March 25, 2010

Our Whole Big Tax Mess

My wife recently handed all our tax information over to our CPA.  It takes us a while to get our tax stuff in order since we've got a lot of stuff.   I also have rental investments jointly owned with my father so I have to depend on getting some records from him which also slows things.

Last year I used a CPA to do my taxes for the first time.   Before that I had always done my taxes myself by hand using paper forms and a calculator.   I'd have worn a green tinted eye visor while doing it but I didn't own one.

We're having a CPA do our taxes for a few reasons  I had a couple problems doing my own taxes before and wasn't keen on making more mistakes.   The extra complications to the taxes from getting married was enough to push me into finally seeking professional help. .

Our taxes are fairly complicated

Our taxes will include:
Wage income from my employer - W2
Interest income from standard savings accounts
Rental income and expenses (Schedule E)
Depreciation of rental properties (form 4562)
Health Savings Account (Form 8889)
Itemized deductions (Schedule A) for our home mortgage, property taxes, charity giving and state taxes.
Multiple short term and long term stock sales from stock incentives from my employer (Schedule D)
Various charity deductions of household items and cash
Some stock dividends.
And probably something else that I'm forgetting at the moment.

If I had just a simple W2 and deductions from our home mortgage, property tax and state taxes then I'd do it myself no problem.   I think if I didn't have the rentals or the employer stock sales I'd be able to handle stuff like the HSA myself too.  I've done the stock and rental stuff in the past without the CPA but it can get pretty complicated.   In fact the stock sales are one thing I've made a mistake on before.   Thankfully it wasn't a big error and fixing it didn't cause any harm but its not a good thing to make mistakes on your taxes that will draw attention from the IRS.    Anyway, to sum up this point our taxes are complicated enough that I think calling in professional help is a good idea.

The CPA's expert knowledge can potentially save a lot of money

Last year our CPA also found a couple things that saved us money so I think that paying an expert should pay off.   The one idea that she had (which had never occurred to me) saved us I think about $2,000 off our tax bill last year between state and federal income taxes.  One such idea from her easily pays for her fee many times.

I think that an independent expert helps protect against tax problems

My wife and I both think that if we do end up audited for whatever reason that it will help us that we have a professional CPA do the taxes.  I'm figuring that if I accidentally make a simple math error and end up paying $1000 less in taxes then that *might* look more suspicious to the IRS if I did my taxes myself, but if a CPA does the taxes and she makes such an error they are going to assume it was just a simple error and not an attempt at cheating.   Now I'm not sure how much truth there is to this and I don't know that using a CPA makes the IRS look at your returns differently, but this is my opinion at least.

It saves us time and hassle

If my wife or I did the taxes ourselves then we'd have to spend a few hours filling in forms, going over paperwork, checking our math, etc.  Paying someone else to do the taxes is saving us that time.

2 comments:

  1. You are right an accountant can save you thousands.

    ReplyDelete
  2. finding the right accountant can be tricky. I was talking with one coworker who had to change accountants when he felt like his wasn't doing much more than plugging into the same software he'd be using at home.

    When it comes to money, rave reviews/referrals are gold.

    Laura Pagles
    @fatwallet

    ReplyDelete

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