We’re fresh off the annual spectacle of the Super Bowl. The Chiefs and 49ers played a great game. But with my hometown Bengals long removed from the playoff scene this year, my family was there for the commercials. (Well, my daughter was probably there for the Taylor Swift sightings.)
Our personal favorite commercial in the McCarthy household was the “Mayo Cat” commercial. My middle son has an affinity for mayonnaise. He’ll pair it with any dish we serve, so “Mayo Cat” is now his spirit animal. 😄
So why are we talking about the Super Bowl commercials here on the blog today?
For accountants, Super Bowl is the official start of TurboTax commercials. The accountant community loves to scoff at whatever Intuit (parent company of TurboTax) serves up around this time of year. Perhaps the community feels threatened by the company that promises 100% accurate results or your money back. Or, that they now offer a “Live” service to match you with an accountant for one-on-one service for as low as $169 (Federal only, state extra, terms and conditions apply…).
As much as I used to cringe at seeing TurboTax ads this time of year, my position is that TurboTax is a good thing.
The Case for TurboTax
TurboTax fills a market need for those with simple returns. Until the IRS offers a wide scale and reliable alternative filing resource (more on that below), TurboTax and others like them serve an important role in helping taxpayers with simpler tax needs stay current on their filings.
Up until recently, TurboTax was a free file partner with the IRS and assisted taxpayers with adjusted gross income under $79,000 with free software to file their federal return. That was until 2022 when the FTC found that they had deliberately hidden the free file option from web searches.
This transgression has sparked the IRS to develop their own Direct File option. It is in limited rollout this year to taxpayers with income under $200,000 in 12 pilot states. The pilot excludes anyone with dividend income, capital gains, itemized deductions and retirement distributions.
If you have a W2 and a few deductions, in my opinion, TurboTax and the like are fine filing options for you. At this level, you simply don’t need to pay for my firm to file your return. Unless you really hate to spend a Saturday wading through the IRS 1040 instructions.
The Case for CPA Firms
So, when does it make sense to hire an accounting firm?
In my opinion, there are two reasons to hire us:
- Tax Planning
If you have equity compensation, your tax return just got a whole heck of a lot more complex whether you realize it or not.
We’ve seen countless TurboTax (and even other accounting firms) returns fouled up in the worst ways possible when it comes to RSUs, NQSOs and ISOs. The most common mistakes are not realizing the need to report stock option sales, missing cost basis and too-many-to-count errors involving ISOs and AMT.
Here’s the thing – TurboTax isn’t infallible. It won’t stop you if you’ve not given it all the info it needs. And their live experts are only as good as their underlying experience. At a minimum, Intuit requests 2 years of experience working on at least 30 returns per year.
What’s the chances that those 30 returns included ISOs? (The correct answer, folks, is -0-, nada, zip.)
If you have equity compensation, you want someone with experience.
A quick look over the TurboTax website will show phrases like “Biggest Refund”, “100% Guarantee” and similar expressions.
What you won’t see anywhere is a mention of proactive tax planning.
TurboTax can help you file your current year return. However, they are in no way helping you plan proactively for taxes for next year, 2 years from now, or over the next ten years.
With great complexity comes great planning opportunities. Equity compensation provides both, but only if you are working with a trusted expert that knows how to apply the tax rules in your favor.
If you’re looking for some help with proactive tax planning for your equity compensation, be sure to book an introductory call to find out more about our tax planning packages.