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Tax preparation

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  • Avatar Kamban 
    Participant
    Status: Physician
    Posts: 2569
    Joined: 08/01/2016
    I have been doing my taxes for years with Turbotax. Initially it was very simple since we had only our W2 income to report and didn’t need to itemize. It got more complex after residency when I started itemizing and doing backdoor Roth’s. The last 2 years it’s become much more complex since I have multiple streams of income, including an airbnb room my wife manages. I’ve almost contemplated getting someone to do our taxes, but so far TurboTax has been working well enough that I still feel comfortable that I’m doing it right.

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    I was in a similar state for the first 7 years of my attending life though Tax software were either not there or were rudimentary at that time. I did the tax return by hand, using  a pencil and getting the forms from our local library. Every other year I would use a CPA for low cost preparation.

    As the complexity increased I did the tax return one year (maybe a couple?) using TurboTax. And then it became even more complex and I was spending hours on it. I calculated the time I was spending on it, and it was worth the money charged by the CPA to do it for me. I also justified it by telling myself that I am DIYing my investing and could afford the CPA since I was not paying AUM fees on investments.

    #190706 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 519
    Joined: 06/12/2017

    The true value of having a CPA do your taxes isn’t in the preparation of your tax forms, it’s the formulation of your tax-reduction strategy.

    Tax-preparation is rear-view mirror stuff, tax-reduction strategic planning is looking through the windshield at the road ahead.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #190709 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3293
    Joined: 09/18/2018

    @Kambam,
    “I also justified it by telling myself that I am ……”

    Does your daughter and wife ever tell you that you always can justify everything? Mine tell me that a ton.
    Just saying.

    #190742 Reply
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1498
    Joined: 12/07/2016

    @Kambam,
    “I also justified it by telling myself that I am ……”

    Does your daughter and wife ever tell you that you always can justify everything? Mine tell me that a ton.
    Just saying.

    Click to expand…

    Yeah, I justified 2 weeks in Hawaii (just got back) by simply stating “because I want to.”

    #190766 Reply
    Liked by CordMcNally, Tim, Peds
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 3012
    Joined: 01/03/2017
    Yeah, I justified 2 weeks in Hawaii (just got back) by simply stating “because I want to.”

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    You don’t even need a reason to justify that!

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #190774 Reply
    Avatar mapplebum 
    Participant
    Status: Spouse
    Posts: 328
    Joined: 04/17/2018

    Started working on mine. Last year was end of training for him so I was curious. Jeepers. His info alone we had about a $4k refund but between my self employed income and two W2’s, looks like I’m paying all of my taxes on the back end. I never noticed how little was taken out of my actual paychecks. Add in the backdoor Roths and we’re ballpark owing feds $4k and state $2k. So much for buying a new bed. I do all the deductions for self employed (office, depreciation, miles, meals, etc) but have never been confident I’m claiming everything correctly. Tempted to hire someone for this year simply to compare results. $6k hurts my precious little soul.

     

    Edit: refund not return. long freaking day.

    #190775 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 2121
    Joined: 02/11/2019

    The true value of having a CPA do your taxes isn’t in the preparation of your tax forms, it’s the formulation of your tax-reduction strategy.

    Tax-preparation is rear-view mirror stuff, tax-reduction strategic planning is looking through the windshield at the road ahead.

    Click to expand…

    I would have stuck with a CPA if I was getting good advice but the one I usedlast year told me not to waste time with 529 accounts because they have little value and wanted me to look into roth contributions in my 403B.  I did not know about back door roths at the time but I am sure she doesn’t either.  Anyways remembering that confirms that I am probably my best advocate and I am glad I just used TT this year.

    “Never let your sense of morals prevent you from doing what is right.”

    #190780 Reply
    Liked by Tim
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8325
    Joined: 01/09/2016
    I would have stuck with a CPA if I was getting good advice but the one I usedlast year told me not to waste time with 529 accounts because they have little value and wanted me to look into roth contributions in my 403B.  I did not know about back door roths at the time but I am sure she doesn’t either.  Anyways remembering that confirms that I am probably my best advocate and I am glad I just used TT this year.

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    Just as with physicians, CPAs are not fungible and it can be extremely difficult to find one with the expertise you need.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #190782 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 519
    Joined: 06/12/2017
    I would have stuck with a CPA if I was getting good advice but the one I usedlast year told me not to waste time with 529 accounts because they have little value and wanted me to look into roth contributions in my 403B.  I did not know about back door roths at the time but I am sure she doesn’t either.  Anyways remembering that confirms that I am probably my best advocate and I am glad I just used TT this year.

    Click to expand…

    Sounds like your CPA was really just a tax-preparer and was clueless about strategic tax planning in general and serving the physician market in particular. Sorry, you had such a bad experience. But, trust me there are great CPAs out there that are worth every penny. Matter of fact, a few of them routinely answer questions here in the WCI forums.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #190783 Reply
    Avatar Larry Ragman 
    Participant
    Status: Other Professional
    Posts: 634
    Joined: 08/30/2018

    I have been doing my taxes for years with Turbotax.  Initially it was very simple since we had only our W2 income to report and didn’t need to itemize.  It got more complex after residency when I started itemizing and doing backdoor Roth’s.  The last 2 years it’s become much more complex since I have multiple streams of income, including an airbnb room my wife manages.  I’ve almost contemplated getting someone to do our taxes, but so far TurboTax has been working well enough that I still feel comfortable that I’m doing it right.

    Click to expand…

    The one issue with your situation is that it is easy to overlook tax opportunities as the return gets more complex. TT will keep working if you do it the same way, but that does not mean you are taking full advantage. It remains on you to stay educated so you can fill the forms in correctly (e.g., safe harbor election for the rental business, home office simplified or traditional, donating noncash items to charity, etc). One way to deal with this by checking in with tax professional every 5 years or so to make sure you are still on track.

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    I don’t disagree with you on that suggestion.  But, I will say that the deluxe versions of turbotax are very thorough.  It really hunts for a lot of various deductions.  All of the things you mention are on there plus a lot more.

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    Yeah, I use TaxAct and I agree the premium versions are thorough. But I still find times that I have to know the answer to figure out how to enter the data. Now I’m curious: what depreciation recovery period does TT use for your Airbnb room? I ask because I have been told the correct answer is 39 years (short term rentals by rule are commercial) not 27.5 for residential.

    #191059 Reply
    Avatar MVrays08 
    Participant
    Status: Physician
    Posts: 19
    Joined: 02/13/2019

    How easy is it to do taxes yourself? I have W2 and 1099 income, family of 4. Never done it before but would love to save the few hundred bucks and learn more about taxes…

    #191664 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8325
    Joined: 01/09/2016

    How easy is it to do taxes yourself? I have W2 and 1099 income, family of 4. Never done it before but would love to save the few hundred bucks and learn more about taxes…

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    Try it and see. You can ask questions here.

    I would caution you that 1099 income definitely introduces complexity. If you have a minimal amount and few or no related deductions, shouldn’t be difficult. If 1099 income is a significant part of your pay, then I wouldn’t recommend the DIY approach, especially now that we have the Section 199A deduction component. There are just too many deductions you can miss and tax planning and intra-year projections are very important when dealing with this area. You can save a few hundred on prep only to pay a few thousand extra in taxes.

    Of course, I am answering only generically, with no specific knowledge of your situation except for the limited details provided.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #191667 Reply
    Avatar FIREshrink 
    Participant
    Status: Physician
    Posts: 1027
    Joined: 01/11/2017

    What are folks paying for good CPA services? I know it will vary with return complexity. I think for a few hundred I’d consider it but I got two quotes recently for a return with no small business and no 1099 income and was quoted$1000-$1500. That’s a big step up from the$18 TaxAct wants, so I didn’t pull the trigger this year.

    What kind of tax mitigation strategies are there for someone with only W2 job income and who doesn’t own a small business? Assuming all retirement accounts are maxed out, what else is even on the table? The one area I am not confident is being done optimally or even correctly is my rental property.

    #191683 Reply
    Lithium Lithium 
    Participant
    Status: Physician
    Posts: 1218
    Joined: 02/15/2016

    What kind of tax mitigation strategies are there for someone with only W2 job income and who doesn’t own a small business? Assuming all retirement accounts are maxed out, what else is even on the table? The one area I am not confident is being done optimally or even correctly is my rental property.

    Click to expand…

    Tax loss harvesting is about the only thing that comes to mind, but it is small potatoes.

    #191685 Reply
    Avatar StarTrekDoc 
    Participant
    Status: Physician
    Posts: 2125
    Joined: 01/15/2017

    Tt user since ty1996. Gone from simple w2 to business tt, w2, k1s real estate and two audits with no findings, still going.

    Did my in-laws in 20minutes and filed. $1300 coming back via dd.

    Tt handles pensions, conversions, ss, tlh, energy deductions, all fine. It’s linked to it’s deductible for deductions of noncash items to Port in easily too.

    I usually do the enter self then go through the direct interview as a challenge to myself on tax prep. Tt does a very thorough job imho.

    For those doubting the dive, suggest that you run side by side with your cpa docs this year to see….just a way to double check your cpa.

    Alas, a cpa is a tax prep persons…not your fa. A fa and their team should be the wise people talking about strategic and operational efficiencies. Penny saved/deducted is a penny towards retirement and beyond

    #191688 Reply

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