Money Making Sense: Why you may need a CPA to do your taxes
SALT LAKE CITY — If you or your spouse and children are getting a stimulus check from the federal government, that may complicate your taxes. If so, should you hire a tax preparer or a certified public accountant (CPA) to file your taxes?
To discuss the situation, Heather Kelly, host of Money Making Sense, invited UACPA (Utah Association Certified Public Accountant) member Mike Criddle of Eide Bailly, which is a regional certified public accounting and business advisory firm, to her show.
She asked Criddle if she doesn’t own a company or a sole proprietorship, why would she need a CPA to do her taxes?
“Well, oftentimes, individuals throughout their life experience come across unique or unusual transactions. You know, my grandfather passed away several years ago, and my aunt is living in his home. Well, the state of Utah condemned half the property for the expansion of a freeway. She’s dealing with a number of very unique tax situations that she normally wouldn’t deal with. A CPA is perfect for that kind of scenario,” Criddle said.
“Not that you want to live on the side of a freeway, but if only half your property is condemned, how do you own the other half?” Heather asked.
“So, they had just over a half an acre. Now they just have a quarter of an acre. And there are a number of tax implications associated with the condemnation of their property and the payment that they received in association with it,” Criddle said.
Selling/buying a home
“I just sold and bought a new home this year. I’m feeling like that might be just a little bit over my paygrade. Who would I go to if I needed help?” Heather asked.
“There are a lot of local CPAs that deal with individuals that may have a unique transaction a particular year — like buying or selling a home. They have a lot of experience with reviewing the tax settlement or the settlement statements that come with your closing and looking for those deductions that you’d be entitled to in both the acquisition and sale of a home.”
What CPAs typically charge for taxes
“The next important question is how much are you charging?” Heather asked.
“Well, different CPAs charge different amounts relative to the level of complexity. So, you know, on the low end it may be a couple of $100 on the high end it could be several $1000. It really is driven by the level of complexity and the amount of time, effort and expertise that you need to address your situation,” Criddle said.
“If I pay, let’s say it’s the low end because I like that. It’s the $200 amount. Should I expect that I can recoup that $200 by going to a CPA?” Heather asked.
“When I first got married, my mother-in-law was like, I know you’re a CPA, but I do my own taxes, and I don’t really want to get you involved because my financials are private. I said that’s fine. But after a couple of years, she came to me [and said] I’m paying a lot in tax. And I said, Well, let me just look at one year and then we’ll see if there’s something there. I ended up looking at it. It saved her $2,000, and we ended up going back and amending previous years to get her some additional money,” Criddle said.
“Anything else we need to know about why someone would choose a CPA instead of trying to do it themselves?” Heather asked.
“I think CPAs, generally speaking, are really happy to just sit down and talk with people and try to help them understand the aspects of their unique situation and how a CPA might help. I’m a real value-driven kind of guy, so I’m not going to ask somebody to pay me a bunch of money unless I can really provide them value,” Criddle said.
Tax preparer vs. CPA
“What’s the difference between a CPA and a tax preparer?” Heather asked.
“To be a CPA requires a master’s degree in the state of Utah or an hour requirement that’s comparable. They have to take an exam in order to demonstrate a level of proficiency, and they’re required to do ongoing continuing education. So with a CPA, you have the confidence that they have both the expertise and the ongoing continuing professional education that they need to really be up on the tax law changes, like the recent tax reform, both at the federal and state level that are really impacting individuals today,” Criddle said.
“A tax preparer at some of those big box stores that you hear this time of the year during tax season. They may charge a little bit less but they may not also be as knowledgeable about helping you find the savings or going back three years and figuring stuff out,” Heather said.
“Precisely. One of the big things where CPAs drive value is forward looking. You’re not going to get that from one of these big box stores,” Criddle said. “[CPAs] have the ability to sit down with you and talk through what are your transactions or your situation tomorrow and next year and the following year. And what are the decisions you need to be thinking about and making relative to your tax situation for future transactions.”
Learn more about the role of a CPA, pitfalls to avoid when doing your taxes and much more on Money Making Sense, available anywhere you listen to podcasts.
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