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Discussion:Do tax returns "look" better when filed by a CPA

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Discussion Forum Index --> Consumer Questions --> Do tax returns "look" better when filed by a CPA


Cazint (talk|edits) said:

10 January 2007
For years, we have been paying a CPA to do our federal taxes, and really, there's not much too it. Just seems pretty mechanical. As such, being a small company, part of me wants to go ahead and just do the taxes on my own for 2006.

However, I keep remembering how someone said that the IRS seems to give favor to taxes that are filed with a CPA. I'm not suggesting that the IRS just ignores it and moves on. No. Rather, i was told that it just, overall "looks" better and that the IRS seems to not be as weary when a small business uses a CPA versus when they file their own taxes.

Any strength to that argument? Of course, if many of you are CPAs, then i should expect a bias response. But the point did make sense to me.

Just trying to decide if it is worth paying $250 for something that may take an hour or two (max) of my time. Seems like the bulk of that amount is for the comfort of having the cpa do it and hope that prevents an audit. Perhaps wishful thinking.

Gosix (talk|edits) said:

10 January 2007
Right is right. Wrong is wrong. If you can correctly self do your return in an hour or two, you have no need for a CPA. Enjoy.

FTF65 (talk|edits) said:

January 10, 2007
In my unbiased opinion, tax returns always look better when prepared by a CPA. Without the signature of a CPA, your chances of being audited increase tenfold. Never question your CPA - they are always right. Enjoy.

PGattoCPA (talk|edits) said:

10 January 2007
Cazint: It's a loaded question because we can only take your word that there is "not much" to your return and the preparation is "pretty mechanical".

If you scour the various threads in Tax Almanac you will see people like yourself realizing that their initial questions were not as easy as they thought. (This also happens to tax preparers with either little over-all experience or preparers with many years of experience, but not in the particular area in which they are asking the question. However, in the latter case the experienced preparer usually qualifies the question with, "I'm not sure whether this is a complicated issue or not . . .")

Your return may well be easy, all I am saying is that we don't know. Asking a bunch of people who do not know your capabilities or your business is kind of futile. We already know you only want an answer that is acceptable to you. ("Of course, if many of you are CPAs, then i should expect a bias response.")

All that being said, you should have a good enough relationship with your CPA that you can ask him/her the question and get a straight answer. Presumably a $250 per year client is not worth it to them to lie to you merely to keep your business. (If it is, you need a new CPA anyway.) S/he can go over with you the pros and cons of you self-preparing your return.

Also keep in mind that the time you spend preparing the return can be spent drumming up new business, spending time with your family, etc.

Lizzit (talk|edits) said:

10 January 2007
I agree wholeheartedly that the time you spend slogging through the paperwork is probably better spent in a thousand other more profitable ways for your business. Hiring an accountant is delegation. The whole point of delegation is that it frees you up to focus on the things you do best and the things you want to do more.

Another point in favour of hiring a CPA - or EA! - is that their job is to stay on top of new tax laws. The fact that "last year's looks easy" may have no bearing at all on whether this year's is easy or not.

Aren't you eligible for the crazy new Domestic Production Activities Deduction? When you buy your next car, which make or model will give you the biggest tax cut? Should you change the ratio of your salary and dividends this year? Do you have the best retirement savings plan possible? If you're not sure, then maybe what you need to do is switch to a CPA or EA who will do tax planning as well as tax prep. This costs more - expect to pay at least double what you're paying now - and expect to save more (in tax) than the extra it's costing you.

If you still want to go it on your own, you may want to do what a number of my clients do: Prepare their own return, and then come to me for review of the paperwork and tax advice. This has the lowest cost to you (and it's more fun for me). You get the maximum benefit of their wisdom and advice, while saving money by doing the donkey work yourself. Plus, if it turns out you're not as adept at tax as you thought you were, the person catching it is someone who likes you rather than the IRS.

Uncle Sam (talk|edits) said:

10 January 2007
Lizzit hit it right on, and as PGatto said.

For you do-it-yourselfers, it's not merely the filling out the forms that's important, but the ability to distinguish important facts of a given situation and interpret them into compliant tax law - the ability apply knowledge to judge and advise. CPAs and EAs must go to CPE sessions each year to learn the new tax law changes-that costs time and money. Merely by having a CPA signature on the tax return doesn't guarantee anything. Plenty of CPAs make plenty of blunders on returns and really shouldn't be preparing returns. But the risk of not having a compliant tax return would usually be lower than a do-it-yourselfer return. Are you aware that there are special rules for depreciation, entertainment, auto expenses, office-in-home expenses where to prepare the return properly you need to know what facts determine which treatment? So go ahead Mr. do-it-yourselfer, save money - after all, what do you need a knowledgeable person for just to do preparation of returns?

JR1 (talk|edits) said:

January 10, 2007
FTF's response is a keeper! So I guess that it's been ME that's been wrong when reviewing some of those CPA filed returns...dang. And wondering why so many CPA's pose tax questions here....Yes, right is right, that's what matters. And can say that CPA's are in fact, trained auditors, not tax folk. Ahem. *running*

Solomon (talk|edits) said:

10 January 2007
For $250 there can't be much to the return.

Death&Taxes (talk|edits) said:

10 January 2007
Solomon, you hit the nail on the head!!! The problem is that you are paying the CPA for the simplest part of his job and not using him/her for the advice they can give to help your business. Taking a trial balance and dropping it on the 1120 or 1120S takes nothing, so perhaps you are asking the wrong question and should be asking 'what are you doing for us?'

Corptaxhelp (talk|edits) said:

January 10, 2007
Wow, Cazint! I can't even get my personal taxes done for $250. How many hours does $250 buy in your neighborhood?

If your return really is that simple, you can probably do it yourself. I don't think you are any more likely to be audited if you do the return yourself all else being equal.

If I were you, I'd prepare my own return for 2006 and take it and my 2005 return to a different CPA. If that CPA gives you a clean bill of health for both years, you're safe to file on your own. If the second CPA, however, finds missed deductions or asks you questions neither you nor the last CPA thought to ask, I'd let the new CPA do your taxes.

If you can really get your business taxes done for $250, that is a heck of a deal and you'd be foolish to pass up the expertise. Penny wise and pound foolish or something along those lines.

Cazint (talk|edits) said:

10 January 2007
Thanks for your replies.

(1) $250 seems like a lot to my humble little brain, but you guys are certainly correct in that it indeed is NOT, as after checking around last year, most companies were WAY of $250.

(2) Yes my business taxes are very simple. Mind you, this may be a direct result of the fact that the current CPA does not do a whole lot more than copy my Income Statement and Balance Sheet data over to the appropriate forms. That is why I said mechanical. Perhaps the reason for paying more money is so the cpa can save me a lot more.

(3) However, none of those points answered the main question of this thread. It wasn't about do i have the ability to file on my own. It wasn't about is $250 too much. The question was simply do taxes "LOOK" better when signed and filed by a CPA?

Many of your comments and posts were helpful, and I do appreciate your time in responding.

FTF65, however, was the only user that actually answered the question. Does anyone else have an opinion in this regard? Biased or unbiased...doesn't matter. Just curious as to the overall opinion of the users. It does seem fair to think that the IRS would scrutinize the return of a small business less if they used a cpa, but perhaps i'm way off base on this.

Death&Taxes (talk|edits) said:

10 January 2007
Look at the chart at the top of Discussion: How Many Audits Did You Have in 2006? and read some of the discussions. The low rate does suggest correlation with the signature on the return.

PJLCPA (talk|edits) said:

10 January 2007
One reason they "look" better is that a paid preparer is also signing the return, stating that to the best of their knowledge and belief, the return is true, correct, and complete, based on all information of which preparer has any knowledge. That means that someone else, with tax knowledge, has already looked at it.....less chance of errors and ommissions. Also note that most of us take classes every year to keep up with current tax law changes.

Gosix (talk|edits) said:

10 January 2007
Oh why oh why did I not become a lawyer, or a securities broker, or any other similar profession other than accountant. Everybody else gets paid for their professional knowledge, the poor tax accountant gets questioned on a $250 bill.

Free legal advice to anyone who want to finance my career change!

Deback (talk|edits) said:

January 10, 2007
I don't believe your return needs to be prepared by an actual CPA (remember, many CPAs hire temporary clerks to enter the data on the returns...), but I do believe that returns filed (especially those that are efiled) that were prepared with a computer by any tax preparer who has had several years of experience (who don't rely on temporary clerks to prepare the returns) would "look better" to the IRS. I believe that returns prepared using a pencil or pen and mailed in to the IRS (rather than being efiled) will not "look as good" to the IRS. But it all depends on whether or not you include all of your income on the return and whether or not you deduct expenses that are reasonable to the IRS.


As far as the fees, CPAs generally charge much more than tax preparers who are not CPAs. They sometimes have more expenses, such as, building rent, utilities, hired help, etc. I believe that tax preparers who prepare taxes in their home (and have no employees) have less expenses than CPAs, so their fees are generally less than CPAs. In my case, based on what you've told us, my fee would probably be between $150 and $200 to do your return. My average fee in 2006 was about $110. I expect it to be about $120 this year (at about $250 per hour when I'm actually working), but I don't have to pay anyone to type in the data on the returns, and my only expenses are the normal office-in-the home expenses, office supplies, equipment upgrades, and software.

Blrgcpa (talk|edits) said:

10 January 2007
The "look" is the same. The same tax return is used.

If you should do it or not depends on your acctg ability. If you get financial statements, you need a cpa.

Do you know how to close the books at year end? Do you know aje? The acct may start with your t/b and g/l, but that may not be the end product.

Will (talk|edits) said:

10 January 2007
I charge $225 to complete a 1040 and a schedule C if the client provides a trial balance or something close. State form included. I am not a CPA and the rate you are quoting seems very fair.


Much easier to quantify than the impact of a paid preparers signature on the overall low likelihood of audit, is the guarantee you are buying that the return will be correct no matter what twists and turns your business takes. It's right there in the engagement letter. You are buying a completed return and a guarantee (at least how I do business). Only you can decide if the guarantee's value to you is worth the price you are being asked to pay for it. Some people don't care how easy it is, or how much time it will take, they use professionals to handle areas of their life where they lack expertise and this gives them piece of mind and more hours to spend on what they enjoy.


William Price, EA | Portland, OR - Talk to me

Dennis (talk|edits) said:

10 January 2007
I sincerely doubt that prepared/not prepared by a CPA is one of the data entry fields at the IRS Service Center where the returns are filed.

Death&Taxes (talk|edits) said:

10 January 2007
I think it plays a part when a return is spit out for review for potential audit, Dennis.

Deback (talk|edits) said:

January 10, 2007
I think the reputation of the tax preparer is important, too. Doesn't the IRS keep track of preparers who make a lot of mistakes or have had a lot of audits?

San Diego (talk|edits) said:

10 January 2007
Ahem, there are many tax professionals that are not CPA's that are VERY proficient at their job... Just make sure you find someone who will research the unknown before filing a faulty return. I find that my clients appreciate it when I tell them I do not know the answer and will have to research it. I have also refered potential clients to CPA's if their situation was too complex for me.

JR1 (talk|edits) said:

January 10, 2007
I've never seen audit stats on paid preparer/self prepared, which might be interesting. If anything, the advantage of having a pro do a return is that it's more likely to be correct, which prevents it getting kicked out for stupid reasons. When things balance and are in the right spot, the return processes the way it's supposed to. Otherwise, bang, crash, bad things happen. But then, I've seen an awful lot of things that curl your hair that never drew attention at all. And I may have filed one or two like that, too, somewhere far back in my past...

Buckarooski99 (talk|edits) said:

26 December 2008
I am a CPA with 30 years' experience. My average fee probably runs around $400 for a relatively simple return, but some of the 1040s I do have run as much as $2500 if they involve complex tax issues or creation of books and records for a small business. I have never had a client complain about fees nor have I ever had a bad debt, because I screen my clients and restrict my practice to those who understand that most returns do involve complex issues: if you think there are no real issues involved, you simply don't know what the potential issues are. My fee structure is $150 per hour - $250 per hour, depending upon the complexity of the issues and the value to the client. Representation in IRS audits and representation in the US Tax Court run higher. I have always been successful in IRS audits and US Tax Court representation. I recently assisted a client in taking an IRS bill of $35,000+ all the way down to -0-, so I know I am worth it.

Mscash (talk|edits) said:

26 December 2008
If you are getting a CPA to do business tax returns for $250, consider it a gift. All he has to do is spot one glitch that you would miss and he has paid for himself.

CrowJD (talk|edits) said:

27 December 2008
I do a goodlooking return. I use a 48lb paper I import from France.* Yes, I believe in paper filing. Where is the aesthetic in Efile?

Most CPAs have little appreciation for art and beauty, having almost uniformly skipped their art and humanities classes in college. What can you expect from them but a ratty looking return?

So, in conclusion, I think you should pay for a goodlooking return. However, your funds have gone wasted so far, since you have squandered them in the vain hope that a CPA can produce one. I wish you better luck going forward.

MWPXYZ (talk|edits) said:

27 December 2008
Back when I was a CPA, I had a greater appreciation for art and Beauty; here is a portion of a client letter to a specific client:

"Attached are your copies of your 2004 individual income tax returns. The copies that are to be signed by you and submitted to the government are attached to addressed envelopes. When you SIGN the returns please review them carefully. If you have any questions do not hesitate to give me a call.

The federal return shows NO TAX DUE. Please mail the return at your convenience. In fact, take some time to savor the completed product and peruse the various forms at your leisure. Enjoy the crisp yet understated font used for the financial numbers a contrasted with the bolder bureaucratic form design. Enjoy the mathematical progression of income for the first 14 lines of the 1040 as the income builds to a crescendo and then imagine the chipping away of the income through various deductions until, as a finishing touch, the underused retirement savings contribution credit wipes away the last vestiges of a tax liability. And finally, note on Schedule E how the loss in column B runs perilously close to being subject to the passive loss rules. Yet, with a certain preciseness, the loss not only is completely deductible; it also fully interacts in a pleasantly complementary manner with it’s corporate stakeholder. And, in spite of the modern engineering that creates the now standard computerized tax return, your return is graced with the traditional covering of W-2s attached with S.F. 4 premium staples with precision engineered chisel points."

I did cheap out with 20lb paper, however.

Regarding the original question, after 30 years of this I do not have a clue as to how they REALLY choose returns for audit. Maybe the audit rates are so low it does not matter. The so called DIF score is possibly a starting point. Butonce a return has been chosen for audit, most IRS auditors are more comfortable dealing with most professional preparers because the issues are understood from the beginning.

Pegoo (talk|edits) said:

29 November 2012
I had clients that balk at $250 and come back to me after 2 years and be happy with $600 (with another $65/hr for adjusting entries and anything needed to correct their books). I jacked it up because the mess got bigger. For most businesses, time is money. My clients tell me they need to allocate all their time in the front line doing marketing and sales. Everyone expects everything to be close to free. Customers expect to pay close to nothing but when it comes to paying them, it is never enough. Just how it is....

Actionbsns (talk|edits) said:

29 November 2012
I had a problem with a potential tax client last year. They started as a bookkeeping client who wanted tax prep work, I actually amended their 1040 for an error that I found. So over time we were working together and as it became time to start looking at tax projections we discussed it, and I prepared the projections, they loved the information and said Gee nobody ever did that before. But they hated the bill. It seemed like they thought that should be free. There were some other issues as well with them wanting to make their own rules in certain areas. I ended up voiding their bill and suggesting they seek help elsewhere. They wanted me to continue doing their bookkeeping, but it just never felt right so I declined that,too. They evidently found someone else who was willing to prepare the return they wanted. Maybe they also do the work for free. If they were to come back, they would be charged a higher rate - PIA charge.

CrowJD (talk|edits) said:

3 December 2012
To this day, the most audited return is the Scd. C return under 100K. However, by far the most uh.."prevaricating".. returns are filed by multi-member LLCs. Funny thing, then, that the MMLLCs are almost never audited.

Why? Because the IRS knows that many MMLLC members have the money and the time to defend themselves in an audit. The IRS can do at least 100 Scd. C audits in the same time it would take to trudge through 25 MMLLC audits (what with the "Wild West" character of the latter entities).

Now to the question of whether a person or business should use a tax professional: Jeez consumers, just look at a tax book like Lasser's in the book store and ask yourself whether you really know all the stuff in that Lasser's. If you don't, yes hire a professional. And if you own a corporation or LLC and you intend to actually run your corporation or LLC like a business (you know, a REAL business), then of course, hire a tax professional.

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