For Andrew and Amanda Glasgow, life is hectic. The young Brooklyn couple juggles time with their new baby, Jacob, full-time jobs, even a new home and mortgage.
Amanda says they agree on pretty much everything … except on how to file their taxes. "We have this argument every year. I'm always on the side of Turbo Tax. … He's always pushing for an accountant."
Amanda, a PR consultant, likes the flexibility of the do-it-yourself approach and Andrew, a marketing manager, admits he has trust issues and likes to leave things to the professionals.
So we gave them a challenge: prepare their taxes three times in three different ways. For Andrew it will put to rest their long-running friendly feud. "It will end our eternal debate."
At-home tax software is a booming business. In 2007, 40 million Americans used it to do their taxes, an increase of 17 percent over 2006.
Turbo Tax cost the Glasgows $44.95 and came with an audit risk meter that analyzed their return before they filed and assessed the odds the IRS would come calling. Turbo Tax says as a whole, the IRS audits less than 1 percent of the people that file -- 0.93 percent to be precise.
Total Time: 2 hours
Turbo Tax Cost: $44.95
Total Tax Refund: $699
For Amanda, it was a winner, "It's quick. It's easy. The one con to it, it's just you and the computer. If you were nervous or had a weird thing on your return maybe you'd want to have a real human." For Andrew, "You kind of feel like it doesn't let anything fall through the cracks. It prompts you."
Next they were off to find a real human at H&R Block, where tax pro Vincent Vasquez worked on their tax return.
The average cost to file a return at H&R Block is $200; an extra $30 will buy what's called "The Peace of Mind Guarantee." The company will represent you if there is an audit and pay up to $5,000 if an error is made.
Total Time: 50 minutes
H&R Block Cost $438.75.
Total Tax Return: $699 (exactly the same as Turbo Tax)
Finally the Glasgows went to see the big gun -- Dennis Abramowitz, a 30-year CPA veteran who charges anywhere from $300 to $750 per filing depending on the complexity.
The Glasgows say he offered much more than just doing their return, such as financial advice that could yield a bigger return next year.
Abramowitz says easy ways to get the most out of your return: "Max out your 401(k). Contribute to Medical Savings Accounts. Contribute to 529 plans. Consolidate home equity loans and mortgages to take advantage of the currently low interest rates. Group medical and large dental expenses that might span two tax years into one year, by prepaying your bill or charging the balance on your credit card before the tax year ends. And finally take the energy credit for your home by installing energy saving windows, doors and insulation."
Abramowitz also had a warning for people looking for accountants to get creative to save money: "Embellishing can hurt you now more than ever before. The IRS is cracking down hard on things like business expenses and charitable contributions, looking for extra documentation that may have been overlooked in the past."
Hanging on his every word Andrew said, "He was able to contextualize it to our everyday life and how we can make changes."