Listen & follow The Money with Katie Show: Apple Podcasts | Spotify | Google Podcasts

Dozens of you asked: Is it time to graduate from tax programs like TurboTax to a CPA? We bring in Tim Steffen, a CFA, CFP, and CPWA at Baird Wealth, for another Rich Girl Roundtable. We'll walk through whether you need a CPA or not, when to look for one, and what to know about fees.

💰 JOIN THE 2025 MONEY WITH KATIE WAITLIST FOR 25% OFF AT LAUNCH

Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our Chief Content Officer and additional fact checking comes from Kate Brandt.

Subscribe to the Money with Katie newsletter:

Katie:

Welcome back, Rich Girls and Boys to the Rich Girl Roundup weekly discussion of The Money with Katie Show, although today is a Rich Girl Roundtable. Instead, I'm your host, Katie Gatti Tassin, and every Monday morning we discuss a relevant money topic a little more casually than we do in our Wednesday deep dives. Here's a quick message from our sponsors

Before we get into it. This week's upcoming main episode is about all of you, Rich Girl Nation. We recently asked for community members to submit their budgets, their incomes, all sorts of dirty details, and we learned a lot. So we'll use this opportunity to share more about our community-wide medians, little interesting tidbits and themes and more. It's also an interesting opportunity to experiment with productive comparison to explore how hearing this type of information makes us feel. And this can be a slippery slope, so we shall traverse it together. Alright, onto the roundup. Well, the round table Henah, how are we today?

Henah:

I'm excited. We have a great guest. So excited to hear from him. This week's question came from about 8,000 separate people, and the main question is, when is it time to graduate from ye olde TurboTax to finally getting a CPA and today, since neither of us are CPAs or CFPs, we're bringing in the big guns. Tim Steffen, he is both a CPA and a CFP, and he's a certified private wealth advisor as well as the director of advanced planning for Baird, which is the same firm that our dear friend Eric Jones is from. So Tim, welcome to the show.

Tim:

Thanks for having me. Nice to be with you both.

Henah:

Absolutely. Let's start with maybe the larger question at hand. When is it time to graduate? I know for me when my taxes were pretty straightforward, I worked in one state, I didn't move. I had one job the whole year. I stuck with the automated program. Katie, what about you? When did you move to a CPA?

Katie:

I think when I started having a substantial self-employment income as well as W2 income, though he doesn't file my taxes for me. My guy's name is Terry, he's also my grandma's accountant.

Henah:

Ah, grandma Jean, shout out.

Katie:

Yes, shout out Grandma Jean. Everyone's favorite Rich Girl Matriarch, but he's fantastic. I pay him by the hour just to ask him questions, so I will file them, but I'll set up an hour long call and be like, Hey, is this a write-off? Can I do this? Or like, Hey, these are things that happened or this is income I have this year. Anything that you think I should be aware of or think about because I do like to file my taxes a little strange in that way. So I do pay him for his ad hoc advice and then I just do it myself. But that started, yeah, when I had substantial self-employment income, I would say.

Henah:

Yeah, my taxes got super complicated when I lived in New Jersey, worked in New York, then moved to California and my husband got severance from New Jersey and that's when I was like, I'm going to work with a CPA. So Tim, what is your recommendation on when it's time to move from DIY to a CPA?

Tim:

Well, the easy answer is probably whenever you start feeling a little overwhelmed or you're unsure if you're doing it right, is there something I'm missing here? Should I be doing this? That's probably the easiest thing to think about. I think both the examples you both gave are perfect scenarios of when it makes sense to bring somebody in multi resident state or multi-state issues, particularly if you're dealing with New York and New Jersey and you've got some city taxes involved. It really does hate to have somebody help you with that. And Katie, your point about being self-employment income, that's really the biggest one that we see. If you've just got a W-2, most people can probably do it themselves. Your situation's not that difficult, especially if you're not married, you don't have kids, you don't have a house. Just a straight W-2 is pretty straightforward. You start getting into businesses, side business, self-employment income, it gets complicated quickly.

Katie:

What about real estate when people own a bunch of rental properties? That's also been one where I am not super clear on how those rules work, and so I think if that were me, I probably would be seeking professional help in that instance too.

Tim:

Yeah, that's another great example. So rental properties, we got multiple ones, but even one, you start getting into issues like depreciation. Depreciation is not something that even frankly a lot of accountants like to deal with, but that's why we have computers that do a lot of the hard work for us. But then you get into passive loss limitations and at risk limitations and all these things that most people would never have even considered. You get a loss, you take a deduction for a loss. There's rules that prevent those kind of things. So it's always best to have somebody looking over your shoulder, even if it's just like you did Katie, where you just have somebody to bounce some questions off you. That can be a big help. But if you start getting into these schedule leads and schedule Cs and some of these other forms that are out there, having a third party to actually go through and fill those out for you, I think is well worth the expense.

Especially if you get the dreaded notice in the mail from the IRS and now you don't really know what to do. Those can be kind of intimidating. They're not always really hard to deal with. Sometimes they can be very simple. I think in this era of understaffed, overworked IRS agents response times may not be what you and I would expect them to be for our businesses. So you got to have a little patience when those things happen. But that's where having somebody who's been through the battles on some of these things can be really valuable.

Henah:

Previous Rich Girl Roundup listeners will remember I had an $8k tax bill one year from both not me withholding properly and my husband getting a large severance, and it was that time at which I was like CPA, please help me. And she was able to point out so many deductions that even if I had Googled, I wouldn't have been able to understand what they were. So I think that's a great case. I guess for people who do have the straight up W-2, they may not need a CPA. I know obviously there's Tax Act, which Katie and I have both used, which has been a previous sponsor of Money with Katie. We've had TurboTax, HR Block. I think there's also some lower free filing programs. Tim, are you able to speak to any of those a little bit?

Tim:

Well, I can say from my personal use, I've been a TurboTax guy for a long time. I've used it. I've had no issues with it, but I also was in public accounting for a long time. So I understand how these things work and I know what the forms are supposed to look like and how the numbers are supposed to flow. So if I see something that doesn't quite pass a small test, I know I have to dig in a little further and that's happened a couple of times. Most of the software packages I would say are going to be fine for the W-2 and maybe a couple of small 1099 interest or dividend items. You've got even some of the deductible stuff, you've got some taxes, some mortgage interest. The programs are going to handle that just fine. They're going to walk you through it again as soon as you start starting a new business.

There's a lot of things that have to be done on that first year return. You got to make sure you get right. If you are involved in a partnership, for example, or an S Corp and you're getting a K-1 out of that, first of all, those returns themselves, those are an automatic, I would never have any non CPA or tax specialist prepare a business return like a partnership, S Corp or a trust, all of those things I would absolutely recommend you get a professional to deal with. When I was in the business, I didn't even like doing those returns. You got to be specialized in those. There's some unique things with those that you have to really be ready for. So then just taking that and putting on your own return these pass through entities, these K-1s, they could be tricky and I'm not trying to carry water for the CPA world out there. They're great people and they can do this on their own, but I just know from experience, having looked at a lot of tax returns over the years for clients of ours, it's easy to make mistakes. It's worth the effort and the expense in most cases to hire a good CPA.

Katie:

Tim, I want to ask a clarifying question. You mentioned S Corp and these pass-through entities. You are a CFP and a CPA and you are also a wealth. So you have all these different designations and the scope of your knowledge is very broad in that sense. You made a comment about I would definitely hire a professional if you're dealing with these more complicated business filings. And in that sense you are saying a CPA is the right person to hire for that type of work, or is there an even more specialized professional that you would say should be involved? If you're talking about S-Corp and things of that nature.

Tim:

I am a CPA, which the school got my accounting degree spent years in public accounting as a CPA. So I do think CPA is the best designation when it comes to some of these tax, but I'll acknowledge it's not an exclusive thing. There's attorneys who can be good at preparing tax returns. There's a designation that's kind of growing in popularity called the enrolled agent. It's a designation sponsored by the IRS that requires you to pay a past few exams and learning about individual tax and business tax and working with the IRS and those people are then qualified to prepare returns. So any of those designations, that would kind of be a starting point. The flip side of that though is just because you have a designation doesn't mean you're good at preparing returns. I'm a CPA and I would never touch a tax return for an S Corp or a trust or a foundation or something like that. My specialty was always individuals in 1040s. I can do those all day long. You get me into those other things and I would beg off. So you want to get somebody who not only maybe has some credentials but also experience in what you're actually doing.

Katie:

Yeah, that makes a ton of sense. I'm glad that you specified that. So from a timing perspective, I feel like this is what happens every year is March rolls around, it's like the end of March, the beginning of April, and people are like, oh God, I have to do this in two weeks time to get an accountant. And it's like probably not though. So how would you recommend someone begin that search? When is the best time to begin looking and is there something about that process that people should know? As in when we were talking about financial advisors the other week we spoke at length with someone else who has their CFP designation about interviewing someone who is going to do this job for you. So it might be that the first two accountants or CPAs that you speak with are not a good fit. How should people think about approaching that process and when should they think about approaching it?

Tim:

Well, to your point, late March, early April, not the right time to do it. Most CPAs aren't even picking up the phone for non-clients at that point. And if you do find somebody who's willing to work with you at that point, 99.99% chance, they're going to say, alright, but we're going to extend and we will do this later. And that sometimes turns people off a lot of anxiety over extending a tax return, which there shouldn't be. There's no harm in extending your return. There's this stigma that if I extend, I'm automatically going to get audited. Absolutely not true. You do still have to pay your tax by April 15th, but you can get around to filing later on and you true it all up. The biggest thing I would say is start earlier. If you're thinking about it now, you need to be talking to somebody.

Now in terms of how do you find that person, referrals are usually the best place to go. Find somebody who you know who's working with somebody and then say, Hey, is that person maybe taking on new clients? Especially if it's somebody who's got a similar situation to you. Katie, you mentioned you're working with the same CPA that does your grandma's situation. I'm going to guess her return is a little bit different than yours and you probably got some things in your return that she doesn't have and vice versa. She's probably got social security and RMDs and you don't have that yet.

Katie:

What do you mean? Grandma Jeans—she's running an empire over there in that retirement village. She's putting me to shame.

Tim:

I shouldn't presume. You're right. So it's good to find somebody who is familiar with your situation like you would for a financial advisor. So talk to a coworker, talk to somebody who works in the same industry you do, who maybe has some of the same interests and same activities so you can find somebody who's got experience with that. You never want to be a CPA's most complicated client, so you want to make sure that that person has worked with your kind of issues before. So that's a starting point. Start working with 'em early on. Some people just want someone to put the numbers on the forms, mail it to the IRS and I'll see you again in 10 months. Perfectly fine. And there are plenty of accountants and CPAs and EAs out there that will do that exact work. Other people want their CPA to be more proactive and say, I want them to come to me during the course of the year. I got a business, I need help with bookkeeping and maintaining all the records of this. I have a trust and I need somebody to handle trust accounting issues and managing distributions and some of those. So then you've got more of a year long relationship with this person and again, you, you're going to want to find that person as soon as you possibly can because you're going to need things done throughout the course of the year, not just that maybe six week window in the spring when you're thinking about your income taxes.

Henah:

That makes total sense. And I think kind of piggybacking off of that, we get a lot of questions of what's reasonable to pay, right? But to your point, if you're working with them all year long versus just that six week window, it's really hard to give any sort of hard numbers. So it might be more valuable to talk about fee for value. So what do you usually recommend, Tim, in terms of getting the most bang for your buck so to speak?

Tim:

There's a line that we use in our business that I think applies here, and that is fees are only an issue in the absence of value. So if you think you're paying too much for somebody, it's probably because they're not providing the value you think you should be getting. Whereas on the flip side, if you've got somebody who's answering all your questions for you and giving you all the advice you need, that's kind of invaluable. And so not that you would pay them whatever they demand and just say, here, take all my money. You'd be willing to pay more for somebody like that. So if you look at the two extremes, if you found an accountant who's charging you what feels like a really low amount, maybe I've seen peoples pay a hundred dollars, $200 for a tax, that feels like a very low amount to me.

You're probably getting a level of service commensurate with that, which means you're not getting a lot out of that. You're getting very little value for your fees and maybe you're perfectly fine with that and that's all you need. On the flip side though, if you're paying a lot, if you're paying what feels like in the thousands of dollars and a lot more than that, maybe then you really need to be more careful. Are you really getting the value that you need out of that? You tend to get what you pay for in these things. So if you're paying very little, you're probably getting very little and maybe that's okay. If you're paying a lot, you better be getting a lot. And that may mean year round communications or periodic communications, not just the, I'll talk to you again next March, make sure what you're paying is commensurate with the value you think you're getting. And if it's not, then it's time to look around or at least have a conversation with your prepared and say, Hey, help me understand the value you're providing for the fee you are charging me. Ask that question directly, and if they can't answer that, that might be a red flag for you.

Katie:

Yeah, there was one person in particular who had asked us this question and obviously they didn't provide any details about their situation. So it could be that this is like a Jeff Bezos anonymous being like, my accountant wants 10 grand and that's too much. I'm over here running Amazon. But no, we don't really know the complexity of this individual situation, but they had said that they had been quoted three to $10,000 and that did seem pretty egregiously high to me. Again, barring a very, very complex situation, how does a range like that, who would be paying $10,000 and should be paying $10,000? Does that make sense?

Tim:

I hear you. Yeah. I guess the first thing would be that's a very wide range, 3x from high to low, more than that. So that's a big range. I'd like to understand what moves the needle between that. How do I stay at the low end? What pushes me to the high end of that range so that I going into it know that, hey, every time I call, even if it's a five minute conversation, that needle's moving up a little bit and I'm getting closer from moving from the three to the 10 in that particular example. So I'd want to know what's included in that. If you've got multiple entities, you're filing. If you're a multi-business owner, you've got S Corp, partnerships, you're involved in rental properties, trust, bookkeeping during the year, all those things would add to the cost. Again, $3,000 to $10,000, while the $3k doesn't scare me as much. $10k does seem like a lot, but again, it all depends on what you're getting for that maybe ten's not that unreasonable at all. I think accountants have gotten really good about engagement letters. Here's what we are going to provide for you. Here's how it's going to work during both tax season and outside of tax season, and here's what will be part of your ongoing tax prep fee and here's what will be billed outside of that. So if you ask a follow-up question to your return, that might be part of the return prep. If you come out later on and say, Hey, I'm thinking about doing this, what can you tell me about it? That's probably going to be an extra fee. So understand exactly what are you getting for your $3,000 versus your $10,000 in your example, Katie. So my concern is less about the numbers and more about that range.

Katie:

One thing that I wanted to ask about too is there was one interesting story that someone had told me that raised a good point, which is basically expectation setting. What should I be expecting a CPA to do and what do I actually kind of need a CFP or a more full service financial planner to help me with the story in short was that there was an individual who owed quite a lot of money on their taxes one year and was working with a CPA to file. They were a high level director at a big Fortune 100 company, so had a lot of income and I assume probably stock options and things of that nature, but they also had access to an HSA plan that they were not contributing to. And at no point in their engagement did the CPA that they were working with bring up the potential for, hey, maybe there are other pre-tax accounts that you can to that will help lessen this tax burden.

And they were like, I just thought it was weird that he never even asked. He knows this is my healthcare plan. He knows I haven't contributed to it. I just wonder why that seems like such an obvious thing that we could do. And so I brought it up, but I'm wondering from an expectation setting standpoint, are those the types of things that a CPA is going to be concerned with in thinking about? Or is that something where for that type of, I'll call it more holistic tax planning type decisions and things where you're now talking about investments, is that something where you're going to have to start an engagement with someone who's maybe more broad in their focus?

Tim:

So the scenario you describe is something we get asked a lot. It's the who's responsible for this or who should I go to? Do I need an accountant? Do I need an attorney? Do I need a financial planner? And the answer is, if you find the right person, you one might be able to do all of that. Now, there's certain things like you need an attorney for to draft legal documents or to represent you in court, something like that. Then you need to have an attorney. But just because I have a complicated tax situation doesn't mean I have to go to an attorney. I can have a CPA, I could have an ea. Most financial planners tend to shy away from the heavy tax stuff. They'll answer the questions they can, but especially when it comes to filling out forms that most of the planners will try to stay away from that, especially if you work with somebody at a bigger brokerage firm, for example.

Their firms tend to be very strict from a compliance standpoint. We don't give tax advice kind of thing. You'll hear that a lot from advisors at some of the bigger firms, even the medium-sized firms. My take on that has always been you tell people you don't give tax advice when you don't know the answer to their question because there's a tax angle to everything. There's no question I get asked that doesn't have a tax pin to it at some point. So, hey, how much can I contribute to my IRA and deduct? Well, there's a tax angle to that. Can I answer that or not?

Katie:

You're like, just say you don't know and move on.

Tim:

Yeah, there's some truth to that for sure. So who do you need? Well, if you find a CPA who is up to speed on planning things and can answer questions, when should I start social security or help me understand the latest changes or what might be coming on the estate tax exemption that's looming out there, or help me understand the benefits of doing a qualified charitable distribution versus giving appreciated stock. I know CPAs, attorneys, CFPs, CPWAs, all of whom are qualified to answer those questions. So again, there's nothing unique about any of those designations that says this is the person who can answer that question and they can't answer these because they can all do it if they're qualified and experienced enough. There's just certain things that you have to get a certain type of professional, or in particular the attorneys when it comes to drafting estate documents. But a lot of the other stuff, as long as you get the right person, they'll probably be able to answer most of those questions for you.

Katie:

Yeah, okay.

Henah:

Yeah, I feel like now after hearing all of these different things regarding your taxes, K-1, whatever, my eyes glazed over. So I think that's the key that I am ready for this CPA. And maybe you are too. If you're listening to this, you're like, huh, and you're more complicated than a W-2.

Katie:

Wait, and just for the sake of clarifying the K-1, is that the form that comes if you have any sort of business incorporated, or is that S Corp specific? Now I'm curious.

Tim:

So a K-1 is kind of getting a 1099 that shows your interest in dividends, except the K-1 says, here's your share of the income from this entity, whether it's an S Corp, a partnership, or a trust. So if you are an owner or a beneficiary of one of those, you're going to get a K-1 that says, here's your share of the income this year. And if you're hearing K-1 and you're like, I think I got one of those, but I didn't really know what to do with it, you might need a CPA.

Katie:

Okay, great. I'm like, let's put a finer point on that one because that term caught my ear too. So Henah, you bringing it up? I was like, yeah, we need to double back to this Schedule C though. That's just business income, is that right?

Tim:

Schedule C is a form that's included in your individual return that is used to report other income. Mostly it's from self-employment income. So you might serve on a board of directors, you get a little income from selling things on eBay, or maybe you run this wildly popular podcast and you’re self-employed as part of that, maybe you would be filling out a Schedule C. It's for any business that's set up as a sole proprietorship, which is kind of the key term here. We could do a whole hour I bet, on business structures. That's the really simple one that most people do. If you're running a business and you haven't done anything as far as how you're incorporated, you're a sole proprietorship and you're filing schedule C as part of your tax return.

Katie:

Okay, that's a great clarification.

Henah:

Tim. Thanks so much for all of your insights so far. It's not the last we'll see of you.

Katie:

Yes, Tim, you are a wealth of knowledge.

Tim:

Thanks for having me. I appreciate it.

Katie:

And I love that little teaser Henah. She said that's not the last we're going to see from Tim. So Tim will be rejoining our round table shortly for more exciting tax talk. And that is all for this week's episode of Rich Girl Roundup. We will see you on Wednesday so that you can see how you stack up against #RichGirlNation.