AUSTIN -- There are some big reasons to look more closely at your tax returns this year.
A flood of last minute tax changes that passed as part of the fiscal cliff deal have even some resolute do-it-yourselfers turning to professional tax preparers.
We wondered if it's really necessary to pay someone to do your taxes? So we decided to embark on the KVUE tax test.
Mark and Leslie Nelson have always done their taxes on their own. But after Leslie started a home business they were eager to volunteer for help.
"It's becoming more complicated as our life is becoming more complicated," said Mark.
"Just being sure of what we can and can't write off," Leslie said.
We asked them to do their taxes online using Turbo Tax and also had them go to a CPA at Five Stone Tax and to a tax preparer at H&R Block.
Then we took those returns to an expert here at St. Edwards University.
"There were basically three areas that popped out," said Louise Single, Ph.D.
Single has been teaching taxes for nearly 20 years. She found the Nelson's first mistake on their Turbo Tax return, when they deducted $10,000 worth of medical expenses.
"The amount you deduct has to exceed seven-and-a-half percent of your total adjusted gross income. That’s a pretty big number,” said Single.
“The Nelson's didn't meet that mark. That would jump right off the page. I would expect them to get a letter from the IRS questioning that."
"We could have hit the wrong box," said Leslie.
Another mistake: H&R Block failed to deduct the couple's home mortgage insurance premium. And the Nelson's deducted too much.
Single says third red flag for the IRS: home office deductions. She found big differences in all of the returns there.
The couple claimed $20,000 in deductions, the CPA $16,000 and H&R Block took the standard home office deduction of $12,000.
H&R Block also used an Idaho address for Leslie's home business, which is incorrect.
"The CPA was the most conservative,” said Single.
The CPA got Mark and Leslie the smallest return.
Here’s a rundown of the returns:
- CPA: $1,952
- H&R Block: $2,627
- Turbo Tax $3,820
Here's what they cost.
- Turbo Tax: $135
- CPA: $350
- H&R Block: $428
The H&R Block bill was $200 more than the estimate they gave Mark and Leslie.
"It was a lot more than I thought it was going to be and when questioned about it, they were kind of harsh with their responses," said Leslie.
Single says the CPA did the best job putting the Nelson’s at the least risk for an audit.
"It appears they disregarded things that might be more controversial," said Single.
As for the big takeaway in the KVUE tax test -- "In certain circumstances people really probably shouldn't do their own tax returns," said Single.
In the end Mark and Leslie opted to stick with their Turbo Tax return, originally because it gave them the biggest return, but they're having to amend it with the help of Single.
H&R Block didn't respond to KVUE's request for a comment.
Five Stone Tax said in part: "Five Stone Tax is passionate about serving the Austin community by reducing their tax burdens. Our CPAs leave no stone unturned to ensure two things:
1. Maximize deductions
2. Minimize audit exposure
Most audits result from Preparer mistakes and oversights, which is why we review prior year’s returns to ensure accuracy and make sure our clients did not overpay in the past. Our tax preparation services include tax planning, helping clients achieve maximum tax relief both now and in the future, something rarely done by Tax Preparers. In other words, we’re not your Daddy’s CPA firm."
Help finding a CPA
The Austin Chapter of the Texas Society of Certified Public Accountants has a terrific tool to help you find a CPA to help you with your taxes or other financial issues. Go here to learn more.
Two things to save you money on taxes
Single says there two things people can do to help themselves and lower their taxes -- put money into your 401k and into a Flex Spending Account.
The Nelson's would have saved $524 this year just by using an FSA for their medical expenses. This calculator can help figure out how much to set aside.