should we pay someone to do our taxes for the first time?

[Midcenturymater]

My husband has always done our own taxes. We file joint but I have never worked in the US...stay at home mom. We moved from overseas.

However this last year we bought a home. Our interest payment is $1600 a month. Friends were amazed we do our own and suggested we should drop 300 and pay someone as there may be things we are unaware of that we could be claiming on.

I am in two minds.we only have one income. No savings. Is it really that complicated that we need someone to identify mysterious areas to get tax back.

Thanks!
H

[GrowingTheGreen]

No.

I started a business in 2015, sold investments, got married, had two incomes, itemized deductions, bought and sold a house, and had Roth recharactsrizations.  I did my own.

I ended up using Turbo Tax simply because I like their interface better than Tax Act for all of the information I had to enter.  You have a relatively simple tax situation--try Tax Act.  It is cheaper.

[Midcenturymater]

Thank you!
Yes my husband uses tax act.

These friends suggested things like our internet or limited cable package we have will all 've deductible...my husband works with tv product.
They just made us feel there may be all these deductible s we just are not aware of.

We see it as pretty simple

House interest
Charitable donations
Child care we pre pay via payflex
Health we pre pay via hsa

I just don't see what such mysterious areas they could be thinking of. Surely this us if you own a rental property or investments etc. We don't.

[GrowingTheGreen]

It seems as though your friends either a) don't have a firm grasp on what is and isn't deductible and/or b) are being a little shady on their return.

[Psychstache]

It seems as though your friends either a) don't have a firm grasp on what is and isn't deductible and/or b) are being a little shady on their return.

+1

They better hope they dodge an audit. I can't imagine the mental gymnastics it would take to confidently say that your cable TV subscription is a deductible expense.

[Nickels Dimes Quarters]

I pay a professional. For me, it's worth it. Not only for the tax prep part, but for the tax planning moving forward. I have built a relationship with my tax professional, she knows my goals and is great at giving me ideas for getting where I want to be. If I were submitting a 1040EZ, that would be different.

I know that most people here at MMM do their own taxes, and I think that's great. I just find it frustrating and too time consuming. I have so little non-working time as it is that I have no interest in taking on taxes. I also pay for attorneys to handle my legal work, MDs for medical, and see a DDS for dental work. I don't see this any differently. In fact, I view my tax appointment as one of the most important events annually in my wealth-building plan.

NDQ

[StacheInAFlash]

However this last year we bought a home. Our interest payment is $1600 a month.

You don't need to pay to get your taxes done, but do make sure you have all the interest you paid on your house accounted for. The form 1098 may not show the full amount. The origination fee on the mortgage (typically 1% of the borrowed amount) is the big one that they often don't include. Also, if you paid any other points to lower the interest rate, that is deductible interest too. Also, at your closing you most likely paid mortgage interest for a portion of that month. That is sometimes also absent from the 1098. I believe it is the HUD Settlement Statement - Page 2 that will detail those items. Compare them to what your 1098 says. Double check the PMI amount too as that is all deductible as well.

[Midcenturymater]

Thanks everyone. Stache inaflash.....thank you...really useful info.

I don't think they are shady but they did have a rental property so there's would be more complicated.

Till I start working we have no savings...We dropped them all into a house in a hcol city.

You can deduct your tv package my husband tells me...if you work with tv product...I guess just the tax on it.  We have a limited service mainly for soccer for husband but he dies see shows he works on so I guess that makes it work related.

I reckon we crack on on our own till my income complicates it next year.

[Roland of Gilead]

The tax guys don't know crap.   I went to the H&R Block tax school hoping to learn something but even the teacher was clueless on a lot of things (she did not even know you could recharacterize a Roth).

All you need is a cup of coffee and $10 of software.

[GorgeousSteak]

I would definitely suggest continuing to do them yourself, your situation does not seem very complicated.  Tax knowledge is just too important to an aspiring early retiree to outsource.  When you first start working they are very simple.  Each year you might have a new situation or two, but its totally manageable.  Instead of turning to a tax professional, you instead do a little extra research, and add that situation to your tax knowledge.  Wherever you end up 20 years down the line, you'll understand it all.

[MsPeacock]

Owning a house is a common situation, so it really doesn't make taxes all that complicated. Turbo tax is great and user friendly. I also +1 on continuing to do your own returns

[Jack]

I know that most people here at MMM do their own taxes...

I doubt that; I suspect we're just more likely to answer these sorts of threads.

Owning a house is a common situation, so it really doesn't make taxes all that complicated. Turbo tax is great and user friendly. I also +1 on continuing to do your own returns

It's not that the OP owns a house; it's that the OP owns a house with a mortgage big enough to make it worth itemizing.

Still, although I've never itemized, I see no reason why doing so would be so difficult that it require paying somebody -- IMO, the hard part is gathering up all the receipts and whatnot, and the tax preparer won't do that for you anyway!

[JustGettingStarted1980]

I did a stupid experiment this year:

I Paid someone $215 for my local, state, and federal returns.

I also did my own taxes longhand to the best of my ability.

My Tax Accountant saved me about $1200 over my personal returns

Why? Because she knows more than I do (kind of like the MD, Dentist comment above).

Don't forget that accountants are also insured against malpractice if they mess up your taxes (as long as they have all the information provided by you). This is not a small consideration.

[Jack]

I did a stupid experiment this year:

I Paid someone $215 for my local, state, and federal returns.

I also did my own taxes longhand to the best of my ability.

My Tax Accountant saved me about $1200 over my personal returns

Why? Because she knows more than I do (kind of like the MD, Dentist comment above).

Don't forget that accountants are also insured against malpractice if they mess up your taxes (as long as they have all the information provided by you). This is not a small consideration.

What sort of stuff did you miss? Which form(s) was it on?

[Gone Fishing]

I would definitely suggest continuing to do them yourself, your situation does not seem very complicated.  Tax knowledge is just too important to an aspiring early retiree to outsource.  When you first start working they are very simple.  Each year you might have a new situation or two, but its totally manageable.  Instead of turning to a tax professional, you instead do a little extra research, and add that situation to your tax knowledge.  Wherever you end up 20 years down the line, you'll understand it all.

+1

[JustGettingStarted1980]

Who knows? I checked the documentation and still can't figure it out. Either way I'm happy (and  protected via her malpractice insurance). I'm not too bad with numbers, either.

I'll check again later this week and let you know if I figure it out on the second pass.

JGS

[Gone Fishing]

I also did my own taxes longhand to the best of my ability.

There's your problem!  Did you compare and find the errors?  Were they simply math or actual tax code errors? 

I did my returns longhand for several years early in my career.  Despite being of above average intelligence and analytical in nature I would often become frustrated and made a few mistakes along the way.  As thing things got more complicated, I couldn't stomach the if-then/testing nature and the inevitable resulting mistakes of longhand tax returns any longer so I resorted to paid preparers.  After giving a few thousand of my hard earned cash to them, and with the support of the forum, I resolved once again to do them myself, but this time using TurboTax (I imagine Tax Act or H&R software would be similar) which is basically what most tax preparers use.  Still not simple, but MUCH easier and I was much more confident with my results than when I completed an entire worksheet (or several) that resulted in 0 and was told to ignore it and move on. I contend that tax returns were not designed to be completed by a human. 

You don't pay until you file so you can also back test using one of the software programs to see what your result would have been.

   

[Roland of Gilead]

Who knows? I checked the documentation and still can't figure it out. Either way I'm happy (and  protected via her malpractice insurance). I'm not too bad with numbers, either.

I'll check again later this week and let you know if I figure it out on the second pass.

JGS

That would make me nervous, not knowing why one method gets $1200 more than another.

I am not convinced that malpractice insurance protects you from having to pay back the $1200 if you misrepresent information given to your tax person.  (ie, you forget to tell them about a stock sale or 1099 and thus didn't qualify for the traditional IRA deduction you took).

[Midcenturymater]

Thanks everyone. Very helpful and many things we have not considered.

I should have said that the thing we are nervous about is getting audited.

As renters our tax return has been very straight forward the last 5 years but when we bought our home we moved a big chunk of money from our UK savings accounts.
Also my dad kindly and for the first time in my life....gifted us around 12 k so we did not miss out on the house...which went to the usual mini bidding contest .

Our agent at the time said it was fine and you just declare it as a gift.

We are just unsure if this will draw more attention to us as this influx of cash happened in order to buy our home.
Anyone any experience of this?

[RedmondStash]

I did a stupid experiment this year:

I Paid someone $215 for my local, state, and federal returns.

I also did my own taxes longhand to the best of my ability.

My Tax Accountant saved me about $1200 over my personal returns

Why? Because she knows more than I do (kind of like the MD, Dentist comment above).

Don't forget that accountants are also insured against malpractice if they mess up your taxes (as long as they have all the information provided by you). This is not a small consideration.

I did that experiment in 2012. For years, we had someone do our taxes, and he was great and not too expensive. Worth the ease of stress around tax time. Then when our tax situation became more complicated, we switched to a more experienced tax accountant, and ended up paying like $600+ to her. I bought TurboTax, ran our info, and came up with the same result she did.

Since then, I've done our taxes with TurboTax. We keep a folder marked "Tax" in our filing cabinet, and throughout the year, anytime we get anything tax-related, it goes in the folder. Keeping the paperwork in one known place saves a lot of time and aggravation.

It's possible we may be missing some tax breaks, but I doubt we're missing much. Despite all the itemized deduction info I laboriously enter, we always just end up with the standard deduction. Our situation really isn't that complex.

BTW, I believe there is some annual cap on how much you can accept as just a gift. Many years ago it was $10k; it might be higher now. It's worth looking into what the cap is and whether you're over it.

[Midwest]

The tax guys don't know crap.   I went to the H&R Block tax school hoping to learn something but even the teacher was clueless on a lot of things (she did not even know you could recharacterize a Roth).

All you need is a cup of coffee and $10 of software.

I wouldn't use H&R block as the golden standard.

CPA here, if you have a simple tax situation, you can probably do yourself.  By simple I mean w-2's, simple investments and you are itemizing (the normal US return).  Anything more than that, will depend on your aptitude and willingness to spend time on the project.  As the situation becomes more complex, someone who knows what they are doing can add value and help you avoid problems/save you money.

You mention a foreign account and you are living in the US as a citizen as well as a foreign gift?  If you have foreign accounts as a US citizen, you have to declare.  May or may not need to file on the foreign gift.  If I'm correct about the foreign account and gift, go talk to a CPA (not HR block) and have them file the appropriate paperwork.  It could save you some headaches.

You could go to a tax attorney as well, but probably don't need that level of service.

[Midcenturymater]

Thanks very much.
We are green card holders not citizens...maybe it makes no difference.

The savings I made before we moved to the USA in 2009. I was about to buy a house in London them.my husband got transferred to the USA. So when we needed a house deposition we just moved that over.The gift of about 12 k was so we could compete in the escalation that happened over the house we bought that had multiple offers.

[Midcenturymater]

Just to clarify, all the savings were in my name. My husband has never been a saver but he is open to learning now))) I have never worked in the usa so I have never filed a tax return. I hope to work later this year so guess I will file next year but now have only 10 k left in savings.


My husband had and has no savings but does have a rental flat....that generates no profit by the time repairs are factored in each year. We currently face a 39 k bill for our share of a Victorian roof replacement.
He always declares that on the form....it generates no tax as there is minimal income from it.

My savings have also generated minimal income as the interest rate has been low whilst we have Been here and I obviously did not know about the things I am learning here. Like vanguard.

My savings were around 140 k. We ploughed all of them into our house purchase so now we only have 10 k emergency fund left

[Midwest]

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR

Take a look @ this.  If you need to file anything related to foreign accounts and discloure, consider getting someone to help you out especially the first year.  The US govt has gone overboard on foreign accounts.  If I recall correctly, there is a procedure if you failed to file in a prior year as long as you do so willingly.  This is different than income taxes.

FYI, not legal or accounting advice. 

MW

[Midcenturymater]

Thanks very much.
Yes this is why we think we should maybe get help. Nine of the savings have Been acquired here....all in the UK before we left 6 years ago so I can't imagine we pay tax in savings I didn't make from the U.S. system. Especially as I have 0 income here the whole time.
The U.S. tax people just seem more draconian than in the UK.

[Midwest]

Thanks very much.
Yes this is why we think we should maybe get help. Nine of the savings have Been acquired here....all in the UK before we left 6 years ago so I can't imagine we pay tax in savings I didn't make from the U.S. system. Especially as I have 0 income here the whole time.
The U.S. tax people just seem more draconian than in the UK.

US instituted some fairly draconian provisions against overseas bank accounts in an attempt to avoid hiding income (ie Swiss bank accounts).  The link provided relates to an informational return.  No tax due, but stiff penalties can be imposed for non-compliance.  My experience has been if you are not hiding anything and you file before they get you it's a fairly painless process.  I would suggest getting somebody to evaluate this year and get you on the right path.  Depending on complexity, you may be able to do once you find out what you are required to do.

PS - I would suggest someone other than HR block/jackson hewitt types.  Find a local CPA or attorney.  You don't need a big firm and their rates will be cheaper.

FYI - We had a client come in with a similar situation (they didn't realize the need to file on the foreign accounts).  We filed several years of the FBAR.  No issue because we disclosed.  Just a bit of useless paper.