TurboTax vs. CPA: What’s Right for Your Taxes?

Filing your own taxes can save money, but a complicated return can quickly turn tax software into a frustrating exercise. TurboTax may be enough for taxpayers with relatively straightforward income and investments, while a CPA can offer more personalized help with complex deductions, business income, major investment activity or tax planning. Comparing the cost, convenience and level of expertise each option provides can help you decide which approach makes the most sense for your return.

If you need help tax planning or making the right financial decisions then you may want to speak with a financial advisor. 

Why Investors Use TurboTax

Investors often use TurboTax because it can simplify tax reporting for stocks, mutual funds, bonds, cryptocurrency and other investments without requiring them to hire a tax professional for every return. TurboTax Premium is designed for taxpayers with investment income and can calculate capital gains and losses while guiding users through the forms required to report investment sales.

One of the biggest advantages is the ability to import investment information directly from hundreds of participating financial institutions. This can reduce the amount of transaction data investors need to enter manually, which may be particularly useful for taxpayers who made numerous trades during the year. TurboTax says its Premium product can handle more than 10,000 stock transactions and 20,000 cryptocurrency transactions.

TurboTax can also help investors work through tax issues that go beyond a straightforward stock sale. Its investment-focused software supports reporting for mutual funds, bonds, employee stock purchase plans and cryptocurrency, as well as rental property income and depreciation. Investors can also choose versions that provide access to tax professionals while still completing much of the return themselves.

The tradeoff is that more complicated investment returns generally require a paid TurboTax product. TurboTax’s Free Edition does not cover stock or cryptocurrency sales, for example, so investors who sold securities during the year would typically need to upgrade. For investors with relatively organized records and familiar transactions, however, tax software may provide a convenient middle ground between preparing a return entirely on their own and paying a CPA to handle the process from start to finish..

Why Investors Use a CPA to File Taxes

While tax prep software makes it easy to file tax returns, many investors don’t have the time, energy or desire to do their taxes. For some investors, their tax returns are challenging due to the complexity of their finances. Between household income, business ventures and trust strategies, their taxes often need the expertise of a certified public accountant (CPA) to maximize their tax deductions.

Using a CPA to file taxes is a wise choice for investors who are willing and able to pay for their advice. In many cases, CPA strategies can save more in taxes than the fees that they charge. CPAs have intimate knowledge of the tax code, understand confusing tax language and can easily fill out forms that take others hours to complete.

Before deciding which one is right for you, consider working with a financial advisor who has tax experience.

Which Is Right for Your Taxes?

When deciding between TurboTax vs. CPA, there isn’t a single “right” answer. According to the IRS, about 80 million e-filed tax returns were prepared by a CPA versus 72 million that were self-prepared. The choice should be based on your budget, comfort in preparing tax forms and how much time you have available. Some investors have the ability and knowledge to create their own tax returns, but their time is better spent creating more income.

For people with simple tax returns or more time than money, it makes sense to use TurboTax or some other tax preparation software to file their taxes. And some DIY investors may enjoy preparing their own returns over working with a CPA.

Investors with complicated tax returns generally are better off working with a CPA to file their taxes. And those with simple tax returns may prefer the comfort of working with a CPA preparing their taxes themself. When you work with a CPA, their knowledge and expertise can provide valuable guidance during tax season and throughout the year. This gives investors a chance to make adjustments during the year to lower taxes versus waiting until the year is over when options are limited.

Bottom Line

Tax returns are typically due April 15th every year. The choice between TurboTax vs. a CPA when preparing your returns is often based on time, money and financial complexity. Both are good options, but most investors favor one or the other based on their personal needs and comfort level. For many, hiring a CPA is a wise choice to ensure that you take advantage of every tax deduction that you’re eligible for. If you fall into that category then you may want to consult with a financial advisor to help you make the right tax choices.

Tips for Tax Planning

• Making a tax plan for your entire financial picture can be complicated and, at times, frustrating. It’s important to involve a financial advisor who can help take care of the details for your whole financial picture. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Estimating your income and taxes impacts many of your financial decisions. These include how much to save, invest and contribute to retirement plans. Our income tax calculator forecasts your tax burden based on your answers to simple questions. You can use these variables to guide your decisions on steps to take to reduce your taxes owed.©iStock.com/fizkes, ©iStock.com/Vladimir Vladimirov, ©iStock.com/fizkes