Pay for a CPA

With most things in life, you get what you pay for. I see this year after year in my clients’ tax prep. The clients who try to find the absolute lowest bidder usually end up with errors. Thankfully some are caught before they are filed, but it still means extra work. Let me give you a particularly egregious example from this year. Names are changed to protect the guilty.

My client Enrique found a deal where he could get his taxes done for $50. That should have been the first red flag. Doesn’t it cost about that much for TurboTax software these days? So Enrique drives all the way across town and sits down with a man named Max who is going to prepare his taxes. Max is a nice man, by all accounts, but he is not a tax professional. He does seasonal work for this tax company.

Max diligently enters all Enrique’s information into tax software. He gets all done and reports good news back to Enrique. Enrique is going to get an $11,000 refund! Thankfully Enrique knew better. Nothing had changed from the year before. So either he was missing out on some serious refunds in prior years or this year’s calculation wasn’t correct.

Enrique, to his credit, pressed Max about this big swing in results from 2016 to 2017. Max double checked all the boxes and insisted that the computer must be right. At this point Enrique realizes that Max doesn’t understand the basics of tax prep. Max just fills in boxes. So Enrique calls me to see what I think. It didn’t take me long to figure out that there must be an error in the way Max entered the data.

Now Enrique goes back to the tax prep place and asks to have a manager review it. The manager quickly unchecks a box somewhere that was telling the program not to count any IRA distributions as taxable income. Oops! I guess the computer is only as good as the person entering the data.

In the end this crisis was averted, but it took two phone calls and multiple meetings with the tax prep place. The manager seemed to be the only one who understood the process and the results well enough to recognize the problem and fix it. That’s not a recipe for success.

I like saving a dollar as much as the next guy, but sometimes it’s worth paying a little extra to get quality work. The first year I paid a CPA to do my taxes, I found he got me a better answer than I could have done myself. With results like that, he’s well worth the fees.

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. CTW gathers its data from sources it considers reliable. However, CTW makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.