Comment by bigfishrunning
2 days ago
I'd like to defend the notion of using a CPA a bit. I started using one when I became a partner in a passthrough LLC. I was now self-employed and was responsible for paying taxes on the businesses income as well as my own personal income. Filing that first year was incredibly stressful and time consuming, and I came to the conclusion that sometimes the right thing to do is to hire someone who knows what theyre doing.
Your post paints accountants as con-men, swindling people and promising "loopholes". Maybe some are, but they do provide a valuable service, especially if your tax situation is non-trivial.
I would love for the tax code to be simplified enough that I don't feel compelled to hire someone who put in the work to understand it, but that's simply not the case right now.
I think GP’s point was that the vast majority of individuals have taxes that look like “one W2, maybe a couple 1099s, and standard deduction.” Many of these people have been scared into using a CPA when they really just need to plug-and-chug a few numbers into tax software.
As soon as the words “passthrough LLC” (or “farm” or “S-corp” or “itemize”) are on the table, it’s usually worth it to pay $1,000 for a professional, assuming your time is worth something.
Exactly. Tax complexity drives the CPA / tax prep need.
That said, there is a huge swath of America that's being preyed on by strip-mall tax prep, who derive zero benefit from it. (And an industry whose profits ultimately trickle up to the tax prep software companies)
I was blown away when I learned one of my wife's friends, who has a single W2 and some bank interest, pays H&R Block every year to file her taxes! No stocks or rental income or IRAs or anything else that could complicate things. But still she, and millions of Americans, pay these companies to fill out what amounts to a single form. Eye opening.
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I’m talking about people with a couple W2s and maybe a 1099. In your situation hiring a CPA is likely a very reasonable choice.