Outsourcing My Taxes - Is the Price of Expert Tax Advice Worth the Cost?
March 4, 2008
This is the first year in my adult life that someone other than me will do our taxes. The revelation hit me about a month ago as I started gathering together all our tax documents. My college roommate, a CPA and a tax attorney, was looking for new business for his law firm. Why not hire him to prepare our taxes?
Too expensive, was my first thought. I’ve always used TurboTax to do our taxes myself and am used to paying the $40 or so for the software. I wasn’t jumping up and down to spend any more than that on tax preparation but the more I thought about it the more it made sense.
Time Savings
My life is short on time and long on things to do these days. Not only that, our taxes became less simple the last two years when we added our business income to the mix. One of the things successful business owners do is learn to delegate tasks and leverage expertise. Why not pay an expert to do the work and use the time I would have spent on taxes to work on the business instead?
Tax Expertise
In addition to the time savings, the quality of the tax return will be better as well. My friend really is Mr. Tax, all he does every day at work is find ways to help his clients manage/reduce their taxes. I’m sure there are things he’ll see that I overlooked and maybe some tax planning advice he can offer.
Cost Savings
How am I going to save money when I’m paying more for the tax return? The first answer is a paraphrase from tax expert Sandy Botkins. Taxes are our biggest expense. If we add up all the taxes we pay they “cost” us more than any of our other expenses. If my friend can help me find overlooked deductions that itself will help pay part of his fee.
In addition, the tax preparation fee that his firm charges is actually low for tax returns relative to their normal billing rate. The way I understand it is that they see tax returns as a good lead generation tool for more business so they keep their prices low to encourage people to use them. Since my friend is trying to add new clients, he convinced his firm to let him offer a friends and family discount.
Trust
One key factor in outsourcing your taxes is finding someone you trust to do the work. I lucked out because I have a built-in tax expert as a friend and I know for sure I can trust him. If I was to go out and find someone on my own, I’d likely just start asking friends and co-workers for referrals. Luckily I don’t have to hassle with that thanks to my friend so it made the decision to hire a tax preparer even easier.
All things considered, I definitely think the benefit of outsourcing our taxes is worth the cost. I dropped off my information at his house last night to get the process started. Now that I’m paying for expertise and to free up my time, I have to commit to spending the time I would have spent on taxes to instead working on my business. I guess that means no more watching Apprentice or Lost for the next 6 weeks : )
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Good article!
I agree with your rational for using an accountant for taxes.
As a real estate investor, an added benefit to having an accountant is that throughout the year I can call him on the phone and ask him questions about how different investment actions will affect taxes. His useful advice on many areas of investing are hard to put a value on.
Its always good to have someone with a well rounded perspective on my business to consult with.
I, too, use an accountant, but they don’t come cheap. Mine is a CPA/Lawyer. I’m wondering if I were to get just a CPA if it would be cheaper.
I tried using turbotax but it didn’t fly - I was using as much time punching numbers in and trying to get it to accept some more complicated stock trades and making sure it was done right compared to just doing the schedules with a pencil and calculator.
I have thought about getting an account (a faculty member at my old university volunteered so that just cost me $100 at a time), but the question is — who do you trust?