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.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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