Tax test: Use a tax preparer or do your own taxes?

7:46 AM, Feb 28, 2012   |    comments
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ROSEVILLE, Minn. - You've probably heard the expression "the only certainties in life are death and taxes." Well, chew on this for a minute. There really isn't much certainty when you file your federal and state income taxes.

"The IRS did a study, you know. They went out to 19 different tax preparers and they found out they got 19 different answers and all 19 answers were wrong," said U of M Accounting Professor and tax expert Paul Gutterman.

We ran the numbers through three different programs with the Robinson family of Roseville. Joe is a sales executive and his wife Sara is a nurse practitioner who has student loans. They have a mortgage on a house in Roseville and a young daughter, Harper, in daycare. Their income tax return is pretty common and not too terribly complicated.

"He's actually good with it," Sara said. "I feel like there's a little accomplishment doing it," Joe added while punching in numbers on his laptop.

Robinson had two blanks to fill in on TurboTax when he arrived at H&R Block in St. Louis Park. There, he sat down with tax preparer John Rowell, and about an hour into inputting the numbers, Rowell asked Joe about his work miles. "I just kept the total amount of miles," he replied. When asked if he wanted to add them into the return, Joe said "I didn't want to risk getting audited."

Rowell said the record keeping was good enough and that adding in the miles would be "worth your while." After an hour and a half, he had his federal and state refund numbers from H&R Block.

When Joe got home from his tax appointment, he finished up his TurboTax forms (without adding in his work miles). He also inputted his numbers into TaxSlayer.com to finalize our pyramid of comparison.

Here are the results:

H&R Block: Federal return $4,490, State return $715. Subtracting $394 dollars in preparation costs, the total refund added up to $4,811.

Turbo Tax: Federal return $4,294, State return $401. Program cost $72; the total refund added up to $4,623.

TaxSlayer.com: Federal return $3,591, State return $259. Program cost $28; the total refund added up to $3,822.

Robinson said TaxSlayer.com didn't ask as many questions as the other two. A number of experts who have reviewed tax preparation websites highly recommend TaxSlayer.com for standard or basic returns.

University of St. Thomas Accounting Professor Rich Sathe said he's not surprised to see different numbers in different programs.

"Always with taxes there's some judgment involved and so how you interpret something when you put it into software...somebody else might interpret it differently when they do it themselves," said Sathe.

Professors Sathe and Gutterman say the tax software and websites are very sophisticated, thorough, and accurate. They also say having a tax preparer look over your return is not a bad idea for some peace of mind.

"I would say do what you're comfortable with," Sathe concluded. Gutterman agreed. "I think people have a gut reaction on what they're comfortable with and that's probably good."

(Copyright 2012 by KARE. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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