Software or CPA: How Should You Do Your Taxes?

Which is the best service to use when filing: software or a CPA?

Mar 22, 2014 at 1:00PM

What's the best way to get your taxes done? Should you invest in tax preparation software or work with a certified public accountant? There are advantages and disadvantages to each approach. What you decide to do depends on your particular situation.

Tax Software: Advantages

  • Price. The clear advantage for tax preparation software is the cost, which ranges from around $20 to $100, depending on the type of software and what kind of taxes you need to file (business programs tend to cost more, for example). At the cheapest, a tax preparer will charge around $100, and a CPA will likely charge several hundred. If you're using software to do your taxes, the up-front price is much lower.
  • Speed. If you want your taxes to get done right away, you can't beat tax software. From start to finish -- depending on the complexity of your taxes -- you can get everything done in the course of a Sunday afternoon. If you use a CPA to do your taxes, it will take longer, because the accountant will not be focused solely on you and your tax return. CPAs are especially busy from February through April as they juggle taxes for all of their clients.
  • Simplicity. Everything about using tax software is simple. Many programs can be downloaded directly to your computer, so you don't even have to leave your house. Tax preparation software guides you through entering your income, calculating deductions, and claiming the right credits. It uses algorithms to ensure that you will save the most money on your tax return.
  • Education. Do you learn by doing? Working your way through your tax return with a tax preparation program can help you understand what's important when filing your taxes, learn more about credits and deductions, and get familiar with the tax code.

CPA: Advantages

  • Knowledge base. CPAs know their stuff. Even though tax preparation software has the whole tax code in its memory, CPAs have know-how and real-world experience. This means they can understand how to apply their knowledge to you in a way that software can't. CPAs also have access to materials that regular consumers don't, like professional-grade tax preparation software that costs over more than $1,000.
  • Familiarity. The best thing CPAs do that software can't is plan for the future. Consumer tax prep software uses a simple input-output process to finish your taxes, but a skilled CPA gets to know you and your financial situation in order to help prepare for the coming years. A good CPA assesses your goals and finances and can make suggestions to bolster your finances, identifying potential pitfalls and savings opportunities.
  • Problem solving. If you have a messy or otherwise challenging tax situation, a CPA can help you clean everything up and make sense of your taxes. CPAs have worked with all types of problems and know how to help you set things right. Furthermore, if you have the misfortune of being audited, a CPA can guide you through the process in a way that tax preparation software cannot.

So what will you choose this year? If you like to do things for yourself or want an inexpensive and speedy way to get your taxes done, tax software may be your best choice. If you want an expert on your side, have a complex tax situation, or want help planning for the future, it could be worthwhile to work with a CPA.

Keep your taxes under control
Tax increases that took effect at the beginning of 2013 affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "How You Can Fight Back Against Higher Taxes," the Motley Fool's tax experts run through what to watch out for in doing your tax planning this year. With its concrete advice on how to cut taxes for decades to come, you won't want to miss out. Click here to get your copy today -- it's absolutely free.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers