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Turbo Tax vs. CPA

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Hi Folks.. Newbie by Fire here again...

 

Which method works for you and why?

 

I worked with an accountant, prior to starting my business, but I had earned enough doing odd jobs that I had to report and pay taxes on my self employment. I did not like the way he handled it, lack of communication, perhaps he just wasn't knowledgable about self employment taxes.

 

Then I tried Turbo Tax, and did something wrong and ended up owing Uncle Sam in the following year as it all caught up to me.

 

Currently, I have items I'm looking to write off as deductions while filing this April, and I'd love YOUR FEEDBACK.

 

I'm moving the family room office to a designated home office [thank u hubby!] with 4 walls, and its all for me! At this point, I need some small office equipment and computer software specifically a shredder, new desk, or add' storage solutions ie filing cabinet, Quicken Books].

 

Also needed are a 2nd [cell] phone line, web design, association memberships, etc, and my plan is to find what I can write off prior to purchase.

 

Currently I have pending projects due for 2 clients, and a long term contract with a client who just asked me for an invoice. I just read that I could save all my parking receipts in order to write them off as a travel expense, so the more I read, the more I realize I DON'T KNOW.

 

So I am a SELF EMPLOYED contractor who takes on short term projects to establish a stream of income. I need every write off possible, but yet I'm hesitant to trust a CPA to find some buried write offs, vs Turbo Tax asking me a bunch of questions.

 

Your thoughts? Cmon chime in.. you know you want to!

 

Thanks in advance!

 

This aspect of the biz is terrifying to me because I don't want to mess with Uncle Sam's money, and I certainly don't want Uncle Sam messing with mine!

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For me personally, I am using Quickbooks Premier (geared toward businesses, Quicken to me is just for personal finances). While in the past, I have used Turbo Tax for my personal taxes. Nothing complicated and I was not taking advantage of all the tax breaks for businesses (my choice).

 

Since I started my VA business, I have interviewed accountants and researched their companies on the internet. I will be hiring a CPA to prepare my company's tax return. With all the tax changes I will make sure that my accountant has the credentials to prepare business tax returns. Note: Just as with any other business there are good and bad accountants/CPAs.

 

If you go to the IRS website, you will find lots of information available for new businesses, including what types of deductions businesses can take.

 

I hope this helps you.

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First off, there are TONS of lists out on the Web of business deductions for self-employed, home-based sole proprietors, including one that I wrote as a guest blog for the Work At Home Woman site: http://www.theworkathomewoman.com/things-that-home-based-mompreneurs-can-write-off/

 

These lists should give you a good starting point for knowing what you can write off as a business expense and what you can't.

 

If this is your first year of filing a Schedule C for your VA business, I highly recommend that you work with a local, reputable tax professional. They can advise you more specifically about what's deductible and what's not and teach you what receipts to save, help you set up a schedule for estimated tax payments, etc... The cost of hiring a competent professional is far less than the cost of straightening things out with Uncle Sam if you make a mistake. Also, you should realize that there are many different levels of tax professionals, with the CPA being at the most-expensive end. You can search for a local tax professional at NATPtax.org or NAEA.org and find a lower-priced preparer who has worked with small business people like you.

 

I'm probably biased, as I'm a professional tax preparer myself. But I can tell dozens of horror stories of clients who have Turbo-tax-ed their way into big debts with the IRS, messed up returns, and hundreds of lost hours on the phone with the IRS trying to correct their accounts. I just keep shaking my head, since they would have saved so much time and money if they had just come to me (or any other competent preparer) first!!

 

Good luck,

Deb

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Thanks so much ladies.

 

Linda --- I'm usually a paper and pen gal when it comes to our personal finances, but I know QuickBooks Pro will be an added benefit to begin using all around. I looked at Quicken, and there's just not enough for the business aspect, and I see myself eventually needing a few of its added bells/whistles, so why not bite the bullet and write it off next year!

 

Deb -- I whole heartedly agree, I feel so foolish for 'Scrooging' myself and my taxes using Turbo Tax. Now I'm look for a preparer who has worked with at home entrepreneurs before. I need my ship tight because Uncle Sam has not been playing nice! So I'll definitely check the websites out, thanks again..HUGE HELP!

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My tax guy usually finds stuff that even I miss every year (last year was the sales tax on my husband's car - duh!) so he more than pays for his own fees and my peace of mind. And if, god forbid, I'm ever audited, he'll be there. I've been with him for 10+ years. Wouldn't do it any other way.

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I used to be a die hard do-it-yourselfer, and after starting my own business, had resigned myself to the fact that I was going to owe taxes on my returns each year for the rest of my life. My husband and I own three businesses together, and sorting out all of those tax issues started getting a little crazy, so two years ago I hired a CPA I know and trust, and have actually gotten pretty nice refunds both years (and no, it wasn't because I was paying more in estimated taxes each year). She is well worth the money we pay her, I love the confidence of knowing my returns are done correctly, and as Candy says, if anything does ever come up, it's very comforting to know I have a knowledgeable, skilled ally on my side to help me through it.

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Agree, agree, agree! I've worked as a tax preparer (though I'm not currently practicing and don't plan to this tax season), and I keep up on my continuing ed, and I've always done my personal taxes myself, but for my business, I'm handing it over. I'm too close and another set of knowledgeable eyes is well worth it, IMHO.

 

Also, make SURE you check out whatever accountant/CPA/tax pro you decide to go with - I've seen nightmare returns that were messed up by CPAs that could have been done correctly by a first or second year seasonal tax pro. There is just so much to the tax law, and just because someone is a CPA does NOT mean they're knowledgeable or current on the tax law. (By all rights, I've seen nightmare returns done by first and second year tax pros as well - but they should have known better than to even do those returns). Just make sure whoever you choose is knowledgeable and CURRENT on tax law, AND that they actually do their own returns or have back office staff that is just as knowledgeable - you'd be amazed how many CPAs don't actually do the returns, only sign them.

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Honestly, I think a CPA is better than tax software. My CPA is self-employed herself and from what I understand, unless you know what you are doing, it's real easy to make mistakes that could end up costing you a lot more in the long run. Donna, my CPA, told me with the so many changes in the tax laws every year, the tax software doesn't necessary cover all the information or even last minute changes, where as a CPA would know more including the last minute changes. Since my CPA is family and is self-employed, she has helped me with several questions to starting up my own business.

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Yep I agree with Karen, send it all to an Accountant and let them do it for you. They are uptodate on tax laws and get you the best bang for your buck. I stopped doing my own taxes years ago.

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