Taxes

[Walker Seid]

what do you guys thing about using turbo tax instead of a cpa a a small time landlord? 

[Linda Weygant]

Full Disclosure:  I am a CPA who prepares tax returns for real estate professionals.  I also used to work for TurboTax as one of their Professional Advisors, so I'd like to think I see and know both sides of this issue.

TurboTax is a great piece of software for people who:

1.  Have pretty basic returns - ie, W-2, a couple of stock transactions, day care expenses, college expenses and other generic scenarios.

or

2.  People who have more complex returns AND a good working knowledge of tax code.

The issue for people without a good working knowledge of the tax code is not that TurboTax is bad for people with no knowledge.  It's human nature.  TurboTax asks questions.  You answer the questions.  TurboTax reports that information correctly based on your answer.

The problem is those last few words... "based on your answer".  

If you answer a question wrong, TurboTax will take you down a rabbit hole from which escape is very difficult and can require a couple of hours on the phone with one of their experts (ask me how I know this).  You also have to know what a question is asking and, more importantly WHY a question is being asked.

For example, people who rent out their homes on AirBNB.  The questions for this are complex and you really have to know the background behind vacation rental rules, business use of a home, rental income theory, etc in order to answer those questions so that TurboTax handles it perfectly.  Same goes for house hackers.

The biggest problem with TurboTax is that even their final "review" doesn't think critically.  It's just a program and it's designed to crunch numbers.  For example, it's going to ask you if you bought any equipment to depreciate.  But it doesn't really go into the De Minimus rules for what you can go ahead and expense, even though it's a piece of equipment.  It's not going to analyze whether it really is better for you to take Section 179 instead of regular depreciation on something.  It also does a somewhat poor job of analyzing mileage vs actual expenses on business use of personal automobiles .

For example, just because you **CAN** take 179 on a piece of equipment, it doesn't necessarily mean that you should.  A talented CPA will ask you about your future plans for the business before advising which type of depreciation to take.  There are all kinds of accelerated methods that are great for some scenarios while other scenarios really should use a longer term method.  TurboTax isn't going to advise you on that while a talented CPA definitely will.