You can save a lot of money by doing your own taxes. The best way to minimize your taxes is to understand certain actions impact what you owe. When we say do your own taxes, we really mean with the help of TurboTax and their army of CPAs.
You can pay an accountant instead, but nobody is more incentivized to save you money than you are. In fact, your accountant will get paid no matter what you do. It’s often easier to remember what tax savings steps to take when you have been through the preparation process yourself. You see clearly what levers are available, what worked and what didn’t in prior years. You understand better how to take advantage of carryovers and deductions, both of which can yield great savings.
Many of may not want to get involved with the number details, or have a fear of making an error. But the reality is that most of our recordable tax information comes from from standardized forms such as W-2s, 1099s (capital gains), 1098s (mortgage interest) and other standardized forms. Most can be downloaded or manually entered in TurboTax in seconds. Even if you make $1M+ or currently hire an accountant, we suggest first doing taxes on your own. If you find overwhelming, then ask your personal CPA review what you have prepared.
Knowledge has tremendous value when you prepare your own taxes, and enables you to make far better informed financial decisions. Saving on the accounting fees may be the least of the opportunity for you. The process will get you familiar with what financial steps you can take to reduce your taxes. Whether in deductions, charitable contributions or making different types of investments, doing your own taxes will help you understand how different actions impact returns.
As an example, are you maxed out on the amount of mortgage interest you can deduct from your income each year (typically $10K on Form 1040)? Are you using a HELOC where you are unable to pass through the interest expense as an offset to income? If you have a brokerage account, you can actually take out a margin loan against your securities and fully deduct that interest expense from your capital gains, or investment interest and dividends. Most CPAs wont even know to tell you that. But going through the 1040 on your own is likely to uncover many actions that you can to reduce what you owe.
One of the great things about TurboTax is that if you purchase the Premier package (for about $89), you get free phone support from a CPA. TurboTax has enlisted literally thousands of CPAs to help users by phone. Rather than relying on the sole advice of your own accountant, TurboTax gives you access of multiple CPAs to reduce your error rate. The TurboTax software literally flags the errors or incomplete data in your forms. If you can’t figure out the problem on your own, simply call for live, licensed professional guidance through a screen share. You can call as many times as you like. The preparation process may take many hours, but you will learn a tremendous amount.
