Accountant or software?
What's the best way to prepare returns?
For 26 years, Steven Lipsitt has been preparing his tax filing using a calculator and pencil. But the Brookline freelance musician decided it was time for a different approach.
"I never wanted to chain myself to the desk and do it," said Lipsitt, 49. Over the years, taxes have become a "huge source" of disputes with his wife, Mara Krechevsky.
This year, Lipsitt enlisted some help. First, he used an online tax preparation program. Then, he agreed to let the Globe have an accountant prepare his filing. The goal was to find out whether the software and the accountant would arrive at the same results.
According to the Internal Revenue Service, more than 33 million Americans who filed their taxes electronically have used a tax professional so far this year, up almost 4 percent from the same period in 2007. While most electronic filers are using a professional, the number taking the do-it-yourself route this season is rising even faster, up more than 15 percent to 15 million taxpayers. Many who seek professional help have more complex tax issues such as multiple sources of income.
Lipsitt and Krechevsky's taxes are complicated because a substantial portion of the $100,000 they earned last year came from contractual work. Besides his main job as music director for the Boston Classical Orchestra, Lipsitt brings his musical expertise to other venues. The Boston Pops hired him last summer to guide TV cameramen taping its live performance on the Fourth of July, cuing them to solos. Krechevsky, 49, analyzes teaching methods at Harvard University's Graduate School of Education, but she also leads workshops, speaks at conferences, and collects royalties on three books about her research.
The couple's investments add to the complexity. They have merger-related stock gains, mutual funds run by different firms, business expenses, and an Israel bond. The couple also has two children. Even as filing became more convoluted - and their tax fortunes have seesawed between $2,000 refunds some years and tax bills up to $5,000 in others - Lipsitt shunned professional help.
"It was the same impulse that keeps you from asking for directions," he said. "I didn't want anyone to see how homegrown my method was."
A few years ago, Lipsitt even brought along his tax forms on a late-July family vacation to Mystic, Conn. At night, he toiled beneath a hotel desk lamp while his children slept, losing his work each time he accidentally nudged his solar-powered calculator away from the light.
"I give you credit for attempting to do your taxes yourself on paper," Wes Rickard, an accountant at Quin, Rickard, Lipshires & Grupp in Norwood, said to Lipsitt after looking at his prior-year filing. "I haven't done a tax return on paper in 20 years, and neither should you."
But what if he had help from a Web-based tax preparation product? After plugging his family's information into the $29.95 TurboTax Deluxe edition for three hours, and answering the program's questions about everything from clothing donations to car maintenance, the final tally appeared in red: They owe $9,911.
Next, Lipsitt visited Rickard, a second-generation certified public accountant. Without seeing the results from TurboTax, Rickard began dissecting Lipsitt's 2006 filing and spending two and a half hours discussing the couple's work, expenses, and investments. He noted several mistakes. "You're a dangerous man, Steve," Rickard said, in jest.
During the next two days, Rickard probed for more savings, adding overlooked deductions such as homeowner's insurance, excise tax paid on their cars, and some seemingly minor expenses. Krechevsky's 50-mile round-trip drive to Randolph for a workshop knocked $20 off their tax bill.
Last, he urged them to shift some investments to a retirement account by April 15. Doing so would keep $1,113 in their pockets.
By Rickard's calculations, Lipsitt and Krechevsky owe $8,099. The catch? They would have also owed Rickard $800 if he hadn't donated his services for this article. Still, after lumping in that fee, Rickard saved them more than $1,000.
A few user mistakes and points of confusion caused the gap in results, which would have been $500 more if Lipsitt hadn't inadvertently claimed two expenses twice. In one mix-up, Lipsitt incorrectly claimed dividends from stocks owned by his children as income because Krechevsky's name was also listed on the account. Parents aren't required to claim gains from investments held under their children's Social Security numbers.
"When it comes to taxes, kids are a nuisance," said Rickard, half-jokingly. Children come with their own slate of tax rules. In between play dates and trips to the pediatrician, parents should try to squeeze in some time with an accountant, he said.
TurboTax vice present Bob Meighan said his company's software can handle almost any tax situation. Most mistakes are caused by information entered incorrectly. Consumers can call the company's tech support if they're perplexed. They can also pose their questions to accountants through the company's message boards, he said.
But even Meighan concedes that there are a few cases in which he would recommend that users see a human, including those that involve income from multiple states.
IRS spokeswoman Peggy Riley said that online programs are suitable for about 90 percent of filings, especially if a taxpayer has all relevant documents. But for people who've gone through a major life change, sold investments, or bought property, an accountant may be the way to go, she said.
Tax preparers, whether amateur or pro, often have to interpret rules and decide whether they apply. For that reason, consumers need a basic knowledge of tax law to get the best results from an online product, said Cynthia Brandt, an accountant in Woburn. The US tax code gets tweaked every year, and uninformed decisions can lead to audits.
Lipsitt said his tax test proved invaluable, but Rickard's $800 fee gives him pause. He wonders if he could apply the lessons he learned from their meeting and avoid a high fee by using an online program next year. For now, the numbers speak for themselves.
"If you just look at the hard, cold facts, it was worth it," he said.
Danielle Kost can be reached at dkost@boston.com 