Tax vent/questions

[budgetnoob]

I have a good friend an co-worker who is convinced online tax programs are a poor alternative to a CPA for filing. I just wanted to lay a few thoughts out because I don't want to insult him by telling him he's wrong (although I want to say it just like that and leave it, haha!). But there's also a chance I'm missing something. The reason he thinks this is that last year he filled out TurboTax and ended up owing $2K+ to the IRS. He took his finances to a CPA and ended up with about $80 in a return, so he was very ecstatic. I can't very clearly tell him that our financial situations are different, and for me it makes much more sense to just fill everything out online. I can do it in less than an hour these days. He has a large amount of student debt and pays for a lot more things (car payments, higher internet and CP bill, new computer, sound system, etc). I don't really have anything anything to deduct when I look at it.

Where I'm a little thrown off is that he can manage to get much higher than the standard deduction when we have similar filing statuses. It seems that his CPA is doing things I wasn't aware was legal. He is writing off CP bill as a work expense because he checks his e-mail on it, and says you can deduct all expenses on a trip if you hand out a business card because now it's a work related trip. While I do not support the chaos that is the IRS, I don't feel like I would sacrifice my integrity by claiming what I feel to be nonsense. Now there is one caveat and I am curious about it; we have both worked as consultants in the past and he did last tax season (2012), but I did not. So I'm partially assuming that he has more freedom to deduct "work" expenses if he is considered self employed (rather than our both current salary position). Because he did not do any consulting this year, may he have a harder time doing this?

Does anyone else deduct things like CP bills and travel expenses like this? As a single person renting with no debts and a salary job, I just don't have a lot to deduct as far as I can tell, and so using something like TurboTax makes sense to me. I don't really feel like arguing with him because it brings up more sensitive subjects, like me telling him he's in a lot of debt and is using shady deduction methods, but I do want to make sure I'm not missing something before I ignore the subject.

[GrimJack]

If he was self-employed last year, and is not this year and you were not last year - there is no point in making comparison. Your situation sounds too simple to need a CPA but find out what the cost of a CPA is vs what you pay. Check out the IRS website

[disneysteve]

There are deductions that you can take when you are self-employed that you couldn't otherwise claim if you were an employee. Sometimes there can be some creative accounting there but it's all legal.

For example, I do a lot of online medical surveys. That is considered self-employment income. Because the work is all done online, I'm able to deduct a portion of my internet access charges. Could I do that with Turbo Tax? Probably, but it's much easier to have my CPA walk me through it all and he thinks of things that I probably wouldn't.

[snafu]

http://www.moneytalksnews.com/2014/01/29/tax-hacks-2014-paying-a-pro-to-do-your-taxes-read-this-first/

An article that outlines ideas to help individuals decide whether to hire a pro.

[scfr]

Are you sure that your colleague is using a CPA, and not just a tax preparer? There have been some scandals involving tax preparers who have falsely helped clients get larger refunds than they were due. I remember reading about some pretty large tax fraud cases in New York. I prepare my own taxes using Turbo Tax even though my tax return is moderately complex. However, I do take the time to read about taxes on the IRS web site, not just blindly rely on what Turbo Tax tells me, and in the past completed a tax preparation course at a large tax-preparing firm (and was even offered a job by them) just to educate myself. One time I paid a CPA a consulting fee on a specific tax question that I felt was over my head, and the fee was well worth it. If I ever were to have my return prepared by a professional instead of doing it myself, I would hire a CPA. I believe they are much more knowledgeable and in general hold to a higher ethical standard.

I would never use a tax preparer who I suspected in any way of doing anything improper.

In the case of a fairly simple tax return, I see no problem doing it yourself either with paper & pencil or using tax software.

[budgetnoob]

scfr- That's interesting. I was wondering how often scandals like that happen on a small level.

I know there will be a point in my finances where a CPA or tax preparer may be necessary. I also know that my taxes are incredibly simple right now and was taken aback when this particular friend is convinced that I need to take it to a pro. I'm thinking - "what will a pro do that I can't with my situation?"

If I start a business, own rental properties, work overseas, etc. then it would make sense. I am honestly worried that he's in for a big surprise this year if his pro is not playing with a trick deck, because he hasn't done any consulting work and I wouldn't think he would qualify for any self-employment deductions. Or down the road he may get audited and be in for a nasty surprise. Either way would suck, but he had such a good time last year doing thins like deducting part of rent counting it as a home office that he's hard to convince otherwise.

[moneybags]

I know there will be a point in my finances where a CPA or tax preparer may be necessary. I also know that my taxes are incredibly simple right now and was taken aback when this particular friend is convinced that I need to take it to a pro. I'm thinking - "what will a pro do that I can't with my situation?"

I prepared taxes for 10 years. I had several clients that I thought should do their own taxes. Typically, well educated individuals with very simple returns. Of course, it was not my company, so I didn't advise them to do their own taxes .

[feh]

I've never used a CPA or tax preparer, primarily because I've never been self-employed.

As far as doing things like deducting a trip because a business card was handed out...your friend better hope he doesn't get audited.