrectly.
2. My CPA is up to date with all the newest tax law.
3. My CPA alerts me to strategies to use this year, due to changes affecting next year (ie, real estate tax cap)
4. Through out the year I email him for advice, ie. what is the benefit of funding a dependent care FSA vs just paying for it and including it on my taxes.
5. I chose him as multiple people at the top of my company were utilizing him, and his view of tax was similar to mine.
6. The time I would have spent preparing my own return was worth much more than the difference between Turbo Tax/ Tax Slayer and his fee.

This is very in line with why I use a professional.  Definitely learn enough to be savvy and know how to ask the right questions (I don't think you're getting your money's worth if you're completely clueless), but this let's me free up my time and brainpower to pursue other opportunities.

Title: Re: Is having a tax professional worth it?
Post by: calimbo on December 19, 2018, 01:20:09 AM
Quote from: Sam on September 11, 2018, 12:42:41 PM
Doing my own taxes really motivated to STOP trying to make so much W2 income. Taxes pushed me towards early retirement, and I feel blessed because of it.

Interesting how it turned out for you. For me such a knowledge pays back in quite a paranoid manner. So my employer use pdf cloud storage of this type: https://fillable-form-w2.pdffiller.com/ (https://fillable-form-w2.pdffiller.com/) to work with tax forms, so I can see my W2's for every single year, combine my incomes, do some math, find myself feeling desperation etc.
Title: Re: Is having a tax professional worth it?
Post by: dpmf01 on January 03, 2019, 10:16:40 AM
It very much depends. 

I am a high-end Big 4 tax consultant who does a lot of M&A tax consulting for PE funds.... I use Turbo Tax.  But I only have a W-2, brokerage accounts, and a little rental real estate.  These are simple. 

OTOH, if you have a business, or are making big private investments, then you should definitely hire a professional. 

Additionally, if you business and/or limited partnership investments result in large and complicated K-1's, you want to outsource that because (1) you could just miss something and (2) your time is probably more valuable than what you'll spend gathering paperwork and inputting into the software yourself.
Title: Re: Is having a tax professional worth it?
Post by: david123 on January 03, 2019, 12:32:55 PM
I think it is important to understand your taxes, but also good to consult a professional when needed.  Right now, my taxes are not terribly complicated (2 kids in college, w2 income, 2 mortgages with interest, some interest, some dividends, some capital gains, SALT stuff,... but the tax programs can handle all this stuff pretty well.  I've gone ever several years to a CPA and have them do my taxes (but I also do them myself to compare).

Planning for the future is where tax professionals can help.  I'm getting nervous about retirement and taxes - when to collect SS, RMDs, which sources of income (401K, Roth IRA, Capital Gains, etc.)  to draw from when to minimize taxes.