After years of fairly simple taxes finalized in less than an hour online, this year I went to a CPA hoping that he’d provide me more in value than an H&R Block, given his rates were $220 an hour. Selecting a CPA was a daunting process and admittedly one I ran out of time to do effectively — all I knew is in order to properly submit my 83(b) election form with this years taxes, I needed to paper file, which took Turbotax out of the running.
Going to a CPA, I learned, isn’t a lot different from doing your own taxes online. I sat there with him for a full two hours reviewing my paperwork (which admittedly wasn’t as organized as it could have been) — but what took the most amount of time was him trying to understand my gains and loss statement for my Sharebuilder account, which — I thought for a CPA — should have been easy. He also was confused by my tiny Lending Club and Prosper interest, not knowing where to put it.
I expected to owe taxes this year, and really had no idea if it would be $3,000 or $10k, so I was prepared for the worst. In the end, the relatively good news is, I seem to only owe $3500 or so, plus the $500-$600 to the CPA. I can also sleep at night knowing a CPA filled out my tax forms versus my guessing on a few confusing parts of TurboTax. It’s a little bit of a bummer that I am paying $600 or so to file taxes, versus $100 online, but this also ensures my forms will be mailed in that have to be sent with a paper return.
This week, I also re-discovered the inefficiencies of the IRS and just how behind the times they are when it comes to technology. It’s amazing they let anyone e-file taxes to begin with.
In any case, I’m almost done with this filing. I need to figure out if a stock gain was recorded properly on my taxes last year, or if I need to count it in this year’s taxes. I’m on a life mission to get much more organized around taxes and everything else. It’s only going to get more complicated from hereon out.
Every year so far I’ve managed my taxes via TurboTax. I’m not sure if my taxes were done right, but they were simple enough where I was pretty confident in my ability to answer questions on a software used by tens of thousands of people.
This year, however, I’ve decided last minute to have a CPA do my taxes. There are a few items I’m nervous about and want to make sure to get right. That said, I’m also extremely nervous about selecting a CPA — because they could easily be wrong too. Most CPAs that are good are booked solid until after the 15th right now, which leaves me a little concerned over the CPA I found that seemed to have a few (or maybe more) available appointments. However, in my neck of the woods where everyone is rich, I’ve found the minimums to do one’s taxes are $1500 or $850 (two real quotes I got), so the one person who quoted me $220 an hour with assistants costing $90 an hour, minimum 2 hours, seemed reasonable. Still a lot more expensive than TurboTax — which I’ll probably fill out anyway just to keep my records electronic (I wonder if I can save it without submitting) — and I doubt it will “save” me any money in the actual tax return, but at least I’ll feel like it’s done right.
I’m concerned about 5 particular items:
- 83b filing. You have to file that along with your taxes the year you make the election, and there’s no way on TurboTax to attach documents. I could fill out the paper form myself, but that would be putting a lot of confidence in my math abilities that i don’t have. I am also starting to be paranoid about the IRS never receiving my original “within 30 days” election (even though I sent it within 30 days) and want to make sure I get this right, just in case anything should happen later which would result in my being majorly screwed. I sent it certified mail with a return receipt but given I never mail anything anymore, I apparently did that incorrectly and never got the receipt, so I’m extremely concerned.
- Stock losses. I took a sizable amount of losses this year on a few big losses that were not going anywhere, so I could reinvest the funds left in them into more profitable companies such as Apple, as well as diversify internationally. I “lost” (not paper loss) more than $3000 this year (probably more like $6000), and I want to make sure this is filled out correctly and that any additional losses over the $3k are noted to be carried over to next year.
- IRA conversion. Last year I opened a traditional IRA with post-tax money because I thought I would end up making too much to qualify for a Roth IRA. I think that may be true. Regardless, if you make more than something like $6k you cannot use pre-tax money for an IRA. Which is stupid because if you don’t have a 401k then you have no way to set aside pre-tax money (unless you’re a real sole proprietor, in which case you can set up a solo 401k.) In any case, I want to make sure the IRS understands that this was post-tax money, so when I later do a Roth Conversion (ideally on a year I stay home to be a mother and have very low income taxes) I’ll be able to only pay tax on the interest on the account with a $5k basis.
- $20k of freelance income I forgot about — is there anything I can do to reduce the amount of taxes I have to pay on this? Probably not, but worth asking.
- General investment taxes — my taxable account dividends, P2P lending accounts, etc. It would just be nice to hear someone who does this for a living discuss if I’m doing anything wrong here.
Otherwise, my tax returns are simple enough to do via TurboTax. Other than the carried over stock losses, I assume next year they will be even more simple as I’m back in a full time job (hopefully for the remainder of this year) and not earning freelance income because I’m so busy with this FT job.
Have you ever used a CPA for your taxes? Do you feel it was worth it? How much did you end up paying?