Scary Tales Of That One Time I Used A CPA

Taxes are on everyone’s mind lately, now that most of us have gotten our tax forms in the mail. One of the common tax questions I see around is around what tax software to use, and whether or not to use a CPA.

Every time I see this question, I get a flashback to the one time I used one. They totally messed up my taxes – by thousands of dollars. And the only reason I caught them is that I’m familiar with the tax law.

So grab a coffee, or tea, and learn more about why I use Turbo Tax rather than a paid professional. I’ll also give tips for you to be able to avoid the mistakes I made, and I hope you’ll give some more tips in the comments.

Setting The Scene – My Background

I’m very familiar with accounting.

As in, I was an accounting undergrad. I graduated with high honors, and generally excelled in my accounting courses. In fact, if my life had been different, I’m pretty sure I would have ended up as an accountant.

Why didn’t I? Three reasons:

1 – I got a job in IT November before my graduation from college.

2 – In February before I graduated I learned that I was going to become a mom.

3 – I graduated in 2003, right around the time of the Arthur Andersen, Enron, and Worldcom accounting scandals. There were lots of accounting majors looking for work in a hard time ,and many of them couldn’t find jobs.

This timing meant that it made more sense to stick with IT rather than try to find a job in my field. I finished college in August, my son was born in October, and after my maternity leave, I was only able to find work in IT.

It’s worked out fine for me, in that I’ve built a great career in IT. Leaving accounting wasn’t really a choice so much as something I felt stuck with.

I was able to indulge accounting as a hobby, though, through both my personal finances and doing my taxes.

I kept up to date on the tax law by reading up on major changes. I actually did my taxes by hand for a long time, that’s how much of a nerd I was.

So suffice it to say I know more about taxes than your average person.

The Year I Needed Help

This all happened back in the same year my husband almost died – 2012. He entered the hospital in mid-March and didn’t come home until mid-April. Tax time. But taxes were the last thing on my mind with everything else going on.

I was busy juggling full-time work, my MBA, two kids (at the time), school, new daycare (my husband had been the caregiver), rehab, visiting nurses, doctor appointments, etc…

Frankly, reader, I forgot to do my taxes and only realized it a few months later.

By the time I realized, things were a bit better. My husband had recovered to the point where he could take care of some things, so I asked him to find a CPA. Given that we hadn’t filed, and hadn’t filed for an extension, we were in “unknown tax territory”. I wasn’t really sure what to do and figured a CPA could help us navigate the situation.

Boy, was I wrong.

The Sad Story

Our tax situation isn’t that complex. We didn’t own a business. I had W2 income, costs from my MBA (education deduction), a home (mortgage interest deduction), some investments, interest, etc.

But we did have one slightly less common thing – a Roth IRA distribution. I had taken some contributions out of the Roth to help cover something while my husband was out of work. I wasn’t worried about it, though, because I knew you could withdraw your contributions any time tax free. As long as the account was open five years, we were golden.

Right?

Yes, right, but apparently this CPA didn’t know that. When my husband brought the tax return home for me to sign, it showed we owed quite a bit of money.

I was shocked, because we usually got a small refund. What had happened? That just didn’t seem right.

A quick read of the return showed exactly what was wrong. What happened was this particular CPA didn’t notice the little word “Roth” in front of the IRA and treated it like a distribution from a traditional IRA.

Even though I immediately found the mistake, as in the day my husband brought it home for me to sign, somehow they had already filed the tax return without my signature. Not sure why or if they were supposed to do that, but I was angry.

I sent back to her the part of the tax code that addresses the treatment of Roth IRA’s, a list of all contributions, and a pointed note. My husband tells me she acted like it was all my husbands fault, because he had signed the return. Instead of like it was her fault, for doing our taxes wrong.

So she re-did them, sent in a correction, and lo and behold we were getting a refund. How about that. I’m not sure how much she liked my print-out of the tax code, but frankly, I was too angry at that point to care.

I’ll Never Use A CPA Again, Unless…

At a time in my life I really could have used competent help – the one time I needed assistance – I just learned that I could only count on myself.

Ever since, I’ve been using Turbo Tax, because I just haven’t been able to bring myself to hire another CPA.

Looking back and reflecting on this experience, here’s what I think I did wrong – and what I would do differently next time.

1. I let my husband pick the CPA. This sounds insulting, but it’s really not. I’m the one that knows about tax law, so I really should pick a tax professional, not him. At the time it just seemed too overwhelming to me with everything else going on.
2. I didn’t think to send instructions. I probably could have typed up a letter explaining our tax situation and what I needed help with. This likely would have prevented the mistake, because I would have summarized the tax treatment of the ROTH. Then again, if I have to do that, why am I spending so much money on a CPA?
3. I didn’t interview them. See again my husband picking the CPA. If my tax situation gets more complex in the future, and I need a CPA, I will not only pick the candidates but will also interview them. Here are some good questions I found in case you want to interview one. And here are even more questions.
4. I didn’t get referrals. My husband found this CPA on Google, rather than through referrals. Now, in fairness, none of our friends uses CPA’s, so there weren’t a lot of people to ask. My family mostly uses tax software. But I could have asked co-workers and gotten a referral.
5. They were in my town. My town is not exactly a hub of high-skilled professionals. Frankly, I should have looked specifically at a town about 20 minutes away. It’s too expensive for us but filled with higher income people and higher-skilled professionals. I’m fairly certain we could have found a good CPA there.

I was young and naive – figuring that a paid professional could figure out this tax situation better than I could. But I was wrong. I should have done due diligence, even though I didn’t want to.

Does This Mean You Shouldn’t Get A CPA?

In a word, no, it doesn’t mean that. You should certainly hire a CPA if you need one. You just shouldn’t make the same kinds of mistakes I did.

My situation is unique. I was young, desperate for help, and went about finding a CPA all wrong. And in all likelihood, your CPA won’t make a big mistake like mine did.

It hasn’t turned me off against the profession. Most CPA’s are excellent at their jobs, hard-working professionals, and honestly, mistakes are part of being human.

If you find yourself in need of more professional tax help than you can get through tax software, just be careful. Interview a few different candidates, gather their fees and ask hard questions. Be sure to provide them with all the information you think they’ll need, and don’t be afraid to write notes about unusual tax items.

I Want To Hear From You!

Do you use tax software, or a CPA? If you use a CPA, how did you find them – and how did you figure out they were a good one? And if you are a CPA, what advice would you have to a young, scared, stressed person who is in the situation I was in?

Let me know in the comments!