Income Tax Personal Finances

Do I really need a CPA?

Dear Z, E, and T,

You may ask “Why do I need a CPA?” That is a great question. There’s many reasons you may ask this question. You may not know what a CPA is (Certified Public Accountant). Perhaps you’ve looked into it and thought the cost wasn’t worth the value received. Maybe you view a CPA as a more expensive version of the do it yourself tax prep software you use.

Today, you no longer need knowledge experts to provide you with information. Information is everywhere. The entire tax code is online for free (here it is). You can google search any tax topic you want and find thousands of articles to help you understand your issue. The IRS publishes very helpful publications about every topic you’d ever want to research probably (here they are).

If you don’t need information, what do you need? You need interpretation. You need wisdom. You need guidance. You need a trusted advisor who understands your specific desires, goals, and circumstances as well as the tax laws and IRS positions (which can differ). You can read and understand the articles, I have no doubt about that. But the tax code has its own very specific definitions for terms sometimes that are defined in the code. A simple reading of the publication may not provide the full context you need. CPAs spend their full-time job understanding the facts and circumstances and gaining a big picture perspective on how different sections and facts interact with each other. Their interpretation should be more reliable than someone who simply reads one article or one publication to try to answer a specific question.

When you google search an article how do you know the person writing it is knowledgeable and correct? When you read the IRS publication how do you know your interpretation or understanding of the situation is comprehensive? Not to mention this generally unknown fact: you cannot rely on an IRS publication as authoritative. The hierarchy is US Constitution → US Internal Revenue Code → US Treasury Regulations → Legislative History (court cases) → IRS Positions (revenue rulings, revenue procedures, private letter rulings, and THEN IRS publications and forms, which provide guidance only and should not be solely relied upon).

Not every CPA is an expert in the entire tax code. That’d be impossible. Like a Dr who practices every type of medicine or attorney who practices every type of law. CPAs have areas of expertise as well. Some CPAs, many, don’t even do tax work. It’s possible to find a bad CPA as well. So I’d recommend looking for the CPA credential, but don’t stop there. Ask questions. Ask if they have experience with your situation (for example, if you’re a pastor, make sure they’ve dealt with pastor tax returns before). How much work do they do themselves vs how much do they delegate out?. How much access will you have to them, can you ask them questions throughout the year? Do they seem to care about your values and financial goals or just doing the return and collecting your money?

Hiring a CPA should be the beginning of a relationship with a trusted advisor. It may sound cheesy or over the top, but it’s true. Make sure it’s a good fit.

Maybe you have one job and a simple W-2. Then using the cheap online tax prep do-it-yourself software is probably perfectly fine for you. However, if you have anything more than that, it’s very likely you’d benefit from going to a CPA for tax prep. And if you can find one that will go beyond compliance work and tax prep to help you understand your financial situation, plan for the future, and reach your financial goals, then it’s worth every penny.

Love,
Dad

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