Earlier this year, I went to go see the accountant and decided on the way down that I’d see if she earned her fee, basically. What I wanted to find out is if I could get the same amount of money back if I used a program like turbo tax instead of her firm. While I think some professional services are worth it (like lawyers or doctors in most cases) there are some that can be easily replaced by computer programs – like accountants. What I was wondering was if my accountant was worth the cost.
Earlier this week, I got an email from her saying my taxes were ready, and the amount of refund she said H and I would get was much less than my (admittedly shoddy and probably wrong) back of the envelope math. Unfortunately, my back of the envelope math was way off – I think I missed a number somewhere or got something mixed up in my head as I was trying to do it without the papers in front of me. I had initially calculated we’d get over 5k back, but that was not to be.
Our Tax Situation
H and I each had a w2 from a day job, we had a few 1099 INT forms and 1099 MISC, and some tuition (for H) and some student loan interest for me. We also had some home interest as well. I also have a side business that generates a small amount of income every year. Obviously, our tax situation isnt totally straightforward like we have 2 w2’s and some Interest and some home mortgage/student loan interest, but its pretty close. My side business did less than 8k in business, and made less than 4k in overall profit in 2012. I do have it incorporated, but it’s all taxed as pass through income so there’s nothing super special about the forms that are needed for it or anything like that.
In the first corner, we have the accountant. It’s the same firm that I used last year, and I went back this year even though my taxes were not complicated, I/we had a lot of changes: we got married, bought a house and I incorporated my side income. I wasnt sure what effect all of this would have on my taxes. There were no promises of huge deductions (and they didnt even know they were in a competition to be honest) but I just wanted to see if they were worth what they charge.
I went down and talked with her for about 20 minutes, dropped off all of my tax forms, chatted a bit about the business expenses, H’s tuition and then I went and met up with an old co-worker. All told, I probably spent about 2 hours commuting to the accountant, meeting with her and driving back. I didnt hear anything for a few weeks, and I got an email from her saying that she’d finished up my tax return and that I was getting a refund. It wasnt the 5k that I had hoped, but it was better than owing like I had the last few years.
In the other corner, we have Turbo Tax. Before last year, I used turbo tax religiously because it was free for simple returns like mine, and easy to use. Using it typically ment for me tossing some numbers in there, spending about an hour and then waiting for the feds to deposit a check into my account. This year when I ran through it, I had to upgrade 2 times and filed with the turbo tax deluxe edition, which costs $30. It took me about 3 hours to get everything entered into the system, so the time spent with each is about the same. Turbo tax asked all the questions, but seemed to have difficulty with some of my business expenses, and wanted me to upgrade to the one that costs $79. I demurred on that, and continued my return. I watched the needle estimating my refund/amount owed bounce up and down, and by the time that I had finished it was comparison time.
The accountant was able to get me a return of 1,129, while turbo tax could muster barely less than half that, at $525. Honestly, I didnt expect it to be anywhere near that big of a gap. I didnt really expect the software to win, but I didnt expect them to get their butts kicked that bad either. While the accountants fee was kind of high, even after subtracting her fee I’d still come out ahead – a total no brainer for this year.
Readers: What do you typically do during tax season? Do you file yourself, or use an accountant? For those of you who typically do one or the other, what do you think about the results? Who did you think would win? Do you think this is affected by the fact that I live in a part of the country with a lower cost of living?