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Thursday, March 13, 2014

Battle of bookkeepers: Accountant vs. accounting software – Who wins?

Accounting software tips
Efiling taxes requires the use of accounting software
By  Sarah Parkar

Which option makes more sense for you: an accountant or accounting software for filing your tax return? According to an article by NBC News, about 70 million Americans used the IRS efile system in 2012.

That’s an estimated 99 million persons that were using some form of accounting software, even if it was their accountant who actually used the software on their behalf and filed the return electronically that year. By comparison, an estimated 40 million persons mailed in their tax returns in 2012. 

While the IRS does not release statistics regarding how many people have used a bookkeeper versus how many people have used a traditional bookkeeper, as there really is no way to be certain, it’s safe to say that a good majority still rely upon a traditional bookkeeper simply for the fact that even with accounting software there are still many confusing and obfuscating questions that linger for most filers. By contrast, according to its 10K SEC filing, Intuit, the maker of the popular accounting software Turbo Tax, raked in over $4 billion in annual revenue, and reported about $3.5 billion in shareholder equity in 2013; that's telling of how popular their tax software is.

This leads to the question at hand: Should you use modern accounting software or a bookkeeper?

Accounting software is great for simple returns

No matter how intuitive that accounting software becomes, it’s just not a human being. It is incapable of asking you important questions, or looking up every single deduction or situation that applies, regardless of how well it’s programmed. Accounting software is fabulous for simple returns that are not complicated. For many filers in the U.S., they have simple returns with no itemized deductions and relatively simple tax deductions that they are entitled to that can be easily assessed by a computer program. For these people, software makes the most sense because it can be a cheaper and faster alternative to using a traditional bookkeeper.

Complex returns always benefit from accounting experts

Benefits of tax accountants
Business accounting expertise benefits financial management
When filing complicated returns, such as those that involve trusts, stocks and bonds or dividends, IRA withholdings or withdrawals, itemized deductions, self employment income (1099), mixed returns, interstate returns, international reporting and other elements, an experienced bookkeeper seriously never has any replacement.

Just one error made by the unscrupulous and unknowing user can result in the return getting flagged for a review by the IRS. Furthermore, if the individual is then sequestered for a review, they won’t have a bookkeeper by their side when audited, if using software. If they, however, file the return using a bookkeeper, they assuredly will.

Maximizing deductions

For those who are filing complicated returns, an accounting expert nearly always earns their fee in the form of found deductions and knowledge. For example, a person who has settled past credit card debt may not be aware that the difference in the debt they settled must be reported as income. They also may not be aware that they can leverage that against their assets, and in some cases actually remove that settled debt from their income if they are considered insolvent. That’s something software won’t ever tell you, and that only an accounting expert can. As you can see, the answer is straightforward: software helps simple returns be easily filed; accounting pros help complicated returns see the greatest reduction in tax liability and the highest assurance of accuracy.

Author biography: Sarah Parkar is an internet marketer as well as a freelance writer. She is passionate about her work and has experience writing for a broad spectrum of topics. Parker continuously educates herself on the evolving practices of internet marketing, which is reflected in all her work. Her recent writings include comparison between accountant and accounting software. Follow her on Twitter/Sarah_Parkar.

Image licenses: 1. Ken Teegardin, CC BY-SA 2.0; 2. US-PD


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