If you’re starting a small business, it might be the right time to switch from TurboTax to a CPA for your tax return. Many business owners have reservations about switching over — this FAQ addresses some of the pros and cons.
TurboTax is a great tax filing option if you’re solely a W-2 employee and not a business owner or self-employed. It’s quick, easy and convenient — and you don’t need to be a tax expert to use it.
When you become a small business owner, however, it is often best to switch from TurboTax to a CPA for your tax return. Both will get the job done, but a CPA is better equipped to handle more complicated tax situations.
Making the switch can make small business owners nervous, especially if you’re used to TurboTax. This FAQ highlights some of the biggest differences between using the two — and can help you decide when to keep using TurboTax or hire a CPA.
Using TurboTax vs. hiring a CPA: pros and cons
The quickest way to compare using a CPA and TurboTax is to review their pros and cons.
The most glaring difference is that CPAs are best suited for business owners, who typically have complex tax returns. On the other hand, TurboTax is best suited for people who have never done their taxes before or have simple tax situations.
CPA |
TurboTax |
|
Pros |
Maximizes your savings Offers personalized tax strategies Gets to know you, your business and financial situation more thoroughly |
Easy to use for simple tax returns Gets your tax return done quickly Cost-efficient |
Cons |
Costs more than TurboTax Less convenient than filing on your own May take longer to get your tax return filed |
Relies heavily on the information you provide Doesn't automatically take deductions or credits for you No long-term personalized tax advice |
How do I know if I should switch from TurboTax to a CPA?
If you’re an employee who only receives a W-2, stick with TurboTax. If you’re starting a small business, switching to a CPA could help maximize your savings.
Generally, you should switch from TurboTax to a CPA if you’re filing your first tax return as a business owner. Your small business is likely a pass-through entity, which means your business income is taxed as your personal income. So you still have to fill out a Form 1040, but the process might look very different. If your business is taxed as an S corp or partnership, there are additional tax returns you have to file that your CPA can handle for you.
The same applies if you’re self-employed in another sense, like independent contractors. You still have to file a 1040, but also additional forms. You may also be required to pay quarterly estimated taxes, which your CPA can help calculate for you and save you from penalties.
Even if you’re not self-employed or a business owner, there are still complicated tax situations you could be in that make a CPA a good fit for your tax return. Factors like real estate and investments have a big impact on your tax return, so it’s important to get those details right.
Doesn’t TurboTax also let me file with a CPA?
Yes, which may be helpful if you’re not looking for a long-term tax strategy.
TurboTax recently came out with a new feature where they match you with a human — either a CPA or other tax expert — that helps you with your tax return. There are also options where you can complete your tax return using TurboTax software, but have a CPA or expert simply review it before you file. They’ll offer you advice on that particular return and guide you through the process.
Those are both excellent options if you’re looking for a short-term, more affordable solution to your taxes. A CPA should be more of a long-term investment you’re planning to make to help you save in the long run.
Working with a CPA or other tax expert via TurboTax is still a bit different from working with a CPA on your own. According to TurboTax, its option to have an expert handle everything for you consists of you securely uploading your documents and then they take over from there. But they’re likely never to be heard from again.
There’s more collaboration and communication involved when you hire a CPA. More collaboration means more opportunities for them to ask you questions and help you save now and in the future. And with TurboTax, your tax return is only as good as the information you provide the expert — so your information might not be entirely accurate. Your CPA helps make sure every aspect of your information is correct and organized in a way that helps you save.
Why do CPAs cost more than TurboTax?
CPAs typically cost more because they put more time into your return, offer personalized advice and are certified and experienced.
TurboTax’s range is $0 (if you meet certain criteria) to $129, while DiMercurio Advisors, for example, starts at $700 per individual tax return. Both could increase depending on what your tax situation calls for.
The reason CPAs are more expensive is because they’re humans, not software. It takes CPAs time to gather all your information, analyze your circumstances and decide the best way to complete your return. But the biggest benefit of your CPA is they can build a relationship with you and help you make future business and tax decisions.
They also cost more because of their experience, certifications and education. Many tax professionals are required to receive continuing education. Those requirements are in place so that you can trust your professional is staying knowledgeable about the things that got them certified in the first place.
Doesn’t a CPA take longer to finish my tax return than TurboTax?
Yes, it takes CPAs longer than TurboTax to complete tax returns because they spend more time gathering information from you to maximize your savings.
Yes, your tax return will probably take longer with your CPA. At any given time, they’re working on dozens of tax returns for this year and years past.
The sooner your CPA has the information they need from you, the sooner they can file your tax return. They may also take a while longer if you’re in a complex tax situation. They take more time to comb through your expenses and make sure that you’re taking all the deductions and credits you can.
Your CPA will spend more time asking you about things that can bring your tax bill down that TurboTax might not, depending on your plan — like whether you bought any vehicles or took any trips. By asking you personalized questions based on your business, they can cover more bases than a software can for complex tax situations. (If you decide to work with DiMercurio Advisors after filing your taxes with TurboTax and we lower your tax bill, TurboTax will refund any applicable fees.)
How much time will I spend working on my return with a CPA compared to TurboTax?
You’ll spend significantly less time on your return with a CPA compared to TurboTax. However, you’ll still have to spend time talking to your CPA.
When you work on your tax return on TurboTax, the majority of the burden is on you. When you hire a CPA to do your tax return, they handle the burden for you.
Keep in mind, however, that hiring a CPA means your tax return will still take some time away from you. Your CPA will want to talk to you about your income, expenses and other questions before filing your return.
Although those things take some time, it’s still less of a time commitment than filing a complex tax return with TurboTax. Filing your taxes as a new small business owner for the first time can be stressful or overwhelming. The longer you work with a certain CPA, the easier the tax filing process will become — and the less stressed you’ll be.
That’s because as they work with you, they’ll learn more about you and your business. It does take some time, but it’s worth it for small business owners who are looking for a tax expert who will listen to them and support them.
The bottom line
Switching from TurboTax to a CPA is a big step. It’s hard to move away from something you already know and trust.
But for business owners, independent contractors and people with complex tax situations, it’s almost always the best move. Working with a CPA to file your return manually gives you more flexibility and improves your chances of lowering your tax bill. On the other hand, TurboTax is the best option for traditional W-2 employees without complicated tax situations because it’s faster and more affordable.
Your tax situation looks a lot different once you start a business — even if your business is just you. If you want someone to develop a long-term relationship with a financial expert who understands you and your business, you’re probably ready for a CPA.
Still not sure if a CPA is still right for you? Schedule a free call with a DiMercurio Advisors team member today and find out if a CPA is a good fit for you.
