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Tuesday, October 16, 2007

You cannot outsource financial work

One of my favorite financial bloggers, PFBlog writes about spending 10 hours a year on his taxes despite his employer, Microsoft, paying for KPMG to file his taxes for him (what a great perk!). I have lots of friends who pay accountants despite not having taxes as complicated as his.

Like him, I always do my taxes (I also do a few other people's), and I find that it is essential in order to understand the overall picture behind taxes, how they work, and what changes year after year. On top of that, by doing taxes yourself in TurboTax, you also gain access to the wonderful tax audit protection service provided by Tax Resources, Inc at an amazing price.

My aunt is an accountant, and despite her years spent preparing taxes for corporations, TurboTax outperforms her in terms of getting money back. Outsourcing your taxes is a lot like outsourcing your financial planning: without a clear understanding of what you are doing, you will not get satisfactory results.


md said...

What a timely post, I just filed my taxes on Oct 15. Some people don't like to deal with taxes, but I would find it hard to let someone else do mine - trust issues.

Every year I think about getting Turbo Tax, and every year I figure my taxes are simple enough, so why spend the money? However, this year I nearly forgot to make the adjustment for qualified dividends on line 9b (getting a tax break for qualified dividends makes me feel wealthy, BTW)... little incidents like that make TT very appealing.

Piaw Na said...

If you start getting hit by AMT (which a lot of people will be this year if Congress doesn't pass an AMT modification law like last year), then TurboTax is very appealing. It saves you from having to work out your tax liability under 2 regimes.

DWallach said...

I've been happily using TurboTax for years. The one year that they included nasty kernel-infecting DRM at no additional charge, I used TaxCut. They all work pretty much the same, although TurboTax has relatively nice integration with Quicken.

If you have variable income over the year and pay quarterly estimated taxes (i.e., you need to file Form 2210), TurboTax and Quicken are much less help than you'd like them to be. I probably blew two or three hours with an Excel spreadsheet to get those forms done right.

The only problem with TurboTax, so far as I can tell, is that you can make rookie mistakes and it's not smart enough to recognize them as such. Typo on a W-2? It just happily includes whatever numbers you give it.

Still, I'd much rather spend the hours slogging through TurboTax than pay somebody else to do it. Maybe if my taxes get more complicated some day, then I'll need professional help.