Sunday, 21 August 2011

Comparing Turbo Tax to a Qualified CPA for Income Taxes

Richard A Beauchemin and Peter B. Diaz Talk About Saving You Money

Turbo Tax is the #1 best-rated selling software for tax preparation. This article will compare them to some of the top CPA firms on the Internet.

Tax season has arrived and the ultimate question is about where to go for tax preparation. The taxpayer has a few choices, including online software tax preparers or qualified CPA firms. Both of them are vying for the tax season business and hoping to convince everyone to come their way.

TurboTax being the number one tax preparation software giant is often being compared with professional CPA firms. Which way should the taxpayer go?


Tim Geithner, Treasury Secretary and TurboTax

The LA Times (January 21, 2009) "Timothy Geithner: Blame me, not TurboTax" reported that the finance committee was grilling Tim Geithner (during his confirmation hearing for Treasury Secretary) on how they could trust him with a $700 billion dollar rescue fund in the worst economic times ever, if he could forget to pay his taxes for $34,000 when

For the years of 2001-2003 Geithner had missed the need to pay his social security and medicare taxes. He was asked if he used tax software to prepare his taxes and he admitted he used TurboTax.

Although there was no software error or problems with the functioning of the software itself, there were questions about the oversight or use and knowledge of tax codes. In the confirmation hearings Tim Geithner stated he was taking full responsibility for his problem and stated not to blame TurboTax.

How does Richard A. Beuchemin, CPA Compare to TurboTax?

In a recent interview on C-Span’s “Newsmakers” program, IRS Commissioner Douglas Shulman stated that he uses a tax preparer for his own returns. “I’ve used one for years. I find it convenient. I find the tax code complex so I use a preparer.”

According to Richard A. Beauchemin, CPA,  "If the IRS commissioner uses a tax preparer because he finds the tax code too complicated shouldn’t others consider it as well? In addition to the complexity of the tax code, below are several reasons why a tax payer should consider using a CPA to complete his or her tax return verses using an off-the-shelf-software program such as TurboTax:"

  • Education & Knowledge - Every single CPA must take a rigorous exam to show qualified knowledge of the very comprehensive tax laws. In addition, the CPA is required to take additional hours of professional training each year to keep abreast of the new tax law changes.
  • Experience - A CPA deals with a vast array of clients through the year with many different types of scenarios. He builds his experience based on this collective knowledge. Therefore if any questions do arise, the CPA knows what resources to use and where to look for a particular issue.
  • Complexity and Changes in the Tax Codes - The tax code contains over 65,000 pages and is growing constantly. Because the tax code is constantly being amended and added to, there are many facets to what may seem to be a simple answer.
  • Regulation of Tax Preparers - The state requires that all CPAs must comply with ethical standards set forth by the state CPA boards; maintain continual professional education throughout the year and have periodic peer reviews.
According to the IRS, there are plans to regulate online tax preparation sites. As of yet TurboTax is not regulated.

How Does Peter B. Diaz, CPA Compare a CPA to TurboTax?

According to Peter B. Diaz, CPA, "I compare TurboTax to a CPA like this: Most people use Microsoft Word. It's a great tool. It performs spell check and other checking functions. Bottom line, it does not make you a writer. If you use TurboTax you will lack the expertise provided by a seasoned tax professional to give you the extra edge you need to save and take advantage of all tax laws and sustainable tax positions on gray areas."


TurboTax Speaks About Tax Preparation

This year Turbo Tax is offering free e-file and free filing for anyone using a form 1040ez. The main selling point of their #1 best selling tax software is "Try before you buy." This is a great marketing campaign and will surely bring them much business.

According to their website TurboTax.com, these are the reasons to do taxes with them:
  1. Get the biggest refund guaranteed - TurboTax guarantees the taxpayer will get a larger refund with them than any where else or they will refund the fee charged.
  2. Covers over 350 deductions - Through their software they have a thorough questioning stage to inform the taxpayer about every imaginable deduction. They also ask the taxpayer several times if they want to go back and recheck their work.
  3. Full value of charitable deductions - They have the ability on the software to let the taxpayer deduct all charitable expenses made during the year.
  4. Simplifies deducting medical expenses - The software has easy calculations of all medical expenses paid.
  5. Shows you where the taxpayer stands - A meter is shown through the entire process indicating the refund status so far.
TurboTax is a very simplified and unique program which takes the taxpayer through a step-by-step process. It does take a while to complete, but it is easy to use. The price varies on the product from free for the 1040ez to $129.95 for the Corporation tax software.

Summary of Comparison of CPA to TurboTax

According to Richard A. Beauchemin, CPA, "In summary an off-the-shelf tax software package, cannot replace the years of education, knowledge and experience that a CPA possesses. With an ever-increasing complex tax code that seems to change each month, a CPA is in a better position to understand a tax payer's situation and what impact a specific change or piece of tax code will have on that taxpayer."

Photo courtesy of Photobucket/ postersff
Photo of Peter B Diaz by permission