Tax Preparation Vs. Tax Planning: The Great Debate

Tax Preparation vs. Tax Planning: The Great Debate

Well not much of a debate, really.

Although based on how I see most people handling their taxes, you’d think it was.

Time and time again, I have people tell me how great tax preparation software is, and that it’s a lot cheaper than working with a CPA. It’s a great product for the do-it-yourselfer, they say. And you know something? They’re right.

If you have a simple tax situation, a software like TurboTax can be a great solution for tax compliance. What is tax compliance? Simple – Meeting your obligation to file an accurate tax return with state and federal agencies.

You’re probably surprised I’m saying this. Why would a CPA admit that TurboTax can be a great fit for some people? Shouldn’t I be afraid of heading the way of the Dinosaur when facing a software designed to put me out of business by leveraging technology and scalability? David vs. Goliath. A story for the ages.

But not really…

The truth is, if you have a simple tax situation, all you’re concerned about is filing an accurate tax return, and you’re willing to spend a few hours getting organized and working through a software, then by all means, use TurboTax. Just be sure to cross all your “Ts” and dot all your “Is”. I’ve used the software myself, and if all the expandable instructions are not read, mistakes will be made. We’ve amended a lot of TurboTax returns because the individual using the software didn’t read everything. And I mean it when I say everything.

The problem with Turbotax and other softwares like it, though, is, that you’re probably unknowingly leaving money on the table.

Working with a CPA is far more than assisting with tax compliance. It’s nice to know you’re not missing anything and having someone do the work for you is obviously great, but the real benefit of working with a CPA is tax planning.

Even those with the simplest of returns will have times in their lives where decisions are made that should be vetted by a CPA. Making the incorrect decision could cost you hundreds or thousands of dollars. Tax planning is absolutely not a service that should be utilized by only those with complex financial situations or the wealthy. CPAs help with tax savings on the tax return, but they also help with tax savings before you even get to that point, which is often overlooked by most people using tax preparation software.

Sure, TurboTax will file your return correctly in hindsight as you report what you did over the past year, but it can’t undo a mistake. A CPA is the gatekeeper between you and everyday decisions that could be costing you unnecessary tax.

It’s time to rethink your tax preparation habits and relationship with your CPA. Your CPA should be one of your most trusted advisors, and leveraging their knowledge is worth the time and expense in the long run. In my experience, most will come out ahead financially. It’s short cited to focus solely on meeting a tax deadline once a year.

Thinking about getting married or having marriage troubles? Tell your CPA.

Having a baby? Tell your CPA.

Buying a car? Tell your CPA.

Changing jobs? You guessed it. Tell your CPA.

Tax season isn’t just February through April 15^th. If you work with the right CPA, they will be available to help you navigate your finances year-round, so when it does come time to file your taxes, you’re paying Uncle Sam less.

Filing a tax return is easy. Minimizing taxes before you bring out the software, not so much. Don’t make the mistake of quickly addressing what is probably your biggest annual expense once a year with what you think is a cheap software.

You don’t know it, but I do. It’s not as cheap as you think.

If you’re looking for help with tax preparation or tax planning in Plymouth, we’re a CPA firm near you. Let us get to know you and help minimize your taxes. You can read more about our tax return preparation services here and our tax planning services here.