Tax Software VS Accountant: Which One Is Better To File Your Taxes?

10 Min Read

Taxes

Scope of Work

Tools

Tom Smery

Tom Smery is a certified CPA for over a decade. In his free time, he writes articles to pass on his expert knowledge on taxes and accounting. Thomas has a wide range of deep knowledge on 1099 taxes, and finance topics. You can find him fishing when he is not preparing taxes for his clients or writing about accounting.

New Year's is getting closer and closer, and while everyone is enjoying the celebration feeling, one more thought lingers behind: tax software vs. accountant, which one should you pick?

Yes, the tax year is also coming to an end, which means that you'll have a bit of tax preparation to do. Should you hire an accountant to get the job done, or should you use tax preparation software instead?

Well, we are going to help you make a decision, allowing you to breeze through this tax season.

Note: If you want tax software to help you easily file and save money, then try Bonsai Tax. Our software sends filing reminders, estimates taxes, and automatically tracks your business expenses. We'll scan your bank or credit card receipts to discover potential tax write-offs so you can maximize your savings. Users typically save $5,600 from their tax bill. Claim your 14-day free trial today.

Tax Preparation Software

Using tax preparation software is a very popular option for people who wish to do their own online tax work. Comparing tax planning options such as TurboTax vs. an accountant, the software can be a more affordable option for tax preparers who want to save some cash.

If you have a simple tax situation to address, with not too many roundabouts, then there is also a free online option for filing your taxes. This often works best for those who only need a W-2. Packages are offered to people with complex tax needs as well (i.e., self-employed people) or those filing a 1099 with a W-2.

In most circumstances, the software won't leave you completely on your own either. TurboTax, for instance, will ask you questions along the way as you are filing for tax return.

Its algorithm was also made specifically to see if you are eligible for deductions under the tax law. This way, you will not have to hire a professional to see exactly what tax returns you are eligible for.

Tax preparation software can suggest 1099 deductions based on your domain or any other information that you may be able to provide. However, bear in mind that you are the one responsible for any potential representations you make inside the software.

Advantages of Tax Preparation Software

Using tax software comes with a few advantages for your personal financial situation. Comparing software such as Bonsai Tax, H&R Block and TurboTax vs. an accountant, here are the advantages that software brings you:

Smaller Cost

It costs less to calculate your income tax return this way. Since you are not paying a tax professional to give you advice, that money will go straight into your pocket.

Note: If you are looking to track all of your business expenses to save you money on your tax return, try Bonsai Tax. Our software is a fraction of the price you would pay in taxes. For example, our users typically save $5,600 from their tax bill. Try a 14-day free trial today.

Quicker Turnaround

You get a quicker turnaround for your tax returns, as you'll be able to sit there yourself and do the taxes. When hiring a tax professional, you'll have to wait on them, giving you a slower turnaround. If you are planning a quick audit defense, then this option might not prove to be too beneficial for you.

Easier to Use

With tax planning software, all you have to do is to answer the questions put your way. The algorithm of the tax software will take care of the rest for you.

Disadvantages of Tax Preparation Software

While tax preparation software does have a couple of advantages, there are also some disadvantages that you might want to keep in mind.

It May Be Lengthy

Unlike an accountant, you may not know exactly how to efficiently compile your personal financial information. You may spend hours trying to sort out your tax returns.

It May Be Difficult

An accountant has an eye for tax planning; it's what they were trained to do. However, you may not have such an easy time. When you don't hire a tax accountant, you might have difficulties in handling complex tax concerns such as for a small business.

It May Potentially Be Inaccurate

No piece of software is ever perfect. Bugs can happen, and mistakes in the compilation can change the entire course. Anyone who has ever dealt with software and computer science knows that a single missing bracket can change the whole result. If your input was not correct, it may lead to some very expensive mistakes in the long run.

You're the One Responsible

If you use tax software, you are the one responsible for filing your income tax. If you get audited, everything you file is completely on you.

Choosing an Accountant (CPA)

Those who do not want to calculate their taxes by themselves might decide on hiring an accountant instead. You may file for a Certified Public Accountant (CPA) online, or you may get one to work for you in person.

Hiring an accountant will take numerous problems off your hands when you are tax filing. Since they are trained to handle more complex concerns, you don't have to worry about any potentially inaccurate answers.

You are still the one responsible for your taxes. However, there are certain delicate circumstances where you might want to go for an accountant. These circumstances might include:

Owning a property and renting it out to other people
You are beginning an estate planning process
You are just starting with a small business
You are either retiring or you are starting a business partnership
You earn income from a source that is outside the United States
You are handling restricted shares and stock options
You are dealing with an AMT or alternative minimum tax

In the majority of the circumstances, you'll have to make an appointment in person. That being said, this can also be much slower and complex as opposed to an online appointment.

Meeting with the CPA face to face can be more convenient, as you can get some firsthand insight, along with more tips on how to handle your taxes. Dealing with taxes is often easier and more open when you have a professional in front of you.

Bonus Tip: If you have problems with the IRS or have been in conflict with them before, then you might also want to bring a professional accountant in the mix. A CPA may be able to offer you additional expertise on that matter.

Advantages of Using an Accountant

Accountants can have their benefits. Here is what you may reap by using a CPA:

They're More Knowledgeable

Rather than relying on an algorithm to calculate your taxes, a CPA relies on years of experience. While they may occasionally use a tax tool or two, most of their results come from the skills that they have honed over the years.

They Can Offer Insight

The average tax software only offers you the exact information that you need. A CPA, on the other hand, can also provide some nice tax hacks for business owners/ insight on that matter. They may also give you professional advice on how to handle your taxes in the future.

Disadvantages of an Accountant

Using an accountant as opposed to just TurboTax has its perks. However, there are also a couple of disadvantages that you may want to keep in mind.

They Are More Costly

Software such as TurboTax is typically more affordable when you are filing taxes. When you are using an accountant, you are paying for extra services - which will cost you more in the long run.

Potential Tax Return Delay

When filing for a tax return using tax preparation software, you get your tax return the moment you file your papers. However, it might take longer with an accountant, as you will also have to make an appointment.

Human Error

Humans are not machines - and just like machines, humans aren't perfect. As knowledgeable as accountants may be, human error can occur at any time, and this can cost you a lot in the long run.

Is It Better to Go to an Accountant for Taxes?

In some cases, it is better to go to an accountant to get your taxes done. If you do not have the patience, nor the time to prep your own taxes, then an accountant should help save you both time and money.

Taxpayers with a more difficult tax situation might also benefit from hiring an accountant. TurboTax might not be able to assess your current situation, but an accountant might have some personal insight into it. They'll take your business into account, your employment type, your lifestyle, and many more.

If you've also had a major change in your life, financially speaking, then you might also want to consider hiring an accountant. They'll be able to help you process the situation so that you do not have any tax problems.

Last but not least, if you don't trust yourself to calculate your taxes, then it is much better to go to an accountant. This way, you will be able to save money by avoiding some very expensive mistakes.

Is a Tax Preparer the Same as an Accountant?

While there are similarities between the two, tax preparers and accountants are not the same. Indeed, both can help you with your taxes, but a tax preparer's knowledge is often limited as compared to an accountant's.

Every accountant can be a tax preparer, but not every tax preparer can be an accountant. For instance, a tax preparer is only limited to helping you file for tax returns. However, an accountant will go deeper into your financial life. From life events to small business and tax returns, a certified accountant can take a wider range of accounting skills.

While tax preparers may have the knowledge to help you with your taxes, they do not usually have any credentials. Because of this, their knowledge may be limited when it comes to matters outside tax forms - something that may significantly affect your tax returns.

Do CPAs Use Tax Software?

We live in a time when technology is at a strong point - so, if there are any pieces that can help us do our job better, we grasp that opportunity. This includes tax software, which may be used by CPAs as well.

That being said, while a CPA can use tax software such as Bonsai Tax to calculate your taxes, they won't be relying on it entirely. They will use their own professional knowledge, and the tax software may just be used for some quick verifications or to quickly categorize receipts. This is very common with online accountants, as they can offer the best of both worlds.

Using all methods of calculation available gives the taxpayers some peace of mind. Both knowledge and technology should be taken advantage of when paying your taxes. As a result, even though they are CPAs, this doesn't mean they cannot use the software.

Is It Worth It to Use a Tax Preparer?

In most cases, using a professional tax preparer is completely worth it, especially if you know for a fact that they can do a good job. Even if they are not an official CPA, tax preparers still probably know more than you do, which will help you save money when you file taxes.

Tax preparers also have a better eye for detail as compared to you. They may find tax credit or deductible self-employed expenses that you may have normally missed. It may also take less time to file taxes, which takes care of the hassle in the long run.

That being said, if you have the funds, it is worth it to get a CPA rather than just a tax preparer. A CPA is an enrolled agent who has been certified in the business, so they can help you with bigger concerns than your tax forms.

The Bottom Line

In some cases, it is better to use an accountant in order to calculate your deductions. In other circumstances, it may be enough to use software such as TurboTax. You just need to determine how complicated your taxes are for you - and if they are too difficult to handle, go for an accountant.

What Defines a Verbal Contract?

A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.

Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.

Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.

The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.

Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.

When is a Verbal Agreement Legally Binding?

For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:

Offer and acceptance: An offer is made and accepted by another party involved in the agreement;
Consideration: The involved parties must exchange something of value (money, a service, time, etc), this is known as consideration;
Intention and certainty: All parties must fully understand the terms of the contract and intend to make a legally binding agreement freely; and
Capacity: The parties must have the capacity to legally enter into the contract; they're above age and of a stable mindset.

Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.

How strong is a verbal agreement in court?

Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.

If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.

That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.

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When are verbal agreements not enforceable?

There are some types of contracts which must be in writing.

The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:

The sale of real estate or vehicles
Real estate leases lasting longer than one year.
Property transfer following the death of the owner.
The case of a party agreeing to pay debt for someone else.
Any contract that requires more than a year to fulfil.
A contract involving and exceeding a specified amount of money (which varies by state).

Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.

Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.

How are Verbal Contracts Enforced?

Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?

How can you prove an oral contract?

Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!

If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.

Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.

Written vs Verbal Contracts: What's the Verdict?

Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.

So, ultimately, the question is: written or verbal agreements?

Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.

Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.

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David Urbinati

Motion design / animation

Say hello to digital contracts

Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.

There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.

Benefits of written contracts

A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.

Create Professional Contracts with Bonsai

Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.

With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.

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