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Its my first time filing taxes on my own and I need to decide between using some tax software like TurboTax or hiring an accountant.

What are some factors I should consider when making this decision?

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    Personal advice: unless your situation is more complicated than most, try the software once. If you get stuck or aren't sure your results are reasonable, try an accountant and see what they come up with. Note that for basic cases in the US, the free online tools may be all you need for the federal forms, and state forms are usually "copy these numbers from the federal return, copy those from your W2, answer a few questions about special programs in our state, and send us the result. Heck, for basic cases it isn't all that hard to fill out the forms by hand or to create your own spreadsheet. – keshlam Mar 12 '16 at 19:12
  • If you are running a business, have an international aspect , or initially setting up a rental property; then professional advice might be in order. – mhoran_psprep Mar 13 '16 at 12:55
  • Keep in mind that there are some truly horrific 'professionals' out there. I have seen returns completed by CPAs for $25 that should have cost more like $500-$1000 due to complexity [and tax-affecting errors reflected that]. Be warned that cheaper is not necessarily better, when it comes to professional services. If you do go with a CPA, go with a reputable firm which you can hold accountable for errors. – Grade 'Eh' Bacon Sep 27 '16 at 13:32
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Largely it comes down to the complexity of your return (likely relatively simple if it's your first time filing) and your comfort level with using software. More complex returns would include filing business claims, handling stocks and investments, special return forms, etc.

One benefit to most of the software options out there such as TurboTax, HR Block, and Tax Slayer, are that they are free to use and you only pay when you're ready to file. You could give them a shot to see how easy/difficult they are and if you feel overwhelmed, then contact a CPA (whose time won't be free). Also remember that those HR Block seasonal places that open up are not CPA's, but are temps hired and trained to use the software that you would find online. You didn't indicate they were an option, but I like to point that out to those who might not know otherwise.

My opinion would be to use one of the online options because of cost and their ease of use. They also allow you to take your time and save your progress, so you can start using it and go ask questions/do research on your own time.

  • My experience with CPAs is rather dull - as soon as your case is a bit more complex [rental property in foreign countries], they are helpless and don't want to do it anymore. I ran around for months, until I found a single one 2000 miles away that would do it for over 1200 $. So go with the software first - it is really easy. – Aganju Sep 27 '16 at 0:09
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Hiring a CPA comes into play if you're doing something that requires judgement or planning, such as valuation of internal shares in a partnership, valuation of assets in an asset swap, or distribution of the proceeds of a liquidation. That said, I would strongly suggest hiring someone who is also a Tax Attorney over a plain old CPA. In the event you do need representation to clarify positions or assertions, you're probably going to need to hire one anyway. Qualified representation is much cheaper to hire up front than after the fact.

If all you need is help filing compliance paperwork (returns), software should be more than adequate.

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I'm glad keshlam and Bobby mentioned there are free tools, both from the IRS and private software companies. Also search for Volunteer Income Tax Assistance (VITA) in your area for individual help with your return.

A walk-in tax clinic strength is tax preparation. CPAs and EAs provide a higher level of service. For example, they compile and review your prior year's return and your current year, although that is not relevant to your current situation. EAs and CPAs are allowed to represent you before the IRS. They can directly meet or contact the IRS and navigate audits and other requests on your behalf. Outside of tax season, an accountant can help you with tax planning and other taxable events.

Some people do not hire a CPA or EA until they need representation. Establishing a relationship and familiarity with an accountant now can save time and money if you do anticipate you will need representation later. Part of what makes the tax code complicated is it can use very specific definitions of a common word. Furthermore, the specific definition of a phrase or word can change between publications. Also, the tax code uses all-encompassing definitions and provide detailed and lengthy lists that are not exhaustive; you may not find your situation listed or described in the tax code, yet you are responsible for reporting your taxable events. The best software cannot navigate you through your tax situation like an accountant.

Lastly, some of the smartest people I have met are accountants and to get the most out of meeting with them you should be as familiar as possible with your position. The more familiar you are with accounting, the more advanced knowledge they can share with you.

In short, you will probably need an accountant when: You need to explain yourself before the IRS (representation), you are encountering varying definitions in the tax code that have an impact on your return, or you have important economic activities that you are unsure of appropriate tax treatment.

  • Uhm... Disagree re the upsell. The software I use does offer it, but it's a soft sell and there's no pressure to take it. I agree that for most people is unnecessary, but it's less obnoxious than software which tries to sell you unneeded upgrades as one of my other tools is currently doing. – keshlam Mar 13 '16 at 17:07
  • The point I was trying to make is audit protection service is not the same as representation. I'm not familiar with the sales tactics so I thought it wise to remove that sentence. – emican Mar 13 '16 at 21:10
  • OK, counterpoints: (a) the software companies do offer an optional representation service, and (b) 99.9% of the time, at least, representation simply isn't an issue if you aren't trying to fudge things. On most returns, an audit is pretty painless and is as likely to find that you owe less money as to find that you owe more, and they aren't going tonbwaste time on a return that doesn't have something goes about it. – keshlam Mar 13 '16 at 23:22
  • I am not familiar with the optional representation service you refer to. Can you provide a link to the program, your qualifications, references, and/or how you arrived at your figures? – emican Mar 14 '16 at 1:11
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    Optional service: Quicken offers it to me every year. I presume competing products have a similar service. I never buy it because I am doing nothing that I can't fully justify myself. Stats: self- evident when you know how infrequent audits actually are compared with number of returns. I know the profession likes to spread doubt here, but it really is overstated. If you know you need representation, go for it. If you don't know that you do, and you are being basically sane in following the instructions, I submit that you generally don't. The US government isn't generally malicious. Really. – keshlam Mar 14 '16 at 1:20

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