CPA vs. TurboTax, Which Is Better to Calculate Your Taxes?

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CPA vs. TurboTax, Which Is Better to Calculate Your Taxes?

Introduction

Both Certified Public Accountants (CPA) and TurboTax can help you in tax preparation and filing. However, you may be tempted to use TurboTax or one of the other tax preparation software programs as they seem more convenient and cheaper to do it yourself. 

On the other hand, CPAs, though high-priced, are adept at handling complex financial dealings. Choosing either is one of the important decisions for your business. You may be wondering which of the two is better for calculating your taxes, CPA vs. TurboTax, and whether it is beneficial to hire a Certified Public Accountant (CPA) professional or do your taxes with the help of TurboTax software. Well, there are no universal answers to this question.

Your decision can be influenced by your personal preferences, budget, and your financial situation. It also depends on your comfort level and familiarity with IRS rules, If you decide to use tax preparation software like TurboTax.

In this informational piece, we will compare the two options: CPA vs. TurboTax, to help you understand better and make an informed decision.

CPA Vs. TurboTax

The major difference between “CPA vs. TurboTax” is that the former is a licensed accountant while the latter is just software, specifically tax preparation software.

Comparative Table of CPA vs. TurboTax:

Here is a simple comparative table pointing out all the major differences between the CPA vs. TurboTax –

Particulars CPA Turbo Tax
Definition CPA refers to an accounting professional who has been licensed by the state board to practice accountancy. Turbo Tax belongs to the category of tax preparation software, which is designed especially for tax preparation & filing.
Regulatory Body/Owner American Institute of Certified Public Accountants (AICPA) Intuit Inc. 
Availability Mode Both Offline and Online Online
Pros  1. Can effectively deal with complicated tax situations2. Increased reliability due to human interaction 3. Provides Personalized financial recommendations4. Provide help in Tax planning for the future5. Time-saving6. It can provide a variety of non-tax-related services too. 1. It is comparatively Inexpensive2. Self-controlled (uses AI)3. Provides Automatic access to tax code updates4. 100% accurate calculations are devoid of human error.5. It is User-friendly6. You can access it anywhere & anytime.
Cons  1. Expensive 2. Your financial situation is shared.3. Takes a long to prepare and file returns4. There is always a chance for human error 1. Time-consuming2. No tax planning guidance
3. Can’t handle complex tax situations.
Who should hire/use? Hiring a CPA is a much better deal if you are a – Business owner professional with multiple income sources individual with huge stock portfoliosInherited property owners or deals with property trading people with foreign income person with complicated tax situations Using tax software like Turbo Tax is better if you are a -W-2 employeeRenterHomeownerSmall business ownerInvestorSelf-employed individual
How much does it cost? Hiring a CPA can cost anywhere between $200 to $500 Pricing for TurboTax’s software packages ranged from $60 to $120, which does not include state tax filing or other add-ons.

Let’s take a deep dive into the details to understand the contrast between CPA vs. Turbotax.

What is US CPA?

A Certified Public Accountant or CPA refers to an accounting professional with a state license to practice public accountancy in the United States. Getting the CPA license is quite a daunting task. Here are the 4 Es to gain the CPA license/ credentials – 

  • Education – A Postgraduate degree with at least semester hours.
  • Examination – Pass all four parts of the Uniform CPA Exam sections with at least 75 points in each part.
  • Experience – Gain 1-3 years of relevant work experience, dependent on the state board
  • Ethics – Clear the Ethics examination, if required by the state board; not all states of the United States require this.
Cpa Institute In Bangalore

The education, Ethics, and experience requirements depend completely on the state board. Thus, please check with the state board for the eligibility criteria.

The US CPA exams are considered one of the toughest accounting examinations. The course curriculum is designed to test the candidate’s skills and knowledge needed to effectively do the Auditing work as a CPA. The examination will be conducted in the English language by the AICPA (American Institute of Certified Public Accountants) in collaboration with the NASBA (National Association of State Boards of Accountancy).

CPAs specialize in various areas of accounting, including tax preparation. They are well-trained to examine a company’s financial records & develop effective strategies for enhancing its economic performance. It is recommended to opt for a CPA if you are dealing with more significant numbers & larger financial decisions. 

If an individual has received the inheritance of his/her parents and wants to go through the inheritance documents, then CPA is a better option. The individual may need a CPA accountant if he/she has started a small business, formed a company, lived overseas, or dealt with other issues that may not be clear in an algorithm.

Cpa Usa

CPAs have the required professional expertise in tax accounting to deal with more complex tax situations. Even though it may be slower and more complex than using online software, meeting with an accountant in person can provide you with tips to help you plan for the future and also reduce your tax burden. However, hiring a CPA can cost a lot and have a slight chance of human error if you rush through the filing.

Advantages of Hiring a CPA

For CPA vs. TurboTax, the CPA USA holds several benefits of hiring a CPA to prepare your tax reports. Some of them are as follows – 

  • The primary benefit of hiring a CPA is the personal touch that the accountant brings to the table. Hiring a CPA ensures access to valuable advice related to taxes and other financial matters.
  • Hiring a CPA is time-saving as a CPA spares you from the trouble of preparing various documentation and other required paperwork.
  • Insights; the CPAs can provide you with some valuable insights to grow your business.
  • If a dispute arises, the CPA has the authority to represent you before the IRS. Thus, saving you from the trouble of dealing with them.

What is TurboTax?

Turbo Tax is one of the most famous online tax filing software out there. It allows you to prepare and file your tax returns online. It is one of the first software in the field of online tax filing and is designed especially for U.S. federal and state taxes. Thus, it is quite a popular option for tax filing in the United States. Chipsoft’s founder Michael A. Chipman developed it in 1984. Later, in the year 1993, it was acquired by Intuit inc.

Using such online tax filing software is a tempting option for a quick & easy tax filing method. With the Turbo Tax, you can fill out and submit the tax form electronically. The software initially asks you a series of simple questions about your lifestyle and spending habits. The software fills out the form correctly and guides you through the overall procedure of tax filing. 

It also provides you with automatic access to every tax code update. Thus, making sure that there are no mistakes due to human error. At last, TurboTax conducts a final audit of your state and federal tax returns to avoid any tax disputes with the Internal Revenue Service (IRS).

The freedom to do your taxes anytime and anywhere has helped the turbo tax in becoming one of the most prominent online tax filing software in the United States. Turbo Tax can be used to handle multiple tax situations for a variety of clients. It is most prominently used by renters, homeowners, investors, self-employed individuals, and individuals with small/simple businesses. However, if you have multiple income streams or a complex and large business, you are better off with a Certified Public Accountant.

Products Purpose Price
Free Edition Simple tax returns $0
Deluxe Maximize tax credits and deductions $60
Premier Investments and rental property $90
Self-employed Personal & business income and expenses $120

Advantages of Using TurboTax

Utilizing TurboTax or other similar tax filing programs has a number of advantages, which may include the following – 

  • The simplicity of using the Turbo Tax. You don’t need to be an expert to file taxes through such software.
  • Cost-effective. With Turbo Tax, you do not need to pay for professional advice since you’re using software instead.
  • It saves the time and effort involved in dealing with a CPA.
  • Freedom to use it anywhere and anytime.
  • It practically removes the chance for human error, as an algorithm processes everything.

When Should You Use CPA vs. TurboTax?

Which should you choose between the CPA vs. TurboTax? There is no universal answer. Each option is good enough to prepare and file tax returns. However, there are certain pros and cons to each option. You need to analyze those pros and cons. After that, you should choose the option that works best for your financial and tax situation.

When You Should Hire CPA Professional

Choosing to work with a certified accounting professional is better if you lack the time. If you consider that the time you have to devote to calculating your taxes would be better spent elsewhere, outsourcing your taxes seems the most sensible option.

Hiring a Tax Accounting professional is also quite beneficial for someone who owns businesses, does freelance work, has multiple income streams, or is self-employed. Such individuals might get flagged by an audit because of their non-typical tax situation. However, CPAs can have the authority to deal with the authority on your behalf and save you from trouble.

Itemizing your deductions can be tricky to figure out. Thus, if you plan to Itemize your deduction, then maybe you should consider hiring a CPA.

Sticking with a CPA is better if you are in the middle of a major life-changing event. Maybe you got inherited property? Maybe you got married? Want to buy a house? Each of these events can also have a major impact on your tax filing. CPAs can help you document these situations on your tax return.

When You Should Use TurboTax

If you find yourself with enough time and patience, you may want to do your taxes with TurboTax, as it consumes a good chunk of your time to prepare your tax returns. How much time, you may ask? Well, as per the IRS estimate, an average person has to spend over 7 hours preparing their tax returns. You may have to spend well over 20 hours on tax returns if you are a business owner.

Using the TurboTax is ideal if you have a straightforward tax situation with no dependents, no major deductions, and no significant assets or charitable contributions. Tax preparation software such as TurboTax is designed especially for people with fewer deductions and other financial factors to consider.

Another thing to consider is that there is a lot of stake in the tax filing. Few errors can invite unnecessary trouble and tax disputes with the IRS. Although, if the thought of having to fix any errors doesn’t scare you, and you can navigate through the software and search the IRS website for answers to your tax queries, then you may consider doing your own taxes with TurboTax.

Conclusion

In conclusion, there is no universal answer to the question of which is better, CPA vs. TurboTax. What is best for you is highly dependent on your financial situation and also your personal preferences. You have to weigh the pros & cons of each and then choose the right option that fits your needs.

In case you are an accounting professional who wants to pursue the US CPA certification, then enrolling at the best US CPA coaching, like NorthStar Academy, is crucial. Our US CPA certification course is well-organized, offering Becker’s most preferred CPA study material. The mentors at NSA provide all-inclusive guidance to the students with a complete roadmap for getting certified as CPAs. If you still have any doubts, contact us and discuss them with our counsellors.

Hope this blog has helped you with choosing the best option for you. Good Luck with whatever option you are going with.

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