Accountant

[okayplayer]

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Spinning off the 1099 thread, do those of you with a simple W2 position and a fairly uncomplicated financial setup (deductions for mortgage interest/property tax, etc, nothing exotic) pay for an accountant annually? I used one last year who charged me $750 and I felt gained me nothing over TurboTax. Am I missing something? It seems like there are very few deductions that most W2 employed people can claim and they don't require an accountant.

 

[caligas]

Spinning off the 1099 thread, do those of you with a simple W2 position and a fairly uncomplicated financial setup (deductions for mortgage interest/property tax, etc, nothing exotic) pay for an accountant annually? I used one last year who charged me $750 and I felt gained me nothing over TurboTax. Am I missing something? It seems like there are very few deductions that most W2 employed people can claim and they don't require an accountant.

Well, as you saw in the other thread most people here think an accountant is worth the money. I use TT and am confident that I am not missing anything but I also spend a lot of time reading about finance. Do you understand things like the back door Roth and self employed healthcare premiums and how to handle these in your taxes? Do you know how to maximize your tax sheltered retirement accounts? I have also used an accountant in the past and compared it to my own results.

 

[risnwb]

okayplayer, I had the same
experience last year (and I am 2.5 years out of residency) I'm W2, and spent a bunch of money on an accountant because everyone suggested it. Gained nothing more than we would have if we had clicked file with turbo tax. I'm guessing in a few years things will be different, but as of now I'll be doing my own taxes.


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[deleted162650]

If you own a home and have investment accounts it's probably still worth it. Plus, the accounting fees are tax deductible if your group is set up correctly. The other thing is that it's nice to have a tax professional who prepared the return in your corner in case you get audited.

 

[2ndyear]

Count me in for Turbo Tax. It makes it stupid easy for W2 work, even with the basic deductions. I've even used it for K1 distributions, side-gig 1099 income, and investment losses as well as capital gains. No problem.

If I did straight 1099 and could do the big deductions I would absolutely hire an accountant, but for everything else Turbo Tax can walk you through most situations.

 

[deleted171991]

I think an accountant is almost useless except for 1099 situations, or tons of other deductions, or for people who are too lazy to read an income tax guide. I'd rather make an honest mistake and have to explain it to the IRS, or leave some money on the table, than have an accountant do "financial engineering" on my return, just to be able to claim that he'd saved me a lot of money (I've seen it, it was obviously illegal - checked with the IRS, and I was able to come within $500 of it myself legally). And if you think one is not liable for things one's accountant misrepresents on one's tax return, think again (and re-read the part of form 1040 above the signature).

So, if you have a trustworthy accountant, highly-recommended by financially-literate people, give it a try for a year or two (and read your return to see how/if he saves you money in ways you couldn't). Just don't waste your money on the run-of-the-mill tax return person that feasts on stupid doctors.

 

[Mman]

My accountant charges me $500 a year for my W2, my wife's W2, my K1s, and all the random little things like HSA, backdoor Roth, various investment gains/losses/dividends, etc. I live in a relatively low cost of living place so you might have to adjust upward depending on where you live.

Could I do it myself? Of course. But I'm not paying an accountant to do financial engineering, I'm paying them to provide a neutral 3rd party that can assure they are done correctly and help protect me in an audit. Just ask yourself how many $ per hour you get paid at work and how many hours it would take you to do the taxes correctly. And don't forget that your accountant's fee is tax deductible.

Personally I'd rather work the extra amount of time it would take me at work to generate the pay to cover the accountants fee than to just do it myself to save a few bucks.


Now don't get me wrong, I wish we'd put all those CPAs out of business by going to a flat tax and getting rid of almost all deductions (or maybe just all of them), but that isn't happening any time soon.

 

[deleted171991]

Lucky you. The first year I arrived in the States, I almost got burnt (caught the fraudulent tax return before I mailed it, two days before the deadline). The accountant was from my native country, too, and I guess old habits die hard. Plus we were relatively poor, so every dollar spent on tax returns counted. I just got used to doing the taxes on my own. On the flip side, it got me interested in a basic financial education.

Now that I am an attending, I should probably start looking for an accountant again. This time I know what to ask before hiring him.

 

[Mman]

Lucky you. The first year I arrived in the States, I almost got burnt (caught the fraudulent tax return before I mailed it, two days before the deadline). The accountant was from my native country, too, and I guess old habits die hard. Plus we were relatively poor, so every dollar spent on tax returns counted. I just got used to doing the taxes on my own. On the flip side, it got me interested in a basic financial education.

Now that I am an attending, I should probably start looking for an accountant again. This time I know what to ask before hiring him.

I did my own taxes from the time I was 18 through college, med school, and residency. 12 years of practice. As an attending, the risks of me screwing up are way too high IMHO. I mean when you earn 40K a year, paying an accountant is a much larger relative expense. When you make average anesthesiologist salary, it's a much smaller expenditure and much more valuable.

 

[DokterMom]

Spinning off the 1099 thread, do those of you with a simple W2 position and a fairly uncomplicated financial setup (deductions for mortgage interest/property tax, etc, nothing exotic) pay for an accountant annually? I used one last year who charged me $750 and I felt gained me nothing over TurboTax. Am I missing something? It seems like there are very few deductions that most W2 employed people can claim and they don't require an accountant.

I was happy to have a good accountant do my taxes once -- then switched to TurboTax and have been using it ever since. It's nice to have the 'software to knowledgeable human' comparison so I can be assured I'm classifying things correctly (though TT is really pretty idiot-proof) .

Having already used an accountant once, unless something big has changed, I would not see any advantage in doing so again --

 

[Mman]

I was happy to have a good accountant do my taxes once -- then switched to TurboTax and have been using it ever since. It's nice to have the 'software to knowledgeable human' comparison so I can be assured I'm classifying things correctly (though TT is really pretty idiot-proof) .

Having already used an accountant once, unless something big has changed, I would not see any advantage in doing so again --

It all depends on how much money you are earning and how complicated your particular return is. If you make 40K W2 a year, it's pretty mindlessly easy and you can do it without any special software. You have essentially zero chance of ever getting audited, so no risk if you are off by a $1 or $2 here or there with your math. No biggie. If you earn $500K a year and have income coming in from many different sources (and different types), it becomes both a lot more complicated and a much higher risk of actually getting audited.

This article from Time suggests if you earn $40K per year you only have a 0.53% chance of getting audited in any 1 year, but if you are at $500K per year your chances go up to 3.62%.

 

[VA Hopeful Dr]

When I was a resident, I use TurboTax and was told I got 0 back.

I paid an accountant $400 instead and got $4500 back.

If you get a good accountant, it's worth it. A bad accountant, on the other hand, can cause pretty big problems.

 

[deleted171991]

When I was a resident, I use TurboTax and was told I got 0 back.

I paid an accountant $400 instead and got $4500 back.

If you get a good accountant, it's worth it. A bad accountant, on the other hand, can cause pretty big problems.

Except that you will never know whether he bent the rules and where. 😉

That's a lot of money to appear out of nothing, for a resident. Unless you had overlooked something major, such as not filing a joint return with a very different income spouse etc. What's that, like $20,000 of deductions? And you signed off on them.

My bad accountant put in a lot of untrue things, such as donations etc. ("they never check"), besides a downright illegal filing status that did not apply.

 

[VA Hopeful Dr]

Except that you will never know whether he bent the rules and where. 😉

That's a lot of money to appear out of nothing, for a resident. Unless you had overlooked something major, such as not filing a joint return with a very different income spouse etc. What's that, like $20,000 of deductions? And you signed off on them.

My bad accountant put in a lot of untrue things, such as donations etc. ("they never check"), besides a downright illegal filing status that did not apply.

True, but my family has been using this guy since the 80s (and I still use him for my practice) so I don't think he's dirty or stupid, instead I think that I don't know taxes well enough and it's worth a few hundred bucks a year so I don't have to learn.

Plus, part of his service is representation if I'm audited and insurance if he screws up so the IRS penalty is covered.

 

[urge]

I would say TT for anyone that is paid W2. For an extra fee (maybe $40 or $60) TT will represent you in case you get audited if that is a concern.

I have heard stories of people saving money with an accountant but they never provide any examples of how they did it.

One thing that seems to be pretty consistent for accountants is that they urge you to go into deep mortgage debt to get a few dollars back on your tax return.

 

[Mman]

I have heard stories of people saving money with an accountant but they never provide any examples of how they did it.

My accountant redid my taxes from my last year of residency/first year attending with nothing but 2 W2s and saved me 5 figures. How? I had never itemized deductions because as a resident it wasn't really worth it and I didn't have anything worth deducting. I didn't realize the massive amount of state taxes I paid those 6 months as an attending could be deducted from my federal taxes. My mistake.

 

[facted]

My accountant redid my taxes from my last year of residency/first year attending with nothing but 2 W2s and saved me 5 figures. How? I had never itemized deductions because as a resident it wasn't really worth it and I didn't have anything worth deducting. I didn't realize the massive amount of state taxes I paid those 6 months as an attending could be deducted from my federal taxes. My mistake.

Turbotax would figure this out for you. I agree with a lot of those above. For W2 employees, turbo tax takes care of just about everything. If you have lots of investments in taxed accounts, then you could make a case for an accountant, but even then you could do it yourself. Deduction wise, healthcare costs, business deductions etc... are for greater than a relatively large % of AGI so unless you're talking about 5 figure deductions for those, you can't deduct anyway. Turbotax does a great job of figuring all that stuff out for you.

 

[psychbender]

I use an accountant, but my situation is complicated, as my wife and I are residents of different states (military), my military income is taxed in my home state, but my meager 1099 income (and my eyes income) is taxed in the state where we physically live. One of the states wanted me to generate a federal tax return for married filing separately, print that out and use it to generate a state tax return, then start all over again and actually federally file married filing jointly, using that return for the other state, as well. The time required to do that was just not worth it, so I gladly paid someone $250 to do it for me. Next year will be worse, as I add another state to the mix when we move.

 

[VA Hopeful Dr]

Turbotax would figure this out for you. I agree with a lot of those above. For W2 employees, turbo tax takes care of just about everything. If you have lots of investments in taxed accounts, then you could make a case for an accountant, but even then you could do it yourself. Deduction wise, healthcare costs, business deductions etc... are for greater than a relatively large % of AGI so unless you're talking about 5 figure deductions for those, you can't deduct anyway. Turbotax does a great job of figuring all that stuff out for you.

Every one keeps saying that TT will do all that for you, but it doesn't always - that's my point. I tried to use it and it didn't catch all of those.

Now that's likely user error, but I can't be unique in that. A good accountant I can just give all my paperwork to and they make it come out right with minimal chances for me to screw up.

 

[Mman]

Turbotax would figure this out for you. I agree with a lot of those above. For W2 employees, turbo tax takes care of just about everything. If you have lots of investments in taxed accounts, then you could make a case for an accountant, but even then you could do it yourself. Deduction wise, healthcare costs, business deductions etc... are for greater than a relatively large % of AGI so unless you're talking about 5 figure deductions for those, you can't deduct anyway. Turbotax does a great job of figuring all that stuff out for you.

I'm not anti turbo tax. As I've said I think whether you should use an accountant or not depends on your income level and the complexity of your returns. For me personally, the 1.25 hours of time I have to work to generate the income to pay my accountant's fee for the year is well worth it. Lowers my risk of making an error (even with software) and provides superior protection in case of audit, not to mention that I can go to them at any point for advice on how to structure things. Hell, I'm not even sure I could do my taxes with Turbo Tax in 1.25 hours. My return last year was nearly 100 pages with all the various schedules and what not.

 

[pjl]

I'm not anti turbo tax. As I've said I think whether you should use an accountant or not depends on your income level and the complexity of your returns. For me personally, the 1.25 hours of time I have to work to generate the income to pay my accountant's fee for the year is well worth it. Lowers my risk of making an error (even with software) and provides superior protection in case of audit, not to mention that I can go to them at any point for advice on how to structure things. Hell, I'm not even sure I could do my taxes with Turbo Tax in 1.25 hours. My return last year was nearly 100 pages with all the various schedules and what not.

I pay 3 hours of work for mine. 176 pages 🙁
I would rather play with my kids (or wife) anyways in my time away from work.


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[Mman]

I pay 3 hours of work for mine. 176 pages 🙁
I would rather play with my kids (or wife) anyways in my time away from work.


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In other news I also spend money to have a lawn service. I'm kinda cheap, but when I can pay someone else less per hour than I make to do something that genuinely makes me life easier and gives me more quality time with the family when I'm not at work I do it without thinking twice. (well that and 95 degrees and muggy in the summer is no way to spend a few hours outside)

 

[BLADEMDA]

My advice is to fork over the $300 and let a CPA do your taxes. Once you are "attending status" finding a CPA to do your taxes for $300 because it is well worth it for the peace of mind. I remember using the Deluxe Tax cut version with review by one of the H and R block people and the cost was $175.

FYI, it takes me almost 3 hours to do my taxes with the software; the CPA is better at it than I am and the cost is very reasonable.

 

[Noyac]

My wife and I used an accountant one year and did TurboTax at the same time. Turbotax was better!
Maybe we had a bad accountant.

 

[deleted162650]

My wife and I used an accountant one year and did TurboTax at the same time. Turbotax was better!
Maybe we had a bad accountant.

Maybe a good CPA could help you figure out your Backdoor Roth?

 

[deleted162650]

The other benefit to CPA your first few years out is that they can run projections and provide tax planning advice in addition to just filing your return.

 

[Noyac]

Maybe a good CPA could help you figure out your Backdoor Roth?

Exactly. I have an appointment with a Tax attorney and a CPA.

 

[pjl]

In other news I also spend money to have a lawn service. I'm kinda cheap, but when I can pay someone else less per hour than I make to do something that genuinely makes me life easier and gives me more quality time with the family when I'm not at work I do it without thinking twice. (well that and 95 degrees and muggy in the summer is no way to spend a few hours outside)

I mow my own lawn and do some landscaping purely to make my kids see me doing work. I dont really enjoy it, but I feel it is important that they see me doing some of the jobs around the house and performing basic maintenance tasks. When they get old enough they will do it for me though 😉.


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[deleted162650]

I mow my own lawn and do some landscaping purely to make my kids see me doing work. I dont really enjoy it, but I feel it is important that they see me doing some of the jobs around the house and performing basic maintenance tasks. When they get old enough they will do it for me though 😉.


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The biggest reason to have kids is so you can make 'em do work around the house.

 

[BLADEMDA]

• Never do your own taxes. The U.S. tax system is overly complicated. Until that gets reformed, don't do your own taxes. You might save a few hundred bucks by using TurboTax instead of hiring an accountant but you will lose thousands in the long run. As you start to make more money, get married, buy a home, invest in stocks, run other businesses and so on, your taxes will continue to get more complicated. The bad news is that there will be lots more paperwork. The good news is that there will lots more loopholes that you can use to your advantage. Not only will you save time and avoid audits by using a CPA, you will essentially be increasing your annual income. So, is a CPA telling you it's going to cost $500 to do your taxes? Trust me…smile and pay them.

http://www.cnbc.com/2016/12/07/get-...se-you-want-to-but-because-youll-have-to.html

 

[facted]

• Never do your own taxes. The U.S. tax system is overly complicated. Until that gets reformed, don't do your own taxes. You might save a few hundred bucks by using TurboTax instead of hiring an accountant but you will lose thousands in the long run. As you start to make more money, get married, buy a home, invest in stocks, run other businesses and so on, your taxes will continue to get more complicated. The bad news is that there will be lots more paperwork. The good news is that there will lots more loopholes that you can use to your advantage. Not only will you save time and avoid audits by using a CPA, you will essentially be increasing your annual income. So, is a CPA telling you it's going to cost $500 to do your taxes? Trust me…smile and pay them.

http://www.cnbc.com/2016/12/07/get-...se-you-want-to-but-because-youll-have-to.html

Can you give us one financial situation that your accountat helped you with that TurboTax couldn't do? Could understand if you're a corp or non w2..

 

[BLADEMDA]

Can you give us one financial situation that your accountat helped you with that TurboTax couldn't do? Could understand if you're a corp or non w2..

Some of us have K-1 forms and lots of stock trades, capital gains, etc. While I could do it all on my own even a small error would cost more than the CPA's fee. In addition, the IRS has held up my refunds for 2 months longer when I filed on on my own vs using a CPA. The chance for an audit is higher (IMHO) when you are in the higher income levels and NOT using a CPA. As long as you are audit proof and 100% certain there are no errors in your return then by all means use a tax software.

In my experience the CPA is well worth the additional $200-$300 he/she costs to do the taxes for you. I still think one should also do their taxes with the software as well to see if the CPA was worth the money. My hunch is that many superstars on SDN could be humbled by a few simple errors on their returns.

 

[scootad.]

It's about the opportunity cost. Many attendings consider their free time valuable. I'd rather spend time with family, watching tv, dining, having sex or doing just about anything than my taxes. If as an attending you are too cheap to fork over a couple hundred bucks to a tax expert you got problems.

 

[urge]

Some of us have lots of stock trades, etc.

For argument sake, stock trades have been "covered" for many years by now.

What that means is you get a paper much like a w2 detailing how much you put in and how much you got out.

Very simple for you or your CPA to declare in your taxes.

For those of you who think a CPA is a wiz at dealing with all your uncovered trades from 2 decades ago, the fact is that you have to provide them with all the paperwork for each trade. They are not going to get it for you. And that is the hard part. You will be digging in drawers anyway instead of "spend[ing] time with family, watching tv, dining, having sex or doing just about anything".

 

[BLADEMDA]

It's about the opportunity cost. Many attendings consider their free time valuable. I'd rather spend time with family, watching tv, dining, having sex or doing just about anything than my taxes. If as an attending you are too cheap to fork over a couple hundred bucks to a tax expert you got problems.

I agree with you. I did my own taxes for about 10 years as an attending. I bet my errors cost me DOUBLE what a CPA would have charged me over that same time period.

These days I play with the tax software to estimate my taxes but would still recommend a CPA as they really don't cost that much for a simple W-2.

 

[doctalaughs]

Can you give us one financial situation that your accountat helped you with that TurboTax couldn't do? Could understand if you're a corp or non w2..

My cpa showed me how to do the mega-backdoor roth, which allowed me to invest about 30k more a year into a roth. I'm a w2 employee. Prior I had spoken to a financial advisor who had no idea.

From that perspective only, he's probably saved me thousands (if not hundreds of thousands over a career).

Cost: 350/yr


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[mostwanted]

I personally do my own taxes, but will be using a CPA this yr. One of the guys I work with, mentions something abt being audited every year until he got a CPA. I think Blade is correct, you are less likely to be audited.


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[btbam]

I personally do my own taxes, but will be using a CPA this yr. One of the guys I work with, mentions something abt being audited every year until he got a CPA. I think Blade is correct, you are less likely to be audited.


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You're doing something wrong if the IRS audits you every year..

 

[Mman]

You're doing something wrong if the IRS audits you every year.

not really. You are only doing something wrong if you are being flagged for back taxes and penalties. Certain types of income and business arrangements can set off red flags even if they are perfectly legitimate and legal.

IMHO if you are earning > $300K per year and have anything beyond a W2 you are being penny wise and pound foolish to not use a CPA. The cost is so relatively low and the potential benefit so relatively high that you basically have to IMHO.

 

[facted]

not really. You are only doing something wrong if you are being flagged for back taxes and penalties. Certain types of income and business arrangements can set off red flags even if they are perfectly legitimate and legal.

In 2014, 1.75% of those making 200k-500k were audited. If you're audited every year, pretty sure you're doing something shady (and so is the IRS).

 

[BLADEMDA]

In 2014, 1.75% of those making 200k-500k were audited. If you're audited every year, pretty sure you're doing something shady (and so is the IRS).

When I did my own taxes the IRS did a "paper audit" 3 years in a row which held up my return. Once I switched to a CPA there were no more paper audits and refunds were faster.

The IRS never found anything on their paper audits of my returns by the way.

 

[Mman]

In 2014, 1.75% of those making 200k-500k were audited. If you're audited every year, pretty sure you're doing something shady (and so is the IRS).

What percentage of those audits are on people with nothing more than a W2? What percentage of people with W2s and several K1s and other revenue streams get audited? (hint it's a lot higher than 1.75%) And if you get audited once, your odds go way up in the near future of getting audited again.

 

[VA Hopeful Dr]

In 2014, 1.75% of those making 200k-500k were audited. If you're audited every year, pretty sure you're doing something shady (and so is the IRS).

What percentage of people earning that much don't use CPAs, and of that percentage what percentage got audited? I bet THAT number is much higher.

 

[pgg]

What percentage of people earning that much don't use CPAs, and of that percentage what percentage got audited? I bet THAT number is much higher.

I wouldn't make that bet.

The CPAs who are justifying their fee and saving people huge bucks on their taxes aren't doing it by being conservative.

 

[VA Hopeful Dr]

I wouldn't make that bet.

The CPAs who are justifying their fee and saving people huge bucks on their taxes aren't doing it by being conservative.

Nor do I think they are doing anything illegal

 

[Mman]

I wouldn't make that bet.

The CPAs who are justifying their fee and saving people huge bucks on their taxes aren't doing it by being conservative.

no they aren't, but the IRS knows if the return is prepared by a CPA it's already met a minimum level of scrutiny which leads to less chance of an audit. I wish we had a flat tax and had no need for CPAs. But as it stands, if you are a high income individual with even a moderately complicated return they are dirt cheap. Don't tell my CPA, but I'd pay him 6x what he charges me if that's what he asked.

 

[IlDestriero]

When we had a second rental home, consulting side jobs, etc. we used an accountant. When we were straightforward W2s again I switched to TT. Now I'm doing a little consulting again and I probably should get an accountant as I have some 1099 income that could be sheltered better, etc. I put in the time to understand what's kosher and not. It's not hard. Though I'm also conservative, so our home office deductions, etc. are actually completely appropriate and accurate. If I got audited, I'd have nothing to fear.
My biggest headache to date was regarding foreign stock dividends, options, sales, etc. from my wife's job. Even that wasn't that confusing.


--
Il Destriero

 

[pjl]

When we had a second rental home, consulting side jobs, etc. we used an accountant. When we were straightforward W2s again I switched to TT. Now I'm doing a little consulting again and I probably should get an accountant as I have some 1099 income that could be sheltered better, etc. I put in the time to understand what's kosher and not. It's not hard. Though I'm also conservative, so our home office deductions, etc. are actually completely appropriate and accurate. If I got audited, I'd have nothing to fear.
My biggest headache to date was regarding foreign stock dividends, options, sales, etc. from my wife's job. Even that wasn't that confusing.


--
Il Destriero

The investment K1s from companies with large presences in multiple states and countries are a pain in the butt. From a time standpoint there is no way it is worth me doing my own taxes.


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[pgg]

no they aren't, but the IRS knows if the return is prepared by a CPA it's already met a minimum level of scrutiny which leads to less chance of an audit.

Is that a guess or is there data out there?

 

[caligas]

Just to continue to play devils advocate here:

The times I've used an accountant I had to make 2 trips to his office. I also had to make sure all of my documents where available and reasonably organized. This eliminates a lot of the theoretical time savings. Using TT I can easily bang out my taxes during the course of a slow OB shift. Again, I've invested and continue to invest the time to learn my relevant deductions and how to properly enter them. I enjoy reading about and understanding these things and I think it makes me a better financial steward for myself and my family. There are no super-secret loopholes that only the accountants know, it's all learnable with a bit of effort.