[dkokelley]

Honest question: Why don't more people (especially high earners) go with a CPA firm to take care of their taxes? With the amount of money involved, and the potential legal trouble for getting it wrong, the cost/benefit calculation seems to strongly favor hiring a professional to guide you.

[jmharvey]

CPAs aren't cheap, and most people's tax situations really aren't that complicated. Even for high earners with lots of investments, it mostly comes down to collecting a bunch of forms and either doing manual data entry or sending the forms to the CPA to do a bunch of data entry. It's not particularly clear that the CPA's work will be more accurate.

In a situation where there's some complex tax issue, absolutely, go with the professional, but for most people, the CPA is mainly there to provide peace of mind.

Also, if you make a good faith effort to pay your taxes correctly, the potential legal trouble for getting it wrong is pretty minimal. You'll need to pay the correct amount plus interest and penalties, but "interest and penalties" are pretty light (effectively 14% simple interest on the amount of the underpayment). And since the IRS doesn't usually take more than a couple of months to say, "hey, you screwed up," interest and penalties usually add up to like 3% of your underpayment.

[vidanay]

I went to a tax preparer once in my life. All she did was read the questions from the "Turbo Tax for Professional Tax Preparers" software on her computer. Whenever there was a subject that I wasn't clear about, her "help" was to simply tell me option A and option B and ask me what I wanted to do.

Worst $500 spent in my life.

[dkokelley]

Important distinction that a tax preparer != a CPA.

[vidanay]

Yeah, I know. That's why I specifically said a preparer and not CPA despite the thread topic.

I just searched the site of the person I used (it's a private family company, not one of those cubicles set up in Walmart) and there's no mention of "CPA" anywhere on their site.

[mynameisash]

I was happily paying a CPA to do my taxes for maybe 6-7 years. He charged me something like $400/yr, which I thought was very reasonable.

He decided it was time to retire, recommended another accounting firm in my area, and they charged me $750, and all it was was an Intuit frontend where I had to fill everything out myself. I did that one year, then I switched to FreeTaxUSA and was super happy with it.

I probably would go back to an individual CPA if I could find one like the guy I had, but I've been burned by the first CPA and this most recent one. 1/3 isn't a good prior.

[303uru]

Having used four different CPAs in the past to file taxes, I spent far more money to spend about the same time working on it. I was audited three times, have never been audited since using FTU.

[lotsofpulp]

If you only have W-2 or 1099 income, taxes are relatively easy if you are comfortable reading forms. It might take 2 hours the first year, but after that it should be a breeze.

For federal income tax, there is also this spreadsheet that is very handy:

https://sites.google.com/view/incometaxspreadsheet/home

[TillE]

If you're in a typical situation (salary, investments), doing your own taxes isn't particularly hard. If you're a freelancer or business owner or you have a lot of weird sources of income, sure, paying an accountant is probably worth it.

[bombcar]

It's unlikely the CPA provides any additional liability protection as usually it all flows back to you as being responsible.

If it makes you feel better you can use a CPA once, and then mimic what they did in the years later. The best service they can do is recommend things that may minimize tax or reduce complexity. Note that minimizing tax may not be the best goal, however, especially with investments.

Or you can pay a CPA to do your taxes to feel like a "big boy".

[foobarbazboff]

I think the main reason is that most people have very straightforward tax situations, regardless of the amount of money involved. A high earner at a W2 job doesn't necessarily have anything more to report than someone working at a fast food restaurant. The tax brackets are higher but it's really all the same.

Different story if you're self-employed, own a business, or are involved in various types of investments.

[lern_too_spel]

The legal trouble for getting it wrong is only if you don't pay what you owe after the IRS sends a correction. Most high income people are sufficiently liquid that this isn't an issue. It's only an issue if you are heavily leveraged and micromanaging cash flow, in which case any large unplanned cost is potentially ruinous.

[pbronez]

I contacted a real live accountant a few years ago and was not impressed. I needed help implementing nanny tax for the first time. I wanted a one stop shop that would reduce it to just signatures for me. Instead it was more work than doing it myself and I wasn’t confident in the end result.

[Timothee]

For me, I don't always go with a CPA because I've had bad experiences where they've made mistakes or didn't know about some basic things and I still ended up doing a lot of work to gather and pass along the information.

[Spivak]

Because single/join income W2s with some retirement accounts, other investments here or there, a mortgage interest deduction and some charitable donations is still low complexity. Bigger number on your W2 is still just a W2.

[renewiltord]

You have to verify their work.