Self-serving: How tax pros answer the DIY question

February 28, 2023 1:55 PM

If you want something done right, do it yourself.

Maybe not so much tax returns, though — an occasionally impossible point to make to some tax prep client who insists they've cannily saving bucks by going it alone.

"I had some clients at my prior planning firm try to DIY and they ended up with two IRS notices," said Bruce Primeau, a CPA and president of Summit Wealth Advocates, in Prior Lake, Minnesota. "I completely understand that clients don't like paying to get their taxes prepared. They need to think of it like maintenance on their car or going to the dentist — a necessary evil and hopefully it keeps them out of trouble."

"Tax software is simply a calculator, not something you can rely on for your tax planning," added Larry Pon, a CPA in Redwood City, California. "How can an amateur keep up with daily tax law changes?"

So — what to tell the insistent would-be DIYer?

Help yourself!

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"'Be my guest. Good luck with that,"' Robert Seltzer, a CPA at Seltzer Business Management in Los Angeles, tells DIYers. "I want clients who appreciate my services," he said, "and I don't have the time or inclination to try to convince a client of something that should be obvious."

Dunno It Yourself

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"Most of the DIY software out there is pretty good but if you don't take the time to read and understand the material and questions the software asks, you don't know what you don't know," said Daniel Henn, a CPA in Rockledge, Florida. "The software is only as good as the information you give it. I've seen many people take credits and deductions they weren't entitled to and get whacked with a tax bill later, and I've seen people not take credits or deductions they're entitled to."

Expert advice

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"I explain it like this several times each tax season," said Jeff Gentner, an Enrolled Agent at Gentner Tax Associates, in Williamsville, New York. "'Knowing that your tax return is prepared applying the latest tax laws and with someone who is an expert in their field is certainly worth the fee. It's really about peace of mind, and everyone wants that.'"

Loads to learn

Internal Revenue Code books sit during a House Ways and Means Committee markup hearing in Washington, D.C.

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"'The Tax Code is complex, takes time to learn, and has been through multiple iterations in the past five years. Your time to learn and digest it all to prepare an accurate return is probably more valuable than what you will pay a CPA to prepare a return for you,'" Ann Etter, a CPA at Goodney & Etter in Northfield, Minnesota, tells folks. "'A CPA can work with your specific situation to get the best tax scenario possible, where DIY software treats everyone the same.'"

By all means

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"'So are you sure you aren't missing some deductions and do you understand any tax credits you might qualify for?" Brian Stoner, a CPA in Burbank, California, asks. "'What about other deductible business expenses on your Schedule C or [corporate return]? Do you really know how to depreciate your rental property or calculate your auto deductions so you know if your can deduct them?' By all means, use TurboTax or any of the other DIY programs if you can do all that," he said.

Irregular basis

"Trying to read the Tax Code offers so many costly ways for things to go spectacularly bad," said EA Terri Ryman of Southwest Tax & Accounting in Elkhart, Kansas, who just amended a return where the DYIer posted stock sales exactly as they appeared on the brokerage statement — including a huge sale with no basis.

"It only took a little research to find it. Got a large refund and a client for life," Ryman said. "Asking the box doesn't always help, [and] online help can be insufficient."

A simple answer

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"I'd encourage those whose tax return is 'simple' to use a DIY software and self-prepare," said Manasa Nadig, an EA and owner at MN Tax and Business Services and a partner at Harris Nadig in Canton, Michigan. "They could possibly hire an enrolled agent or CPA who prepares taxes for a planning session maybe once in two years or if they are anticipating or have had a big change in their financial situation."

And high earners or are high net-worth retirees? Those with investment income, crypto trading, foreign income or accounts, rental or business income? "Especially so in the past few years when there have been major tax law changes," Nadig said, "by DIYing their taxes they may leave a lot of money on the table or, worse, incur long drawn-out audits."

That’s entertainment

"If you have a W-2 and maybe one 1099-INT, DIY preparation is fine from a complexity standpoint. DIY software will not catch the dumbest mistakes, especially if you override the numbers," Pon said. "'Go ahead, but it will cost you three times as much to fix your mess.'

"Reviewing DIY returns can be quite entertaining," he added.

Just being nice

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"The problem with clients preparing their own tax returns is programs like TurboTax are not idiot proof — and I mean this in the nicest way," Primeau said. "The program has no idea whether you are entering numbers in the right spot — or if you entered them at all — it's just going to put them where you entered them."

His previously mentioned client entered almost everything as dividend income and skipped entering all security sale transactions. "Needless to say, they received IRS notices saying they owed something like $50,000," Primeau said. "It ended up costing them more in this case than it would have cost them just to have a preparer handle their return in the first place."