4 ms·

No way. That's a bargain, you are not getting ripped off. I pay more than that happily, and (knock on wood) haven't been audited or had any issues yet. I did

No way. That's a bargain, you are not getting ripped off. I pay more than that happily, and (knock on wood) haven't been audited or had any issues yet. I did my own taxes one year and it was a total nightmare. Say it takes you 20 hours, which is a low estimate. You would save the equivalent of 90 bucks an hour, if your rate is 90 or more an hour your loosing money. If your rate is less, your an hourly employee not a consultant. Plus you get all the support, advice, and protections that come with having a CPA. A side point, OP and all the comments here saying CPAs are "ripping off" people is unfair. It's not easy to become a CPA, these people need to pay for school, run a business, and pay their bills and support their family like everyone else. Their time is valuable, they charge for that value. That isn't ripping you off, it's providing a service that you are buying. As a consultant you wouldn't appreciate people saying you were ripping them off just because you sold them your services. did my own taxes one year and the next year had my CPA review them, he found thousands of dollars I left on the table, so in the end it ended up costing me thousands more to do my own taxes.

ryanwaggoner 4y ago
The tax situation described by OP would take more like 2 hours, not 20. The exception would be if bookkeeping is included, but I bet it’s not. And CPAs don’t get all that education and training so they know how to prepare the ultra-complicated tax return of a freelancer with a few 1099s. If you have employees or complicated accounting or whatever, yeah, hire a CPA. But their expertise is overkill here. Source: have done my own semi-complicated taxes (multiple businesses, multiple states, real estate investments, mix of retirement accounts) for 20+ years, never been audited. Had a CPA do them for a few years, it was fine, but nothing I can’t easily do myself.
- iancmceachern 4y ago
  But what about the opportunity cost? Wouldn't you rather do what your passionate about and good at, not taxes? How do you know you weren't missing out on deductions, leaving money on the table?
  - ryanwaggoner 4y ago
    I understand what you’re saying, I wrestled with this myself for years. But in the end, I feel pretty confidant that a CPA isn’t going to find some magical (legal) deduction in OPs situation that TurboTax wouldn’t find. And I consider it my responsibility as a business owner to understand the basics of finances, accounting, bookkeeping, taxes, etc. It’s not that complicated at this level, any software engineer can pretty easily grasp this stuff with a little effort. Also, CPAs are human and make mistakes, something I’ve personally encountered multiple times. So unless you check their work, how do YOU know you aren’t missing out on deductions or overpaying even if you do use a CPA? But then we’re right back to opportunity cost and expertise. I don’t think using a CPA is a horrible idea, but you’re overstating the difficulty and risk of doing it yourself. As I said elsewhere in this thread, the real value for me is in paying for bookkeeping and advice, but I doubt OPs $1800 includes much of either of those.
    - iancmceachern 4y ago
      There is a reason that many tax prep services and CPAs give free reviews to folks who do their own taxes, because it's common to find meaningful deductions and mistakes that cost real money. As a business owner I feel that its my responsibility to understand the basics of finance, accounting, bookkeeping also. I also know when it's time to ask for help and get advice and checks and balances. It's called due diligence. You are just assuming that you've done it awesome without ever even checking. Maybe once in 10 years get it double checked, you could have been leaving a lot of money on the table and not even known it. You just say your smart, awesome at taxes, but have not proven it to yourself. Companies pay external firms to do audits all the time for exactly this reason. It's a complex subject, the laws change every year, and a good CPA (yes, there are bad ones, but again that's part of the responsibility of running a business is vetting the people you trust) will keep you up to date with those changes and help you minimize your tax burden. Mine also gives me advice, helps me when I have a business or finance question with real experience from his other clients. Who better to learn these things from than a CPA? It's not as if we come out of school just knowing this stuff. It's like a doctor, they know stuff, provide value way beyond just looking up symptoms on webmd.
- Eumenes 4y ago
  Yes, no bookkeeping with the annual $1800 fee. They do however give me quarterly estimates and remind me when to pay them, but that seems like a simple calculation I can do myself moving forward. I have 6+ years of returns they did at this point, so plenty of info to cross reference if I get stuck using turbo tax or similar.
gompertz 4y ago
I also look at it from a liability perspective. I pay a marquee accounting firm such that big government will likely never second guess its accurate & legal. (And if they do I have recourse on the firm.) If you're making 6+ figures, you should be treating your business like a corporation and paying a firm to do your bookkeeping. Especially true if your the only employee because in some countries single-employee corporations can be re-assesed and taxed at a much higher rate.
- mindslight 4y ago
  The idea that you would have recourse against the accounting firm is specious. That's exactly why they have you sign something that says they've only prepared based on what you've told them. From their perspective, everything they've filed is fully congruent with what you've told them - think of them like a more advanced TurboTax. So the only benefit is that you can attribute errors to a misunderstanding, rather than your own singular willfulness. But if your goal isn't to commit tax fraud, then you probably don't need plausible deniability. I just dealt with a tax auditor from my state, over something my CPA judged as a toss-up, and it really wasn't was bad as you'd think. To interact with them, my CPA wanted explicit direction for what to do (handle the initial phone call for me, and fish for details of what they actually want). Next, they referred me to the most knowledgeable attorney at a prestigious regional legal firm: "You likely don't have an argument, be happy if they don't come after more. If you really want I can represent you in tax court for a $10k retainer". I decided to represent myself, typed up a few statements outlining the details and my position, and sent them in. A few weeks later, I had a phone call with the auditor and their manager where they immediately proposed that based on the details I sent they could meet me half way. I verbally agreed, the manager seemed content to have a quick amicable resolution, and a few weeks later I got the formal assessment notice with a bit of interest (no penalties). I considered that a major win given what I was staring down. A++ would get taxed again.
- codegeek 4y ago
  "I have recourse on the firm" Don't know about your firm but for our 7 figure business, I was paying a firm 6k+ just for taxes (no help with anything else, no strategy on tax savings) and they all make you sign a 0 liability thing. Ultimately, it is on YOU if you screw up your taxes and not the tax preparer. Fraud may be an exception but unless you can prove that, IRS will ultimately hold you responsible for mistakes, not the preparing firm. I bet you are signing that fine print somewhere.
Eumenes 4y ago
I wouldn't say its a bargain. I started using this firm in a very high cost of living metro area/city, and have since moved to a very low cost of living rural area. The local firms here charge 1/3rd of what I was paying. So I'm paying a premium based on where the firm is located. Its great having a CPA on your side and they are quick to answer questions, but my financial/living situation isn't changing, so at this point I can just cross reference my 6+ years of returns through them and use an online solution for a few hundred dollars. The $1800/year would be hands down my largest expense. They were very useful when I had multiple state returns and some mix of W2 and 1099, but at this point, seems fairly trivial.
codegeek 4y ago
Depends on the revenue that is being generated, the complexity of OP's personal and professional situation combined and what the CPA actually is doing. $1800 by itself is meaningless. It is not always a bargain just like it could be a bargain in many cases. Lot of CPAs just do the taxes and ensure you are doing the right way. They don't really want to/care about giving you advice on how to save more. That doesn't necessarily make them bad CPAs but it also doesn't give them the license to charge crazy numbers. For example, I had a great CPA when I was consulting solo but they wouldn't help me on how to save money pre tax. I figured out on how to do a SOlo 401K which allows almost 44K per year pre tax (this was a few years ago. limit is higher now). Of course, once I told them, they said yea not a bad idea considering my situation. So, it depends.
brudgers 4y ago
Just to add, you want to pay your accountant or bookkeeper enough that they can afford to stay in business and do business the right way.

ryanwaggoner 4y ago

The tax situation described by OP would take more like 2 hours, not 20. The exception would be if bookkeeping is included, but I bet it’s not. And CPAs don’t get all that education and training so they know how to prepare the ultra-complicated tax return of a freelancer with a few 1099s. If you have employees or complicated accounting or whatever, yeah, hire a CPA. But their expertise is overkill here. Source: have done my own semi-complicated taxes (multiple businesses, multiple states, real estate investments, mix of retirement accounts) for 20+ years, never been audited. Had a CPA do them for a few years, it was fine, but nothing I can’t easily do myself.

iancmceachern 4y ago
But what about the opportunity cost? Wouldn't you rather do what your passionate about and good at, not taxes? How do you know you weren't missing out on deductions, leaving money on the table?
- ryanwaggoner 4y ago
  I understand what you’re saying, I wrestled with this myself for years. But in the end, I feel pretty confidant that a CPA isn’t going to find some magical (legal) deduction in OPs situation that TurboTax wouldn’t find. And I consider it my responsibility as a business owner to understand the basics of finances, accounting, bookkeeping, taxes, etc. It’s not that complicated at this level, any software engineer can pretty easily grasp this stuff with a little effort. Also, CPAs are human and make mistakes, something I’ve personally encountered multiple times. So unless you check their work, how do YOU know you aren’t missing out on deductions or overpaying even if you do use a CPA? But then we’re right back to opportunity cost and expertise. I don’t think using a CPA is a horrible idea, but you’re overstating the difficulty and risk of doing it yourself. As I said elsewhere in this thread, the real value for me is in paying for bookkeeping and advice, but I doubt OPs $1800 includes much of either of those.
  - iancmceachern 4y ago
    There is a reason that many tax prep services and CPAs give free reviews to folks who do their own taxes, because it's common to find meaningful deductions and mistakes that cost real money. As a business owner I feel that its my responsibility to understand the basics of finance, accounting, bookkeeping also. I also know when it's time to ask for help and get advice and checks and balances. It's called due diligence. You are just assuming that you've done it awesome without ever even checking. Maybe once in 10 years get it double checked, you could have been leaving a lot of money on the table and not even known it. You just say your smart, awesome at taxes, but have not proven it to yourself. Companies pay external firms to do audits all the time for exactly this reason. It's a complex subject, the laws change every year, and a good CPA (yes, there are bad ones, but again that's part of the responsibility of running a business is vetting the people you trust) will keep you up to date with those changes and help you minimize your tax burden. Mine also gives me advice, helps me when I have a business or finance question with real experience from his other clients. Who better to learn these things from than a CPA? It's not as if we come out of school just knowing this stuff. It's like a doctor, they know stuff, provide value way beyond just looking up symptoms on webmd.
Eumenes 4y ago
Yes, no bookkeeping with the annual $1800 fee. They do however give me quarterly estimates and remind me when to pay them, but that seems like a simple calculation I can do myself moving forward. I have 6+ years of returns they did at this point, so plenty of info to cross reference if I get stuck using turbo tax or similar.

gompertz 4y ago

I also look at it from a liability perspective. I pay a marquee accounting firm such that big government will likely never second guess its accurate & legal. (And if they do I have recourse on the firm.) If you're making 6+ figures, you should be treating your business like a corporation and paying a firm to do your bookkeeping. Especially true if your the only employee because in some countries single-employee corporations can be re-assesed and taxed at a much higher rate.

mindslight 4y ago
The idea that you would have recourse against the accounting firm is specious. That's exactly why they have you sign something that says they've only prepared based on what you've told them. From their perspective, everything they've filed is fully congruent with what you've told them - think of them like a more advanced TurboTax. So the only benefit is that you can attribute errors to a misunderstanding, rather than your own singular willfulness. But if your goal isn't to commit tax fraud, then you probably don't need plausible deniability. I just dealt with a tax auditor from my state, over something my CPA judged as a toss-up, and it really wasn't was bad as you'd think. To interact with them, my CPA wanted explicit direction for what to do (handle the initial phone call for me, and fish for details of what they actually want). Next, they referred me to the most knowledgeable attorney at a prestigious regional legal firm: "You likely don't have an argument, be happy if they don't come after more. If you really want I can represent you in tax court for a $10k retainer". I decided to represent myself, typed up a few statements outlining the details and my position, and sent them in. A few weeks later, I had a phone call with the auditor and their manager where they immediately proposed that based on the details I sent they could meet me half way. I verbally agreed, the manager seemed content to have a quick amicable resolution, and a few weeks later I got the formal assessment notice with a bit of interest (no penalties). I considered that a major win given what I was staring down. A++ would get taxed again.
codegeek 4y ago
"I have recourse on the firm" Don't know about your firm but for our 7 figure business, I was paying a firm 6k+ just for taxes (no help with anything else, no strategy on tax savings) and they all make you sign a 0 liability thing. Ultimately, it is on YOU if you screw up your taxes and not the tax preparer. Fraud may be an exception but unless you can prove that, IRS will ultimately hold you responsible for mistakes, not the preparing firm. I bet you are signing that fine print somewhere.

Eumenes 4y ago

I wouldn't say its a bargain. I started using this firm in a very high cost of living metro area/city, and have since moved to a very low cost of living rural area. The local firms here charge 1/3rd of what I was paying. So I'm paying a premium based on where the firm is located. Its great having a CPA on your side and they are quick to answer questions, but my financial/living situation isn't changing, so at this point I can just cross reference my 6+ years of returns through them and use an online solution for a few hundred dollars. The $1800/year would be hands down my largest expense. They were very useful when I had multiple state returns and some mix of W2 and 1099, but at this point, seems fairly trivial.

codegeek 4y ago

Depends on the revenue that is being generated, the complexity of OP's personal and professional situation combined and what the CPA actually is doing. $1800 by itself is meaningless. It is not always a bargain just like it could be a bargain in many cases. Lot of CPAs just do the taxes and ensure you are doing the right way. They don't really want to/care about giving you advice on how to save more. That doesn't necessarily make them bad CPAs but it also doesn't give them the license to charge crazy numbers. For example, I had a great CPA when I was consulting solo but they wouldn't help me on how to save money pre tax. I figured out on how to do a SOlo 401K which allows almost 44K per year pre tax (this was a few years ago. limit is higher now). Of course, once I told them, they said yea not a bad idea considering my situation. So, it depends.

brudgers 4y ago

Just to add, you want to pay your accountant or bookkeeper enough that they can afford to stay in business and do business the right way.