Should You Use an Accountant?

Use these guidelines to figure out if you can file your own tax return or if you need an accountant. PLUS, get the lowdown on tax software.

Those of us who procrastinate feel right at home during tax season. Preparing your tax return can seem daunting. Then there is the hovering fear that a mistake would cost you dearly in extra taxes or in interest and penalties.

About half of all Americans -- including, according to our recent poll, half of all MoneyLifers -- pack up their receipts and head for the nearest accountant. Others use online help or tax preparation software.

There are a number of things to consider when choosing between going it alone and getting help. Here is some guidance on when it makes sense to bring in a pro, and some resources for do-it-yourselfers.

The Lowdown on Tax Software
If your return is not too complicated (see guidelines below) and you are familiar with the basic tax forms (1040, Schedules A, B, D) and terms (dividends, capital gains, etc.), software can be a real boon. It can jog your memory about a forgotten deduction, provide tips and explanations, and even point out potential errors and pitfalls. You can also try running some what-if scenarios to see how much your return changes, say, if you switch your filing status from married filing jointly to filing separately.

Three programs dominate the field: Quicken TurboTax, Kiplinger's Taxcut from H&R Block Financial, and the new kid on the block, TaxSaver from Microsoft. All three take you through an interview so you don't need to know the intricacies of the tax code.

Although the programs are largely similar, Microsoft's TaxSaver has a big flaw: It has no state tax programs.

You can buy the software at your local computer store. Prices range from about $10 to $30, depending on special offers and rebates, and tend to fall as tax day gets closer.

An even less expensive option is to file your taxes online at www.turbotax.com. And Vanguard, the mutual fund company (www.vanguard.com), offers free access to TurboTax for the Web to registered users of the Vanguard site. Be aware, though, that it takes about a week for the registration process to be completed.

Although you may save a few bucks, you may still prefer to buy the packaged product and keep your tax data on your own computer. Further, you may have concerns about security. Both Intuit, which runs TurboTax, and Block have had some problems with their Websites.

Got Questions?
Whether you use software or just a pen and calculator, you may need help on a particular tax question. The deluxe versions of the tax software mentioned above contain plenty of explanatory information.

There also are dozens of books on tax preparation you can find at any bookstore. The J.K. Lasser series of guides, as well as the Ernst and Young guides, are comprehensive and fairly easy to use.

But the mother lode of online help can be found on the IRS site (www.irs.gov). You can download forms, instructions and publications, scan news releases and fine-tune your withholding with the W-4 calculator. The site is easy to navigate and chock-full of information -- evidence of a kinder, gentler IRS. To download state income tax forms, try www.1040.com.

Other sites worth a visit include Other sites worth a visit include the tax sections on the Motley Fool site, www.fool.com/taxes, and Quicken, www.quicken.com.

Should You Shell Out for an Accountant?
Even with all the software and online help, sometimes it just makes more sense to turn your return over to a professional tax preparer. A good CPA or accountant can save you more than her fee by catching all your deductions and pointing out areas for future tax savings.

Accountants may also be useful if you have a complicated financial life. If any of these situations apply, you may wish to seek help:
• You are self-employed or own a small business. If you just do some freelance work on the side and don't have many expenses, you might do fine with software. However, if your main source of income is from self-employment and you have lots of expenses or you're considering taking a deduction for a home office, an accountant may be your best bet.
• You have rental property. The depreciation schedules alone can send you scurrying to a pro.
• You trade stocks or stock mutual funds heavily, especially if you have to track the basis yourself.
• You own shares in a limited partnership. K-1 forms are tricky and difficult to interpret.
• You have lots of unreimbursed employee expenses. For example, if you're in sales and your employer reimburses you for only part of your mileage, travel and meals, a tax preparer can help you round up all your deductions.
• You had a significant transaction or event last year that will make this year's return very different. For example, if you sold a piece of property (other than your residence), you converted an IRA to a Roth IRA, or you were divorced or your spouse passed away, you could probably use some help from a pro.

Of course, you may just prefer packing your lunch for weeks or giving up a few dinners on the town and splurge on an accountant rather than slave over your tax return.

If you do decide to consult an accountant, ask your friends or your lawyer or financial planner for a recommendation. You may also contact your local chapter of the American Institute of Certified Public Accountants (AICPA) for information on choosing a CPA.

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