TurboTax is great! but…

The most common question I get this time of year is “Hey Tony, I was wondering how much you charge to do taxes? I usually use TurboTax but …”

In the ‘old days’ at my former firm I used to just politely decline these requests without offering explanation. But over time I realized that I’m making assumptions about people that might not be true and that I’m not offering them any value by not responding to that query. Their question posed might really be an opportunity to help them consider their larger financial picture.

There are four things to say about this common tax question:

Working with a CPA is not an alternative to TurboTax.

My job is to help build your long term wealth with the least amount of government hassle and minimum exposure to risk. Most people do not consciously tackle these financial goals and most people do not work with a CPA. So it’s not a coincidence that most people do not use a CPA for tax preparation. Unlike a tax preparer or TurboTax, I am required to consider both the cost and the benefit of any service that I propose. TurboTax might advertise, for example, that the “cost” is $29 but not address the benefits, risks, or missed opportunities. Certainly that cost is much lower than a CPA by a long shot. In contrast, I might offer a cost of $100 per month based on net realized benefits of $3,000 over the year. The tax return is just one part of creating that benefit but not our primary focus. Before even offering to do your tax return, I must be sure that the benefit I offer is more than the cost. This is an entirely different approach to thinking that forms the backbone of our CPA accounting profession that some people have not considered. So yes, I am happy to prepare your tax returns but let’s start with an understanding that this isn’t a focus or a significant benefit of what I can offer.

Most of my exposure to TurboTax is fixing audited returns.

TurboTax is great for many people but not right for everyone. After decades of working with Intuit (the maker) and TurboTax, I know very well that the cost of fixing IRS, state and local tax audits and automated assessments is much more than the cost of avoiding the problem in the first place. A significant part of my annual income is earned fixing the mistakes people made on their self-prepared TurboTax returns – far more than I earn preparing tax return filings – so I have an obvious conflict of interest in commenting on this issue. But be aware that you can use a CPA and use TurboTax if that is what you prefer; it’s not an “either/or” situation. If you like using TurboTax then by all means keep using it. Just be aware of these other issues.

Understand the trade-off of private information.

There is a reason that TurboTax offers free or low priced tax preparation. They really aren’t interested in the tax preparation business. Many people do not understand that Intuit, the maker of TurboTax, has a business model (and a stock valuation) based on the value of collecting and using your personal financial information and the tax preparation business is just a “side gig”; a way to gain easy access to that private financial information for marketing. In the future as their business model evolves.  There’s nothing wrong with this practice per se, but we should used these tax services with eyes wide open.

The CPA must stay focused on the future.

Hockey superstar Wayne Gretzky is famous for saying “I skate to where the puck is going to be, not where it has been”. Tax return preparation, by its nature, is backward looking. We can’t allow this single annual transaction required by government – filing a tax return – to dominate our conversation about your financial future.

So if it makes sense to consider bringing a fresh eyes and a “management by objective” approach to your financial future for the long term then I am happy to discuss handling your tax return preparation now.  I just want to start with an understanding of these points above.

The first thing we should do is plan a short conversation about your financial plans this year. I’ll also ask some questions about your financial values and priorities. Fair warning: I will insist that your basic financial goals be in writing, even if a just a few lines on a scrap of paper. Based on that conversation, we can discuss how your tax situation and filing requirement from last year meshes with the current plan.


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