egis partridge: TurboTax, H&R Block, Tax Act, or a Certified Public Accountant ...

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Well folks, the results are finally in - I have done the unthinkable by completing my 2012 personal/business tax return 4 times!?

Ohhhh the horror, right?!!?

Why on Earth Would I Do My Taxes 4 Times?

I think we could agree that for most people, doing one's taxes would not exactly be considered "fun," and definitely not something that you would want to subject yourself to 4 times over in one year!

However, my purposes for going through my taxes 4 times were two-fold:

So, let's get in to the results I saw by doing my taxes these four times and what I learned in the process!

My 2012 Tax Return Results Using TurboTax

As I mentioned in my comparison post of the three big players in the online tax preparation community, TurboTax is both the most established/well-known and also by far the most expensive option on the market. In my opinion, they also ranked last in ease of use because it is very confusing to determine when you actually need to upgrade to complete your taxes or if they are just trying to upsell you for the sake of making more money.

Nevertheless, I was able to get through their online system pretty well when I calculated my 2012 tax return in TurboTax. Below is a summary of my experience:

Since I had business/self-employed income in 2012, I had to upgrade to the $75 Home & Business version of their software.?
I was prompted to enter my relevant expenses for a home office deduction.
They also prompted me to take a depreciation expense for my home office as well.
It was very hard to tell where I should enter my contributions to my pre-tax Self Employed 401k retirement account (results in tax deduction for current tax year).?
After entering all of my numbers, it resulted in the following return amounts:

$150 Federal Income Tax Refund.
Owed $352 in additional state taxes to the state of Virginia.

My 2012 Tax Return Results Using H&R Block

In my overall comparison of the popular online tax prep platforms, H&R Block was a very respectable option that featured middle-of-the-road pricing. In my opinion, it was the most straight-forward, easiest to use, and least confusing platform.

Below is a summary of my experience when I entered my 2012 tax return numbers in to H&R Block:

As was the case with TurboTax, since I had business/self-employed income in 2012,?I had to upgrade to the $50 Premium (most expensive) version of their software.?
For some reason that I could never figure out, the H&R Block system said that I could only contribute $4195 to my Roth IRA for 2012 (lower than the maximum contribution of $5000).?

I'm not sure why it stated this since I had made at least $5000 in income in 2012 and was below the maximum Roth IRA income limits.

After entering all of my numbers, it resulted in the following return amount:

$802 Federal Income Tax Refund.
It did not calculate my expected state income tax return/owed numbers.?

My 2012 Tax Return Results Using Tax Act

As I concluded in my comparison post of TurboTax, H&R Block, and Tax Act, I thought that?Tax Act?was the best overall value?because it is pretty easy to use and gives you all of the same?functionality?as TurboTax and H&R Block, but at 1/4-1/5 the cost!?

You can get their Deluxe edition along with one state tax filing for only $19!! Pretty awesome in my book for doing your yearly taxes!?

Below is a summary of my experience when I entered my 2012 tax return numbers in to Tax Act:

As was the case with the other two online platforms, since I had business/self-employed income in 2012,?I had to upgrade to the Deluxe version of their software. However, it is only $19 and includes a state tax filing, so it's hardly anything in the grand scheme of things! ?
I was prompted to enter my relevant expenses for a home office deduction.
They also prompted me to take a depreciation expense for my home office as well.
As was the case with H&R Block, for some reason that I could never figure out, the Tax Act system said that I could only contribute a certain amount (I forgot to write down the exact number) to my Roth IRA for 2012 (lower than the maximum contribution of $5000).?

I'm not sure why it stated this since I had made at least $5000 in income in 2012 and was below the maximum Roth IRA income limits.

After entering all of my numbers, it resulted in the following return amounts:

$972 Federal Income Tax Refund.
Owed $35 in additional state taxes to the state of Virginia.

I was pretty shocked at this result.?

Not only is Tax Act the cheapest of the three online tax preparation options by far, but it also resulted in me getting the most money back from the IRS / owing the least amount of money to the State of Virginia! I love it!

My 2012 Tax Return Results Using a Certified Public Accountant

Because I do have self-employment income, I have used an accountant to file my taxes since I graduated from college. I have done this in part because I use the same accountant that my Dad used for his self-employed business tax return, and since they charged him so much, they would do my taxes more or less for free.

However, since my Dad is now being paid as a regular employee, I no longer have this free service, and had to pay $200 for the accountant to do my taxes this year. Not too bad at all, but not free! Whether or not I will continue to utilize an accountant for my 2013 taxes will be the subject of a separate post all-together (on the way soon!).

Below is a brief summary of my experience of doing my taxes with the help of the CPA (I'll describe in more detail in a future post):

I was prompted to enter my relevant expenses for a home office deduction.
They did not prompt me to take a depreciation expense for my home office as well.
After receiving my return from the accountant after 1 month of waiting and a $200 fee, it resulted in the following return amounts:

$990 Federal Income Tax Refund.
Owed $23 in additional state taxes to the state of Virginia.

Conclusions

In reviewing all of the numbers above, we can make the following conclusions:

Assuming of course that I used the platform correctly (hopefully I did!), using TurboTax would have been an extremely costly mistake.?

It would have resulted in a loss of $1139 vs. using Tax Act. Crazy!

As is the case with their platform pricing, H&R Block again represents the "middle-of-the-road" return amount with a federal income tax refund of $802. Not too bad!
As I mentioned above, Tax Act, along with offering the lowest fees, resulted in me getting the most money back from the IRS / owing the least amount of money to the State of Virginia of all three online tax prep options.?
Looking solely at the federal return and state taxes owed numbers, I got a $30 net gain/improvement in using a CPA over the best online tax preparation option, Tax Act.?

However, this does not take in to consideration the $200 fee I had to pay the CPA and $19 fee to use Tax Act.?
If the fees of using Tax Act vs. a CPA are considered, the $30 improvement shown above turns in to a loss of $151 by using a CPA over Tax Act.?

So, purely from a bottom-line numbers perspective, Tax Act delivers the highest value.

However, there are some other non-numerical considerations that makes the Tax Act vs. CPA usage more complicated (and hence will be the subject of the future post described above). For example, you get a nice level of assurance when you use a CPA that your taxes are done correctly. They also reduce the amount of work you have to do, along with me as a business owner, being able to bounce questions off of them throughout the year. In addition, they calculated and prepared my 2013 estimated tax payment stubs and numbers as well, so that is a nice service!

How about you all? How did you file your taxes this past year - an online tax prep platform, through an accountant, or filing out the forms directly?

In general, do you feel the guidance provided by an accountant is worth the fees required for their services?

Share your experiences by commenting below!

TaxACT