Using TurboTax Vs CPA
Should your business use Turbotax or a CPA to prepare your taxes? You might expect us to say absolutely NOT, but let's dig a little deeper on that.
Turbotax is owned by Intuit, who also has a software for professionals to use. In other words, clearly they know how to create a tax software. Having never used Turbotax, I can't speak to the user interface and ease of use, but I'm assuming that Intuit knows what it is doing there as well. So the question is not whether Turbotax is a good tax software, but are YOU a good tax preparer?
Limits of Technology
Advances in technology, specifically Artificial Intelligence are only going to make the software better, but the software doesn't make any of us better professionals. I might do some research about my medical symptoms (and consequently scare the hell out of myself), but if I have a real question about my condition, I'm asking my physician. Why? Because she is the professional. Remember, all of the tools and information I have, so does she.
What about false positives? Remember I diagnosed myself with some rare tropical disease from reading WebMD! Without experience and judgement, you have no idea if what the software is telling you is valid! I've been working with tax software for decades, and let me tell you, there are always bugs.
As good as the user interface is, there is always a chance you enter data into the wrong fields. And I'm talking about the professionals! But we have years of education and experience to know, hey that doesn't look right! Tax software is going to get better, but that only makes the professionals better as well. Technology makes me a better informed patient, but it doesn't make me a medical doctor. Neither does Turbotax make you a tax professional!
When to Use Turbotax
So when can you use Turbotax for your business taxes? I recommend only using Turbotax if you are filing as a sole proprietor (schedule C) on your individual tax return AND if you have revenue less than $50k.
I DON'T recommend Turbotax if you have any other business structure (e.g. S-Corporation or Partnership), even if you happen to have low revenue. There are just too many ways to screw up those returns and cause nastygrams from the IRS and State.
If you have more than $50k as a sole proprietor, chances are you will pay more tax using TurboTax than using a tax professional. Filing as a sole proprietor, all of your income is subject to Self Employment Tax in addition to Income tax. That means every dollar of deductions you miss can increase your tax bill up to fifty cents. Too much opportunity to save taxes working with a professional.
If you have a stable side gig or your a solopreneur with low revenue, tax planning may not come into play. But for growing, profitable businesses, tax planning is the real value of working with a tax professional. Tax preparation is the final step in the Core Financial Process™ but there is much more to making sure you are paying the least amount of taxes possible, with NO SURPRISES. Working with Core (or any professional for that matter) should make you money!
