Denver Accounting and Tax Resources

Using Tax Software vs. a Professional Accountant

By Richard M. Rothman, E.A.

Many computer software companies have been developing packages that will prepare your tax return for you. Supposedly all you have to do is input your information and the program spits out a perfectly prepared tax return. With these programs who needs an accountant? This sounds great! Well, not exactly…

A computer is a tool that professional tax preparers use to help them prepare your tax return. Only after several years of education and experience is an accountant ready to accurately prepare your taxes. Using the software without background knowledge is extremely dangerous.

I have reviewed many tax returns prepared by non-accountant individuals using tax software. All have been amended or corrected. Most people see these programs as a way to save money. Yet in the long run you actually lose money. Often an accountant would find deductions and credits that an individual would miss. An incorrectly filed tax return will come back with negligence penalties and interest for each day your taxes are delinquent. This is true, even if you intended to file correctly! An incorrectly filed tax return triggers the IRS to look into past and future years for other errors you may have made. This often leads to greater costs, problems and headaches.

Tax laws change every year. Only someone who is trained and up to date on the current laws can prepare an accurate tax return. It's not as easy as filling in the blanks on a computer screen. Every year I get a tax manual that explains current and future IRS laws and changes to them. The 2004 version is about twice the size of the 2002 version. This is what the IRS called "a simplification". Only if you are willing to first research and then understand all the current, past and future laws, should you try to prepare your taxes on a "user friendly" tax program.

Even if you know and understand all the laws that apply to your taxes, chances are, you are still missing valuable deductions and or tax credits. A professional who deals with taxes all year round will best be able to find ways to creatively and legally lower your tax bill.

Good accountants will stand by their work and resolve any problems the IRS has with a return that they prepared. I don't know of a software company will guarantee the tax return it creates.

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