Overwhelmed by tax prep? How to decide between software and an accountant with confidence.

Ralph
00:00:00

Let's face it. Tax season can be downright terrifying. The fear of making costly mistakes, even with the best tax software, can keep you up at night. So today, we're exploring the pros and cons of using tax software versus hiring a professional accountant. You're going to hear real life stories of people who tried to do their own taxes and ended up paying the price.

But don't worry, we're also going to discuss how making the right choice can save you time, it can save you money, and it can save you a whole lot of stress. Plus, we're going to take a few minutes and talk about what to look for when selecting a professional accountant. I've got valuable guidance for you today, so make sure you stay tuned.

Podcast Announcer
00:00:37

In a world where crushing debt keeps you trapped, where living paycheck to paycheck has become your new normal, and where the dream of retirement seems impossibly out of reach, there's hope. Join financial evangelist Ralph Estep Jr. A man who's walked through the fire of financial failure and emerged stronger on the other side.

Welcome to Ask Ralph, the show where real world experience meets biblical truth to break the bondage of financial despair.

Get ready to take control of your money, break free from the financial stress and align your resources with God's purpose for your life. This is Ask Ralph with Ralph Estep Jr.

Ralph
00:01:16

Well, welcome to the show where we're mastering your finances from that Christian perspective. I'm your financial evangelist and I'm your guide to financial freedom and spiritual growth. And today, we're tackling a question that many of you struggle with during tax season. And it's how to decide between using software and hiring a professional accountant.

And listen, the real question is this. I hear this almost every day in my practice during tax season. Ralph, why should we pay you to do our taxes instead of just doing them online ourselves? Yes, that is the question and I'm going to answer that question on today's show. But before we begin, let me take a quick look back at yesterday's show.

We discussed how do you trust God when your finances are falling apart? And if you missed it, make sure you check it out and all of our previous episodes for some valuable insight on trusting God in challenging times. You can get to those by going to askralph.com. Well, now let's get into today's topic and we're going to start things off with a listener question from John and John wrote this.

John said, "Ralph, tax season is here and I'm feeling completely overwhelmed. I've always done my taxes myself using software, but this year, I'm not sure if I should continue or if I should hire an accountant. I'm worried about making mistakes and getting audited. Can you help me decide what's best for my situation?"

Well John, like I said, that's a question I get all the time so I want to thank you for reaching out because listen, this is what I do for a living. It's not stressful for me, but I know how stressful this can be for other people who don't do taxes for a living. You do one tax return a year. I do hundreds.

So I'm here to help you explore your situation with confidence and help you make down the best decision. So today, I'm going to break down the pros and cons of tax software. I'm going to talk about the pros and cons of using an accountant, and I'm going to help you make the best decision for your financial situation.

So John, let me break down your question first. First thing you said, you're feeling overwhelmed by tax preparation. Hey, a lot of people do that and you're torn between using tax software or whether you should hire an accountant. You're just not sure what to do, but the big issue, you're worried about making mistakes and you're worried about getting audited.

And hey, that's a legitimate concern, but let me put your mind at ease because by the end of this episode, you're going to have concrete ways to overcome your situation and make an informed decision. Well John, let me start by sharing a few stories about people who chose to do taxes on their own and face some costly mistakes.

And these stories are going to show just how making an informed decision is so important when it comes to tax preparation. Let's start with a friend we'll call Lisa. Now, Lisa was this freelance designer and she decided to use tax software to file her own taxes. Now, Lisa was one of these people I said, she worked for herself.

So she had multiple income streams and she had various business expenses. Her return wasn't that simple W-2 and mortgage interest statement and it may be a couple of little other things. She had some complicated situations. And when she was going through the tax software, and I've never really used these online softwares, the ones you can download, but she misunderstood some of the questions in the software.

And she ended up claiming deductions that she wasn't entitled to. And she filed a tax return, figured everything was fine, but about 18 months later, as it usually happens, she got one of those IRS audit letters. Turns out she had to pay back thousands of dollars in taxes and penalties which leads me to this story.

Let me tell you this story. This one is crazy. So picture this. Couple before I met them, they decide one weekend, they're going to sit down and do their tax return. I remember them coming in and telling me this after the fact. So they had always done their own tax return and every year it seemed like they owed money.

So they had been using, I don't even remember which one it was, but one particular software. So they said, you know what, Ralph, we're going to try this new software this year. So let's just call them Jim and Sally. They sat down that weekend, they decide they're going to do their taxes and they're going through the questions.

They're putting everything in, they're putting their W-2s in, they're putting in their mortgage interest statement. You got the idea. Well, they get to the end and all of a sudden they see they're getting this $8,000 refund. And they said, wow, this is fantastic. We must've been making mistakes with our tax returns year after year.

Hey, we got to get this thing filed right away. So they look at all the things on the screen, they do all the electronic signatures. And I think they even signed up for one of those, you know, rapid refunds so they could get their refund right away. So they press the button and off the tax return went.

Well in about 21 days, which is the normal thing, they got their tax refund. And they thought, Hey, this is fantastic. We're going to finally get ahead. We're finally getting somewhere financially. Well, fast forward to the next year, they've already filed their taxes again for the following year. And then that summer, they get this letter from the IRS and the letter says, Hey, we noticed that you made a mistake on your tax return.

And they're looking at this notice and they're like, this doesn't make any sense to us. The software told us that we could do this. And now all of a sudden this is saying that they owe $10,000 in tax. So of course they're freaking out. They're scrambling. Don't know what to do. They find me on Facebook.

They make an appointment to come in and sit down. I look at this notice. And the first thing I noticed right away, noticed it and notice it's kind of funny. Huh? Well, anyway, the first thing I noticed is that somehow this tax software allowed them to take both the standard deduction and itemized deductions.

So they were able to deduct the standard deduction, which is something that IRS sets based on your marital status and then they also were able to deduct their mortgage interest, their property taxes. So effectively they had doubled their deductions. So now all of a sudden, instead of getting that $8,000 refund, when they recalculated the return, the IRS says, no, you should have owed us $2,000.

And I remember talking to them. They said, well, you know, Ralph, we kind of thought that was strange because that's about what we normally owe. So anyway, think about this. So the big picture of this, and this is the true tragedy of this. So not only did they owe the IRS the $2,000 that they should have paid from the beginning, but now they got this refund and the same thing happened at a state.

It wasn't quite as dramatic. So they cut this $8,000 refund. And that's why I said $10,000. So it ended up, they paid back the IRS $10,000. And that's all because of this online tax software that they had never used before, allowed them to make a double dip effectively. Well, let's get back to Lisa's situation.

I'm talking about her. So with Lisa, she's this freelancer, but she's doing her own taxes online. And she said to me afterwards, she says, Ralph, the stress and the financial burden were overwhelming for me. She got this letter from the IRS and she spent countless nights worrying about how she was going to make ends meet and pay off the debt of what she owed them.

And that audit process, listen, if you've ever been through one, it can be grueling. And she said to me one time, she goes, Ralph, I feel like I'm drowning in paperwork and anxiety. Well, let me tell you about David. Now, David has a more complicated return as well. He's a small business owner and David had used tax software for filing his business taxes.

He'd done this year after a year, but he had a complex tax situation. He had several employees, he had various tax deductions, he had bought new equipment. And this one tax year, he's doing his tax return online. He figured he could do it. No problem. He made a critical error in reporting his income. So all of a sudden, you know, again, he files a tax return, sends it in.

Everything seems fine. A year, 18 months later, he gets the IRS notice. And the IRS says, wait a second, David, you made a mistake on your return. And here's what we're going to do because we're so excited about the fact that you made a mistake. We're also going to audit you. We're going to look at all of your income sources.

We're going to look at your expenses and the IRS was requesting a substantial amount of taxes and penalties and interest and all that. So here's a little truth bomb. And I believe this to my core. Errors can cause an audit with the IRS. And for David, that audit process was time consuming. It was stressful.

And it took David away from his business, which led his business to really suffer. It took a financial strain on his business. It took a strain on his personal life. And here's the thing I'm going to say, and this happens time and time again. Taxes can take a toll on your marriage or your relationships.

They can affect your mental health. I see that in my practice all the time. It causes so many relationship issues. Well lastly, let me tell you about Maria. Now Maria is a single mom. She's working two jobs, trying to make ends meet. She doesn't have any extra money. Her budget is super tight. So again, she decided to use tax software.

She wanted to save money on her tax preparation. Now Lisa had a very straightforward tax return. As I recall, it was a simple W-2. She had some children, so she had earned income credit, but she made a simple data error. She keyed something in wrong when she was putting her numbers on the screen. And of course, the IRS flagged her for an audit, and then Maria had to go through this lengthy and stressful process to correct the error.

And in her case, she ended up paying additional taxes. She paid additional penalties, which you think about it. She's already in this financial strain and now she has to pay more. And it put this massive financial, you know, weight on her. And she struggled. She struggled to provide for her children while keeping up with her bills.

And she shared with me after I helped her correct it. I helped her file an amended return to get this thing in order. We set up a payment plan with the IRS, but the emotional toll was immense. And she said to me one time, she was kind of re breaking down in my office one day when we were putting all this together.

She said, Ralph, I feel like I'm failing as a parent. So what's the big takeaway here? The truth is these stories illustrate why this is such an important decision, David. And I'm going to get to some answers here in a moment, but I want to start by talking about our Bible verse today, because I want to reflect on this biblical principle that really relates to your situation, David.

And it comes to us from the book of Proverbs chapter 13 verse 11. Now this one might seem a little unusual, the one I picked, but I really think it fits. And it says this. "Dishonest money dwindles away, but whoever gathers money little by little makes it grow." And if you think about it, the big takeaways, I'll talk about that story that client thought they had got that $8,000 refund.

Now I'm not saying they were being dishonest, but at some level they kind of had this inkling that something wasn't right. So this verse reminds us of the importance of being good stewards of our resources. It reminds us to fulfill our obligations with integrity. Filing your taxes is a part of that integrity.

So as Christians, we want to ensure that we're handling our finances wisely. We want to handle our finances with honesty and especially do that during tax season.

Well today, I'm grateful for God's wisdom and guidance in all aspects of our lives, including our finances. Today, I'm thankful for the opportunity to help you, John, and others like you make informed decisions that align with God's principles of stewardship.

Well John, let me share just another story with you that might just resonate with your particular situation. So I work with this client, let's call her Mandy.
I worked with her several years ago. And Mandy was one of these people just like you, John. She had always used online tax software to prepare taxes. She thought it was convenient. She thought it was cost effective. She didn't have to pay somebody like me to get her taxes done. But then all of a sudden one year comes around and the software made numerous errors in her tax return.

Now I'm not saying that the software was broken. It could have been the way she was entering the information because it's as simple as garbage in garbage out. And this is why I have such an issue with these tax software things. They use jargon, they use accounting speak, they use tax speak. Well, if this is not what you do on a daily basis, those questions can become somewhat meaningless.

And I always say this, I say tax software will talk you into credits. It will talk you into deductions that you're not entitled to. So let's get back to Mandy. So Mandy didn't realize that she had these errors in her tax return until again, fast forward, you hear me, it's like a broken record, but it takes the IRS generally 12 to 18 months to let you know, Hey, there's a problem.

So Mandy didn't realize that she had made errors on her tax return until she got a notice from the IRS about hey, guess what Mandy? You're being audited So of course, again, here comes this stressful, this time consuming project .And see is, Mandy reached out to me and she goes, Ralph, I am absolutely terrified of this.

I have always been told don't ever get cross with the IRS. She was worried about potential penalties and she was worried about how that was going to impact her overall financial situation because Mandy was a small business owner, but she was struggling just like many small business owners are. David, you might be feeling this same pressure.

So she came to me, she had this fear. She had this anxiety. Her body was physically shaking when she was sitting down in the chair in front of me. And she sits down and she starts to cry. You know, one of the things I keep next to my desk and I'm not making light of this, John, but I keep a box of tissues because let me just tell you. Taxes, financial anxiety will bring out the emotion in people.

And she was overwhelmed by this. Just the thought that she had gotten this IRS letter was completely overwhelming to her. Well, the good news is John, I was able to say to her, listen, Mandy here's the deal. Let's work through this. Let's take it step by step because when you get an audit letter, and I've done shows on this, the first step is to assess where you are.

So that's exactly what it did with Mandy. I looked at her previous tax returns and I found several errors made by the software. So yes, there was a problem. The IRS in that particular case was correct. There were issues. But I said to her, let's take these one at a time. So we corrected the mistakes. And then I helped her through that process with the audit.

This particular audit wasn't a big deal. They just wanted to make sure that she was reporting the income correctly, that she was doing their documentation on her expenses. And I helped her navigate that. Now, at the front end, they were asking for all of these penalties, all this interest, all this additional tax.

Now she owed the additional tax. We couldn't do anything about that. She owed the interest because technically they were correct. She should have been making these payments, but when it came to the penalties, they had issued what they call substantial underpayment penalty. Well, because she came in and worked with me, I was able to get the IRS to waive that.
I said, there's this thing called reasonable reliance on a third party. Yeah. In Mandy's case, she had used this third party tax software, and I was able to go back and take screenshots of this and show the IRS where he'd asked her these questions that she just didn't understand. So I was able to get her issue resolved.

She even got a little bit of a refund because she got so excited and so scared about this. She actually sent them a payment as soon as she got that notice. And then she thought she was talking to a friend or something. She says, you know, I really should go meet with somebody who understands it. So she just went ahead and paid it, but we work to get the money back. And her transformation,

when I saw her the next time after this, and now she comes in every year, it's been remarkable. And she's gone from feeling overwhelmed. She was feeling anxious. And now when she comes in and get her taxes done, she's like, all right, great Ralph, it's done. I feel confident. And John, you can feel the same thing because see, here's what Mandy did.
Mandy realized that having a professional accountant by her side was so very valuable. Now listen, and just like Mandy, she doesn't say that tax software isn't useful, but it can't replace that personalized advice and that expertise of a human tax professional. And see John, Mandy's story is a testament to the power of making informed decisions and seeking professional help when it's needed.

But you got to start by looking at the pros and cons of both options. So that's what I want to do. I want to help you make the best choice for your situation John, and avoid the pitfalls that Mandy faced.

So John, let's start by developing what I'll call an action plan that you can take to overcome your situation. The first thing you've got to do. You've got to assess your financial situation and take a hard look at the complexity of your taxes. Here's the truth. If your finances are straightforward, you got a simple W-2, you have a basic understanding of taxation, and I mean very basic, then tax software might be a good option for you.
But if you're like most people, most people that I meet with, now, the truth is it's not most people. I have a bias here because people that come in to see me for tax preparation generally have more complexities. But if you've got multiple income sources, if you've got investments, you've got dividend income, maybe you've got some brokerage accounts, maybe you own a business, maybe you own a rental property.

That is a big flag to, Hey, it might be time to hire an accountant. I did a show about that about a week or two ago, and I'm encouraging you to check that out. So that's the first thing. Look at your financial situation, assess that overall financial situation and see what you've got going on. Second thing, and a lot of people skip this step.

You've got to do your research. Let's say you decide, you know what, Ralph, my tax situation is not that complicated. Go out and look for reputable tax software with strong security measures and accuracy guarantees. Now I'll be honest with you. Those guarantees aren't worth much because you probably pay $25, $50, $75 dollars for it.

Well, their guarantee probably says if we make a mistake, we'll give you back your money. But find out what is reputable out there. Like that client I talked about, they use some kind of tax software I'd never even heard of. And for it to make such an egregious error where it gave them both the standard and the itemized, listen, that's like first grade tax preparation.

So if you decide, Hey, you know what? This tax software isn't going to meet my needs and you decide to hire an accountant, I'm going to talk about that in a little bit. Make sure they have the necessary credentials, that CPA or public accountant like me or the EA designation. So that's the second thing, do your research.

And third thing, consider the cost. Now you might be thinking, you know, hiring an accountant can be more expensive than using software. That may be true. Not always true. Cause I've seen some software that have all these add on fees, but it, but hiring an accountant might be worth it if you can save time, if you can reduce errors, and if you can avoid potential audits, nobody wants to go through an audit.

And finally, number four, and I probably should have put this one first. Seek God's guidance. Here's when you pray about your decision. You might get on your knees and say, listen, Lord, my taxes have gotten more complicated. Hey, when I first got out of school, or when I first got out of college, my return was pretty simple.

I didn't own a home. I didn't have much. I got a W-2 and that was about it. But now I've gotten a little bit more complicated. So pray about the decision, to ask God to lead you to the best option for your situation. Proverbs chapter 16, verse 1 says this. It says, "We can make our plans, but the final outcome is in God's hands."

And I think that's where you need to decide on that. So let me go over those four things again. Number one, assess your financial situation, determine the complexity. Number two, do your research, look at the different software options, look at the different accounting professional options. Number three, consider the cost.

You just got to look at it. That's just a truth bomb. You got to understand what the costs are. And fourth, but not last least is seek God's guidance. Now let's get to talking about the actual pros and cons of tax software versus hiring an accountant.

Well, let's start off with that first one. That's tax software. I'm going to name a couple of names. I'm not picking on them. I'm just picking out the ones that I see when I go do research companies like TurboTax, H&R Block, TaxSlayer, they claim to offer this user friendly software that guides you through preparing your tax return. You basically log into their website and they start with asking you question after question.

Then they tell you what documents you need, they ask you questions about your income. They ask you questions about your expenses, your deductions, and then they use that information to complete the necessary forms. Now, many of them claim to have what they call audit support or accuracy guarantees, read the fine print, understand what they're guaranteeing.
Like for example, TurboTax offers a premium service called audit defense. Now you pay an extra fee for this. But they'll handle any correspondence you get with the IRS if you get audited. Again, I've never used that service. I can't speak to it, but understand what you're getting. Now, the IRS always recommends filing electronically and opting for direct deposit to speed up this process and minimize errors.

99 percent of these. And I'm actually, I don't know of any that don't are going to give you that option. The second option, free filing. I'm not going to talk a lot about that, but there are free filing options. If you go to the IRS website, that's irs.gov and you meet certain requirements, you may be entitled to file your taxes online for free.

But my grandfather used to say this, and I'm going to tell you the same thing. You get what you pay for. So that's the first number one tax software or free filing. Third thing is an accountant. A professional accountant. I'm not talking about somebody that says, Oh, I'm an accountant, but they don't have any degrees.

They don't have any credentials. Look for that certified public accountant or in Delaware, like me, a public accountant or that enrolled agent. Again, I did a show about this a couple of weeks ago. It talks about the different credentials. And why are you doing that? Because we bring years of experience and specialized knowledge to the table.

And here's the big takeaway. I'm going to say this right now. You'd know where my bias is, but we can provide personalized advice. We can identify potential deductions that you're going to miss if you don't know the tax code. And we can also represent you in the case of an audit. Now there's another one out here and I didn't do a lot of research into this one, but this is something I'm starting to see more of.

And it's kind of this hybrid now, and I'll call it tax preparation services. And many of the online softwares are starting to do this. So they have these individual software pieces, but they also let you talk to a "tax preparer", a professional tax preparer. And you kind of outsource that. It's sort of a virtual, like a telemed thing.

I've not used any of those but they claim that this will give you that extra, you know, tax expert tax advice you need tailored to your needs. Now, maybe that's a good option. I've never actually used it, but you need to really take a look and see, is that the best fit for you? So now let's take a minute and talk about

when it might be time to hire a professional accountant. And I discussed this in detail a few weeks ago, but I feel like this is really part of the core decision to make. So that's, you know, what to look for when selecting a professional accountant? Cause I think that's important.

So David, finding the right accountant, let's just say you made that decision. You've gotten past the software. Nah, software doesn't work for me. The free file definitely doesn't work for me. I don't like the idea of outsourcing this to some kind of telemed, but do you say, Ralph, I think I want to go after an accountant and I've never done that before, but here's what I want to do.

Here's the things I think you need to consider. Number one, credentials. Look for accountants that are credentialed. Like I said, that CPA or that public accountant or that enrolled agent, because this credential, these credentials are important. They mean a lot. Like I have these credentials. It means I have a certain level of education.

I have a certain level of testing. I have to do continuing education. There's rigorous education. There's experience requirements. You want to make sure that you look for that. So that's the first thing, credentials. Second thing, look at their experience. You don't want somebody that's just fresh out of school has never dealt with a situation like yours.
So ask them about particular tax situations. If they have similar experience to what you're talking about, because maybe they've got a background in the same type of business you're in, or they serve the same type of clients that would be in that same area of expertise that you're in and talk about their success stories.

Ask them, Hey, you know, have you ever worked with such and such? I get those clients sometimes. It'll send me a message or they'll send an email, they'll call in and say, Hey, does Ralph work with real estate professionals? Does Ralph work with rental properties? Those are all fair things to ask.

The third thing you want to consider is references. We live in the time where you can go out and get references. Now don't just go by what's online because you can make that stuff up, but go ask your friends, go ask your colleagues. Maybe you want to put some questions on Facebook. You know, I've got some brand ambassadors here in the local area.

Ask for references with our past clients. Speak to those people and say, Hey, tell me about Ralph. How did he do for you? You know, what were the things that you encountered? You know, did you find like he was professional? Did he have that expertise? Did he meet your needs? And the next one is communication.

Listen, this is one of the biggest breakdowns I see tax preparers and accountants do. They just aren't good at communication. I don't know how many clients have come in and say, Ralph, I used to use this person. I would drop off the taxes and it would be week after week after month and I wouldn't hear anything.

Next thing you know, it's almost April 15th. And there's this scramble. I need this. I need this. And then, you know, we're never going to get this done so we're going to file an extension. Effective communication is the key. You want to make sure this accountant can explain these tax issues to you. These complicated issues in ways that you can understand.
One of the biggest things that clients tell me is that you, Ralph, my accountant never told me that. I wish my accountant had explained this to me. They should be responsive to your questions. They should be responsive to your concerns and keep you informed throughout the process. That's one of the things we pride ourselves here in my accounting firm is we keep you aware of what's going on.

We have a ticketing system when you come in for an appointment or you drop yourself stuff off, or if you send it over, we create a ticket and you can keep track of where that is. Because like I said, that's one of the biggest pet peeves that I see people say is Ralph, I drop my stuff up. I never know what's going to happen.

And then they just say, Hey, sign here, sign here. I mean, you don't tell me anything. Another thing you've got to be aware of is fees. You got to understand the accountant's fee structure from the beginning. And this, I'm going to say this, now, look, cost is important. But remember the quality of service often comes at a price.

I have said to many prospective clients, if you're looking for the cheapest option, just keep looking cause I'm not going to be that. There's value in what I do. But you also have to understand the fees and make sure they're transparent and they fit into your budget because maybe you can't afford that and that's okay.

But just understand that from the beginning, you also have to understand their availability. Make sure they're going to be available when you need them, especially during that critical tax season time. You want to be able to get them on the telephone or get them by email or something like that. You know, make sure their scheduling process allows you to handle your taxes in an efficient way.

We meet with a lot of clients face to face. I actually love that. My schedule right now is booked. I looked at my calendar this morning. It's all red because that means people are coming in to get their taxes done. But I also meet with people through Zoom and I make myself available if they've got questions.

Another thing you want to look at is specialization. Some accountants specialize in specific areas, such as small businesses. That's one of the things that I really specialize in, or self employed individuals. That's another area of a specialization that I have. Some specialize in international taxation.

That's not something I specialize in, but choose an accountant who specializes in areas that are relevant to your financial situation, because they need to understand the nuances of what you're working with. Look at their reputation, research their reputation online, look for reviews, look for ratings, look for disciplinary actions, ensure they have a good standing in the community within professional organizations.

Check their license. If they're licensed with the state board of accountancy, check that out. And then look at their continuing education. Because here's the truth. Taxes aren't just cast in stone and never change. Taxes are constantly involved and we're right now in a season of change. I suspect in 2025, we're going to see a bunch of tax changes, which means I'm going to have to really stay attuned to this.

I'm going to be doing more education. So make sure that your accountant is staying up to date with those continuing education and professional development. One of the best ways you can check this is does this accountant send out newsletters? Do they send out updates to their customers, because if they are, that means they're engaged.

That means they're looking at each of those things. So I took a little sidetrack there, John to talk about how to select accountant, but I think that is so crucial because if you've made that decision, then you want to make sure you make the right decision when picking somebody. But let's get back to talking about the pros and cons of the deciding of whether I want to do software or I want to do an accountant, because the truth is both software and accountants have advantages and disadvantages. You got to weigh them carefully, John. So let's start with number one and that's tax software. The biggest pro to tax software, and you can't argue with this is cost effectiveness.

It's generally less expensive than hiring an accountant. That's just true. And they range anywhere from free. You can do free filing if you've got a simple return or maybe up to a couple hundred dollars for more complex situations. If you have multiple States and things like that. Like I said, I don't go and do that.

But in my research, I see that it can be anywhere from free to about $179 if you've got a more complex situation. Now, these softwares are also convenient because you can file these from the comfort of your home. You can be sitting at your desk or you'll be sitting on the couch on the weekend and they, and you work at your own pace.

You don't have to set up an appointment. You don't have to drag yourself out and bring all your documents in. Most of the time, they're pretty fast. You know, you can generally complete your returns in just a few hours. Now you got to ask yourself, what is your time worth? Most of them are user friendly.

Most of these software options have an intuitive interface. They basically ask you questions step by step, something like along the lines of, are you married? Do you own a home? Do you have children? Because they're assembling this information, the same as what I would do if we are meeting face to face.

And for the most part, I have to say they're accurate. They've got some a sophisticated, what we call algorithms, fancy way of saying it. They can help minimize errors and ensure compliance with tax laws. They're going to look at things and say, do these things make sense? Now again, going back to that client that was able to take both the standard and the itemized, I'm not sure how good that tax software was, but

like I said, I don't remember the name of it. So those are the pros, but there are some cons to these. And I think you don't want to overlook these. The biggest con is limited support because listen, the truth is software can't replace that personalized advice of a human expert. I was meeting with a client the other day, we were doing a Zoom meeting.
This couple lives in Florida. We got to the end of the interview. I was telling them about how their tax return looked and they were pretty happy with the results. And I said, but wait a second, I have another idea. They had mentioned earlier in the talk that their broker had mentioned something about funding a health savings account.

And guess what? We were able to figure out a way to structure this so that they could squirrel away some money for medical expenses and have a tax deduction. Tax software isn't going to do that. So there's limited support. There's also a huge potential for errors. Now, I'm not saying that the software itself is broken.

I think for the most part they've beta tested that. That stuff is pretty rock solid. But again, it's that incorrect data entry, or if you misunderstand questions, that can lead to mistakes. It's as simple as garbage in, garbage out. And listen, I love these because it's something I'm going to fix when you get that notice from the IRS or that notice from the state, Hey, you made an error with your return.

That's how I get a lot of people who were using tax software before, but have now decided to use a professional accountant. Another huge thing. And if you've listened to me, you know I say this all the time. These online tax software programs have no tax planning built into them. Now, maybe that's something you can buy if you pay extra, but their software focuses on that current filing tax.

You just want to get that tax return done and they don't look at the long term strategies. One of the things that I bring to the table and a lot of tax preparers and professional accountants bring to the table is we not only do the return. I always say to clients, I'm really good at dotting the I's and crossing the T's.

I can give you a really pretty output. I'll make sure it gets filed correctly, but that's not really where the value is. The value is in that tax planning. Hey, what if you do this? Hey, what if you do that? For example, I had a client in the other day, I was looking at their W-2 and I noticed they were putting money into a Roth IRA instead of a traditional IRA.

And every year they owe taxes. And I said, Hey, why don't you consider this? Well, tax software is not going to do that. It's not going to help you come up with those tax planning strategies and the final con. And I think this one is huge. Tax software may not be suitable for complex situations. If you've got complex financial situations, the software might be sufficient.

It might not be as sufficient it needs to be and it could lead to missed write offs. It could lead to incorrect income reporting. And listen, if I didn't live in these trenches, if I didn't see what this did, I wouldn't be able to speak to that. But so that is really a con to the whole situation. So you really got to weigh the pros, weigh the cons.

Again, if your taxes are very simple, if you've got the single W-2, maybe you're married, you got one child, I think for the most part that tax software is fine, but if you've got any kind of complexity, you're going to potentially run a foul. So let's talk about your second option. Let's talk about the pros and cons of hiring an accountant.

Well, the biggest pro is expertise. It's like me, accountants have in depth knowledge of tax laws and can identify potential savings. This is what we do every day. Like I said, you file one tax return, I file hundreds. So I've seen it all. Another big thing. And a lot of people don't think about this one is time saving.

I can handle the entire process. It frees you up to focus on other priorities. Look at what the book of Proverbs chapter 21 verse 20 says. It says this. "The wise store up choice food and olive oil, but fools gulp theirs down." Now you might say, Ralph, how in the world does that apply to this? Well see, sometimes investing in professionals helps to help you to be wiser with your time and with your energy.

So John, let me ask you a point blank question. Do you really have time to handle this yourself? Do you have time to go through that tax software? Do you have time to go and understand the words they're asking you? Because as a good friend of mine said the other day, you either pay with your time or you pay with your money.

You choose it. You want to spend a whole weekend working on your taxes. Then I say, go get to it. But if you just want to take an hour and have a professional do it, then you might want to think about an accountant. Second big is reduced errors because we have all this expertise, we really minimize the risk of mistakes.

Now we still use tax software. We still use those algorithms. We still use like, I just switched to a new tax software. That is fantastic. Gives me ideas, double checks everything, but here's the difference. I understand what it's asking me. It's not making mistakes with the questions. I know what to put into it.

Another thing is audit assistance. Now, some of these online are promising, Hey, we'll represent you for the IRS. And yeah, good luck with that. I can't wait to see how that plays out. But if you work with a professional accountant and you get that notice, we have the ability, we have the expertise to help you during that process.

And last but not least, and I think this one can't be undersold. And that is that personalized advice. When you come down and sit with me or we do a zoom meeting, I'm going to give you advice tailored to your situation because not everybody's situation is the same. If you've got a simple situation, that's not what I'm talking about.

But just the other day I had somebody come in and they said, Hey, unfortunately, Ralph, it looks like my father's going to pass away. And he's got an IRA account. He's got this, he's got that. How is that going to impact me on my taxes? And see, that's where my expertise, that's where my acumen in this can come out and help them with personalized advice.
So those are all the real pros to choosing an accountant. Now, of course there are cons. I'm going to be honest about this. And the first one is cost. Hiring an accountant can be more expensive than using software. That's just the truth, David. It, or John, it may very well be more expensive, but you get what you pay for.

Like my grandfather said, you get what you pay for. And like the other guy said, either pay with your money or pay with your time. Sometimes scheduling can be a problem. You know, the accountant might not have as much availability. You've got to work on gathering all those documents. Now here's what a lot of people won't talk about, but there also is the potential for incompetence.

And that's why I went through that decision tree of how to select the right person, because not all accountants are created equal. I wish I could say they are, but it's important to be cautious and choose reputable preparers with the credentials we talked about. Make sure they have the expertise, make sure they have the knowledge, look at their referrals, look at their reviews.

Another thing is dependency. And this one's kind of sounds silly, but relying on a tax professional can lead to dependency. Now, I don't necessarily agree with this, but when I was researching for the episode, it said, Hey, these are one of the cons. I put it here because that could be, you know, they say, well, it hinders people from learning about their own finances.

Okay, fair. When you come in with a professional, I'm not going to do a take home, I'm coming along beside you and help you get through that. And the final one. And again, if you're working with a reputable tax preparer or accountant, and this one's not a big deal, but privacy concerns, you're sharing your personal information with a tax preparer. Like I said, it's a very intimate relationship, so you got to make sure you choose a preparer that maintains confidentiality.

Now I will argue on that one and I'll die on this hill. You're putting your stuff out there on the internet on these online tax software. Hey man, that's the height of not being privacy. So listen, John. Okay. Listen to what I'm saying to you. If you've got that complex tax return, find that reputable accountant.

I'm happy to work with you. I'll talk to you later in the show about how you can work with me, but find that reputable accountant, somebody that you trust, somebody has the credentials and the expertise. So let me share some interesting stats with you, John. I thought these were really interesting. According to the IRS, about 21 percent of taxpayers who filed their own tax returns make errors that can lead to audits and penalties.

Now think about that for a second. That's the IRS is 21%. That's one out of five people who file their own tax return, make errors. Now if it was just an error, Hey, no problem, but that's not the big deal. These errors can cause penalties. They can add an interest and that can add up quickly. Now, if you hire a professional accountant, you can reduce the likelihood of errors and provide peace of mind.

I don't have statistic for that, but it's the truth. There are much fewer. Most of my clients don't get notices. Now they'll get notice if they don't tell me about something. And the value of professional relationship with accountant goes just be far beyond tax preparation. Many of my clients will call me throughout the year.

If something comes up in their life, And that's where a good accountant can offer that ongoing financial advice. Yeah. They can help you with tax preparation, but as I've said 10 times today, they can also help you with the tax planning and they can provide valuable insights into your financial situation and that value, that increase, that expertise, that one on one relationship can help you make better financial decisions and that will result in long term savings. And that relates to my core principles about financial stewardship. So if you think about what we talked about today, I always, these are my go to things.
Seek God's wisdom first. Pray about this. What decision am I going to make? Then work diligently, research them, understand the differences between the tax software and the online stuff and the free file and the accountant. See if you can afford it. One of my go through things is living below your means.

If you can't afford it, then you can't afford it. Don't go into debt doing it, save money, look to give generously, invest wisely and plan for a legacy. Those are all part of the things that I talk about every day. Well, developing that relationship with that professional accountant, that tax will, that tax preparer is a being a good steward of your resources.

And by making informed decisions about your tax preparation, you're taking a step towards better financial stewardship. And here's my key takeaway from today. Just imagine the peace of mind that comes with knowing your taxes are in the hands of professional, no more sleepless nights, worrying about audits or costly mistakes.

I don't know how many clients I see throughout the year. They say to me, Ralph, I could probably do this myself. I could spend a weekend and do it, but man, I want that peace of mind. I want to know that if something happens, I'm the, I'm here to help you. That's the key. And then you can focus on living your life to the fullest and confident about your financial affairs being in order.

So that's the kind of peace of mind that comes from making the right choice and investing in the expertise of professional accountant.

Now I know we covered a lot today and that's one of the reasons that I write a blog post every day. So if you want to go a little deeper, you want to look at the actual research that went into it, the reference that I went into it.

You can check it out by going to askralphpodcast.com/blog. I'm going to share some more insights and some resources in there. I put some more stats in there, stuff that you can read on and we do one of those for every episode that we come to.

Well now let's end the show with some reflection questions.
You always like to go back and kind of stew over what we talked about. And the first one is this, what are the main factors you consider when deciding between tech software and an accountant? So ask yourself again, how complex is my situation? Can I do this myself? Do I have the knowledge? Do I have the time?

Do I have the assets to do that? That's the first thing. Second thing. How does your financial situation influence your choice? Hey, listen, if you're robbing Peter to pay Paul and you're struggling, then guess what? Probably hiring a professional accountant may not be the best option. Now listen, I'm talking you away from hiring somebody like me.
But you've got to take a look at your particular financial situation and decide what works for you. And if you've got to invest time, then go learn about the different things on your return. Read all the questions carefully, understand them, make sure you're making those right choices when you're going through that tax software.

And the third thing. And this is what I think all of us can do. What steps can you take to ensure you're making an informed decision? I've covered a lot of those today. Look for the credentials, look for the ease of use, look for all of those things, because it's really going to help you make that informed decision.

Now, Maybe you're feeling overwhelmed by the thought of a navigating tax season by yourself. You know, Ralph, you're like, Hey Ralph, I don't even want to worry about this. I have no time to learn this tax software and I am super scared of making costly mistakes because I'm, I don't want to be up at night worrying about this.

And just think for a second about the financial stress and that financial burden and of a, of an IRS audit, the countless hours spent correcting errors and the impact on your personal and professional life. Like I said, it will destroy relationships. Well, here's the truth. You don't have to face this alone.

See, I've seen too many people struggle with the complexities of tax preparation. They really figured they could do this and only to end up paying thousands in penalties and losing valuable time. And you can't get back your time, but there is hope. And listen to me, there is hope in this. With the right guidance,

you can make informed decisions that will save you time. They will save you money and a whole lot of stress. And that's why I'm here. See, I'm passionate about helping people like you achieve financial success and growing your faith. And one part of that is helping them to get their taxes in order by tax preparation and tax planning.

And if you're tired of that uncertainty, you're ready to take control of your financial future, I'm going to encourage you to book a call with me by going to askralph.com and together we can explore your unique situation. Everybody's situation is different. We can identify the best options for your tax preparation.

We can create a tax plan that will bring you peace of mind, that will bring you financial stability. It will make you be in a good situation where you're not paying more than you have to pay in tax. So listen to me. If you're hearing me, listen to me very carefully. Don't let another tax season pass you by without the confidence that comes from knowing you've made the best decision for your financial wellbeing.

Take that first step towards stress free tax season and book your call with me today. Again, that's at askralph.com.

And if you find value in today's show, please consider supporting us by buying us a virtual cup of coffee. Again, no one is going to show up here in my office with coffee, but your virtual support helps us continue to reach people with this message of hope, this message of Christian faith.

And by supporting the show, you can enable us to create more content that empowers individuals. That's what I want to do. I want to help people achieve financial success. I want to help people grow in their faith. And your support allows us to invest in better resources and better technology. Helps us to put this on more locations, more channels, more areas on the internet where people can reach it.

And it helps us deliver high quality, insightful episodes that make a real difference in people's lives because here you can be a partner in this. We can build a dedicated community to help people with their financial stewardship. So please consider supporting the show. You do that at askralphpodcast.com/support. Well, I know I've covered a lot today and that's all for today. So thank you for joining me and remember to check out tomorrow's show. We'll be discussing what if achieving financial fitness, ready for this one. What if achieving financial fitness was as easy as your daily workout?

That's exactly what I'm going to cover tomorrow. So as I always end the show, stay financially savvy out there and God bless you.

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