re: Taxes: Hire a CPA or Do It Yourself

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But, this is a passive responsive. Do what's best for you. And, I do not know what that is. Good luck!

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Actually, you know exactly what to do. You have to decide which approach best satisfies your wishes. If you have the patience and determination to prepare your own tax return, then it is the best approach provided you do not have some really complicated issues. If you value your spare time and think the cost of a professional is justified, then it is the correct approach.

The software available to the public will prepare complete and accurate returns for just about any taxpayer. However, the "yes" or "no" answers are fine for establishing facts, but they do not take into account circumstances. And tax issues are resolved based on facts and circumstances.

Most CPA's bill at hourly rates, and their fees will be dependent on the time it takes to prepare the return. The time will usually be broken into professional time and administrative time billed at separate rates. Depending on the size of the CPA firm you use the persons involved in the preparation of a return, and their billing rates, will vary.

Let's break return preparation into a series of steps. The first step is meeting with the client and reviewing their tax situation. How have they reported things in prior years? What significant and/or unusual events may have occured during the tax year? Any expected significant events in the next year? It is during this step that the CPA and client discuss risk factors, i.e. does the client want to take aggressive tax positions that may invite examination. The time for this will vary based on the types of economic activities the client has. With some clients it is unnecessary to meet with them as they will fill out a tax organizer providing the required information.

The next step is review and analysis of the information a client provides. For most simple returns this can be accomplished during the meeting with the client. Some documents, like 1099's, require little review and zero analysis. Others, like the shoebox full of receipts, take time to review and determine how they will be reported. It is during this step that the CPA will determine if there is information necessary to complete the returns that is missing, and it will prolong completion of the returns.

Once all the information is organized for data entry purposes it can be input into the tax preparation software. The time it takes to enter the data is dependent on the volume of information a client has. The first year of preparing a return for a client typically has the most data entry time since you have to input all of the background information regarding names, addresses, SSN's, employers, financial institutions, investments, business activities, etc. The software will carryover all information regarding names, addresses, financial institutions, business activities, assets being depreciated, etc. in subsequent years. So most of the data after the first year is just numeric information, and the process is usually pretty quick.

The next step is is to review the returns. The review consists of checks for clerical accuracy as well as for reasonableness. Clerical accuracy is checking for errors in data entry. Reasonableness is the CPA using professional judgement to determine that all issues have been reported in a manner that fit the client's risk tolerance and whether they can withstand scrutiny by the IRS and/or state.

If corrections are needed then the data entry process and the return review have to be repeated.

To physically produce even the simplest of returns and set up the client files will take the CPA about an hour of administrative time (usually billed at lower rates) in order to comply with the IRS rules regarding retention of information, and performing the administrative tasks associated with producing the client copies of returns and filing them electronically.

Simple returns should take less than three hours of professional time with an additional hour of administrative time. I consider a simple return to be one with slaries and wages as the main source of income. Other sources of income would be limited to interest, dividends and maybe a few sales of stocks. A simple return will have itemized deductions for homeownership, charitable contributions, taxes paid and possibly unreimbursed employee business expenses. A simple return may have child credits and child care credits.

At my billing rates as a sole practitioner it would cost at least $250 to have an individual's returns prepared, and there is no reasonable upper limit. I don't prepare Form 1040EZ's as I can't justify my costs, and I do not want someone incapable of preparing a 1040EZ as a client. At larger CPA firms, with multiple professionals, the professional time would be billed based on the experience level of the persons performing the tasks. So the costs would depend on how well the firm could leverage the work to the lowest cost professionals.

Thanks!

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Tax on NEW Car Purchase

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You can possibly deduct costs of internet service as a job search cost if you did any on-line correspondence with potential employers. Job search costs also include any travel you did to meet with prospective employers.

Why are you renting in Bama? Go buy something if you qualify for the home buyer's credit.

As for the educational expenses, you may need to discuss those with the CPA. If you became qualified for a new profession, then the expenses may not be deductible.