Why You Should Hire a CPA

Inuit and Bench provide low-cost bookkeeping and tax products but CPAs provide greater value in a commoditized environment.

What you Need to Know about Tax Preparation and Bookkeeping Software as a Service

I want to start off by saying that I think the offerings from Intuit, specifically TurboTax and QuickBooks Online, and Bench Accounting are great. They provide low-cost bookkeeping and tax services that help keep customers compliant. However, these services have limitations beyond the scope of filing your tax return and tidying up your books for the month. Just like any automated service, they cannot deliver the type of personalized advisory of a professional when your financial picture grows more complex. These services are, by nature, transactional, just like going to your local coffee shop, you pay the barista to prepare your coffee and that's that. The more complex your financial picture becomes, the more important advisory services like tax planning become. In short. hiring a CPA can save you more money, long-term, than an automated service can.

The Value of a CPA

Say you take a job out of college for a company in your early to mid-twenties while renting an apartment near the office. Your tax situation is likely pretty straightforward with you just having a W-2 to report on your tax return. You likely are not going to have enough deductions to itemize and so you just take a standard deduction. In this scenario it makes sense for you to use a tax preparation software and call it a year. But what happens 20 years later when you have a sizable 401K, stock options, you own a home and some rentals, and even started a side business? TurboTax is not going to advise you on the timing of drawing down your 401K and stock options, or how to optimize your passive income through tax deductions. This is when you would want to hire a CPA to advise you in mitigating your tax liability and plan for the future.

What about Small Business Owners? QuickBooks Live Bookkeeping and Bench Accounting offer monthly bookkeeping services with the promise of delivering tax compliant financials. While a nice option for small business owners, the services are limited and impersonal. They assume that you are showing up with clean financials, which for non-accountants, is a tall order and almost never the case. Furthermore, your account is thrown into a pool of other customers, and a lack of on-going support, it can be difficult to access customer service if you have a question about your books. Once your financials are delivered, no insight is given to how your business is actually performing, leaving you to interpret the data yourself. While you may know your business better than anyone, having a CPA's set of eyes reviewing your data can prove valuable. They can track a variety of metrics to provide valuable insight on the financial health of your business. Bonus points if they know your industry and can help scale your business as you grow.

When Should You Hire a CPA

If you've already mastered the tax code and can identify tax planning opportunities all on your own, then you probably don't need a professional. However, if you value spending your free time doing things other than reading the Internal Revenue Code,. then it's probably a good idea to hire a CPA. If you have a small business this is especially important as you'll probably have to juggle running day-to-day operations with managing the financial side of your business.

Life Events that Trigger Tax Planning Opportunities

Below are some examples of life events that allow for tax planning opportunities

• Starting a business

• Purchasing rental properties

• Buying in to a business

• You've been awarded incentive, restricted, or employee stock options

• You're preparing for retirement

• You have required minimum distributions from IRAs

These are just some examples that illustrate how careful and proactive planning can go well beyond the capabilities of filing your tax return with TurboTax.

Final Thoughts

When hiring a professional it is more important to make sure that they have your whole financial picture in mind. This is why at AVL, we like to have all of your individual tax and small business needs under one roof. If you're interested in our services, feel free to book a free consultation with me on our website, or contact me directly at alupoli@avlcpafirm.com!