Your CPA Can’t Save You More


Every year I spend $49.99 to buy the H&R Block Premium Edition software to do my own taxes. And every year someone scoffs at me for spending a couple hours of my life learning, understanding, and optimizing my finances to pay the least amount of taxes legally possible. A part-time tax preparer who’ll make $375 doing my taxes isn’t going to know more than me. A full-time tax preparer with a CPA who charges $1,000 might be worth it. But after doing my taxes for 12 years, the only way the CPA will save me more money is by cheating. There is no magic that only tax accountants can use to reduce taxes.

The best way to learn about something is to do it yourself. Remember when you were growing up and your mom taught you how to do a math problem, only for you to completely forget how to do it come test time? How about reading all those SAT test prep books and then getting a mediocre score because you didn’t take enough sample tests? Being instructed on how to do something is helpful, but getting in the weeds and solving different variations of the problem over and over again is the only way to achieve mastery. The same concept goes for understanding and minimizing your taxes.


1) Nobody cares more about your money than you. Do you really think some tax preparer is going to care as much about your money as you do when he’s got another 50 reports to do after yours, on tight deadlines? Of course not. He most likely has neither the time nor the interest; you, however, are motivated to read everything you can about rental property depreciation, mortgage interest deductions, alternative minimum taxes, and so forth. Tax software is so sophisticated nowadays that even someone with no experience can do their own taxes. All you need are all your documents to plug in the numbers.

2) You can create test cases. My favorite thing about doing my own taxes is creating pro forma scenarios of what my tax liability will look like based on various levels of income and deductions. If you really want to know what making $1 million a year means, input $1 million into the software and see how much you get bent over. Then try entering a poverty wage, or a median household income, and see just how much (or how little) is left over. Thinking of seeing how much a mortgage can help reduce your tax liability? Plug one in based on a realistic interest rate to find out. You can also see how your tax liability changes if most of your income comes from dividends, long term capital gains, and rental income instead of earned income. Once you figure out what’s ideal, you can make appropriate changes instead of flying blind.

3) Gives you goals to strive for. My goal each year is to pay no more than $40,000 a year in federal income tax and $10,000 a year in state income tax. With a $50,000 limit in mind, I figure out income goals for each type of income stream to achieve this balance. You might have goals such as doubling your income, or reducing your tax bill to under $10,000 a year total. It’s easier said than done. Doing your own taxes lets you map out specific goals across your various income streams.

4) Makes you reduce costs. Paying for something in cash hurts more than paying for something with a credit card because cash is tangible and requires the act of counting. When you’ve got to input your W2 tax figures, HOA costs, and business costs one by one, it hurts! And because it hurts, you’ll be much more cognizant of figuring out ways to reduce costs.

5) Increases your knowledge. Teach a person to fish. The reason why so many people get screwed over with bad purchases, expensive mutual fund fees, and higher than necessary interest rates is because people who know better take advantage of people who don’t know better. Think about the classic situation where an unassuming person brings in her car for an oil change and comes away with $1,000 worth of repair suggestions. It happens all the time. The more you know, the more you’ll be able to protect and grow your money.

6) Saves you time. For the first two years after college I allowed tax preparers to do my returns. Each time I had to gather my documents, schedule an appointment, pay for parking or transportation, and sit down with them for at least an hour to explain my situation in order for them to do my taxes to the best of their ability. I also had to go back again to answer any other followup questions, pick up my documents, and pay the bill. Now I don’t have to explain myself to anybody. I can do my taxes from the comfort of my own home and pay for everything with clicks of the button thanks to the internet. If I need tax help, I can utilize H&R Block’s help service or simply search for questions online.

7) Saves you money. $49.99 is cheaper than $375 or $1,000. The biggest fear is that a self-preparer somehow screws up on his/her taxes and owes more or gets less back than possible. The simple solution is to double and triple check your work by going over each step. Your tax software will also check for errors as well. You’ll learn that there is no more a CPA can do for you if you are doing your taxes right. All those commercials about a tax software finding you extra money are targeted towards people who don’t know how to follow instructions and do their own taxes properly. The most common errors I see are: 1) forgetting to input the cost basis for your securities; 2) forgetting to include all costs associated with your rental such as the HOA, mortgage interest, marketing, cleaning, repairs, and travel expenses; 3) forgetting to include all interest income; 4) double counting your primary mortgage interest; and 5) forgetting to input all your charitable deductions.

8) Keeps your privacy. If you are a private person who doesn’t want anybody to know your business, doing your own taxes is the way to go. Think about all the bank tellers who know exactly how much you have with their institution every time you deposit a check. Very few of them stay for more than a couple years, so the longer you are around, the more people know about your finances. We derive comfort from returning to the same primary care physician year after year partly because of trust, but also because of privacy.

Below is the 2021 Federal Income Tax rates:

 2021 Federal Income Tax Rates


It should make everybody sick to their stomach that the government usually takes more from you than you can save. I introduced the Total Income Taxes to Total Savings (TITTS) ratio to motivate you to save more and reduce your taxes. Everybody should shoot for a TITTS ratio of 50% or lower to get ahead.

Most people will ignorantly go through life not knowing where their money is going. If more people did know how their money was being spent, I strongly believe the government would be much less corrupt and much more efficient with fiscal spending because there’d be more accountability. With more efficient spending, we could see a large positive shift in GDP and lower unemployment.

The most pragmatic solution is to probably have someone do your taxes the first time around. Sit down with him or her to go over your entire tax form and ask questions along the way. Once you’ve grasped the basics, go ahead and do your taxes online on your own. You might make some mistakes here and there, but don’t worry, the IRS isn’t some cruel organization who will punish you to oblivion. After several tries you’ll never want to let anybody do your taxes again.

I’ve used H&R Block Online for the past 11 years now because it’s easy to use, contains five free federal e-files, and works just fine. They have several local offices that I can visit in the event I have questions, unlike other tax software companies. Just make sure to get the version that best suits you.

Tax Savings Recommendation

Start A Business: A business is one of the best ways to shield your income from more taxes. You can either incorporate as an LLC, S-Corp, or simply be a Sole Proprietor (no incorporating necessary, just be a consultant and file a schedule C). Every business person can start a Self-Employed 401k where you can contribute up to $54,000 ($18,000 from you and ~20% of operating profits). All your business-related expenses are tax deductible as well. Simply launch your own website like this one in under 30 minutes to legitimize your business. Here’s my step-by-step guide to starting your own website.

Start a simple business to pay less taxes and contribute more to pre-tax retirement accounts

Start a simple business to pay less taxes and contribute more to pre-tax retirement accounts

Updated for 2021 and beyond. Taxes are at the lowest levels they’ve been in years. Take advantage to make more money and invest for your financial future!

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