I have been receiving questions like this one from Ohio CPA Dana Stahl from other tax pros every year since the 1980s:

I've seen lots of advertising by TurboTax on TV lately. I wonder if this may cut into our tax prep business to some degree, as has been predicted many times by various commentators (who say user-friendly tax software will take away much of our market!). One story concerning me: I heard from a tax client who said she wasn't coming back this year. She said she took my data from her 2003 1040 & inputted it into TurboTax, which resulted in an additional $7 refund. Therefore, I must have screwed up when I should have gotten her another $7. I told her to send me a copy of that 1040, and that this was probably due to rounding or something. Oh, well, another one bites the dust.

My reply:

Assuming that your client's TurboTax actually came up with the exact same figure for taxable income as your program did, a slight difference in the tax is quite possible based on the method the programs use to calculate it. If they do an exact dollar percentage calculation, there will be one figure. If they use the IRS tables, which use $50 wide brackets, there will most likely be a slight difference.

I have seen the tons of TurboTax commercials on TV. My opinion on TurboTax and other consumer tax prep programs as a threat to our profession hasn't changed one bit since they were first made available back in the 1980s. If there was ever a perfect illustration of the old GIGO (garbage in, garbage out) maxim, tax prep software is it. This covers all tax software, including the heavy duty and very expensive programs that we professionals use.

I have never discouraged my clients from using TurboTax. In fact, I used to have several clients submit their annual tax info to me on a TurboTax print-out instead of my normal organizer forms. I would then enter that data into my tax program and the bottom line numbers never came out the same because I was able to use my knowledge to better enter the info to reduce the clients' taxes. I don't have as many doing this any more, as we have mandated most of them to use QuickBooks and to just send me a copy of their QB data file.

As I've said since the 1980s, form filler tax services, which just enter numbers onto tax forms (manually or via computer) with no thought as to the various options that may be available, do have a lot to fear about losing business to software like TurboTax. This could very well be the case for the super simple 1040A and EZ clients, which are the bread and butter of the assembly line tax prep outfits. However, we all know that with each additional tax schedule and type of transaction to report, there are dozens of options for how they can be reported in order to minimize the tax hit. This takes much more brain power than the form fillers have and makes those of us who keep up on the tax rules worth the big bucks we charge. I know it sounds crass, but clients who are too dense to understand this aren't who want to be working with.

Just as with the emphasis on doing your own work and not sending it to India, you may want to highlight something like the fact that you and your staff are entering more than numbers into your computers. You are entering your years of experience and vast knowledge, things that are not included in cheap do it yourself programs.

Anyway; those are my thoughts on that.

Kerry

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 1/27/2005 08:14:00 PM Send this post: