Tax Planning Software – Artificial Intelligence or Skill Saw?

By Dominique Molina, CPA MST CTS

Question: How much time should I devote to studying tax planning? Can’t I just select a software providing artificial intelligence to inform me what to do?
Answer: To answer this question, I’ll ask this question in response: are you a user of TurboTax or a similar software tool?

Chances are you use something (or someone) different from software purchased at a big box store. The answer to this question may be a similar situation to a semi-regular TikTok viewer of DIY household construction projects. “Does the job require a Router or a Dremel Tool?” 

If you’ve read my articles about tax planning before, no doubt you’ve read my description of tax planning software as an instrumental tool. It can provide valuable insights such as data extracted from your tax returns, calculation of minimum required estimated tax payments, and even a few tips to save annual tax. 

Whether you are a do-it-yourselfer braving a construction project in your home or a new business owner or novice tax planner, the answer depends on the nature of the job you’re doing. 

Is it possible for this experienced tax planner of more than 20 years with an advanced degree and thousands of tax plans to complete a bathroom remodel in just a weekend with a Dremel tool? Certainly. I’ve even got the pictures to prove it. 

Before 

 

 

 

 

After  

Just like the ‘bathroom-in-a-weekend’, it is possible with an off-the-internet software to develop a few ideas to save some tax dollars. But if you look closely at my personal photos, you’ll soon notice the glue expired on my “driftwood” mirror frame, the recycled wood tiles failed to stay up with the shower moisture in the air, and while the dimensions of my replacement countertop were correct, the walls were just a hair too uneven in my old house so the countertop didn’t fit snugly.

In the end, my DIY weekend project took more than four weekends of my precious free time, more than $1,200 in the after-the-fact hired help to fix my handiwork, and a little of my pride revealing this online to a public audience. 

It’s Just a Tool! 

I was so excited when Flowbee, the vacuum cleaner attachment made for cutting hair, launched its infomercial on TV. It all seemed so simple! Simply set your length and go to town, avoiding the mess that even the best hairstylists create in making a masterpiece. 

While I didn’t have the courage to try it on my own hair, logic overruled my excitement when I pondered why this contraption wouldn’t immediately put every hairdresser, barber, and exhausted mom on a budget out of business. Flowbee couldn’t replace the creativity of a trained expert. It simply could not exercise judgment or interpret the nuances of someone’s preference for ’70’s layers or bangs or sideburn lines. 

The same is true for tax planning software. There are many choices out there.

  • Some accommodate a menu of tactics and include boilerplate rules about how to use them.
  • Some use your tax bracket and past tax return amounts to estimate potential savings using “fill in the box” amounts or maximum thresholds.
  • Some even still include checklists and project management portals to allow you to cross off your tax planning “to-do list.”

I’m not suggesting these aren’t valuable modules to assist you in your tax plan design. However, just like the Flowbee and my handy Dremel tool, these are just tools and cannot replace the intelligence of an expert.

An expert will use projection and reporting tools and portals and checklists to assist you in optimizing your tax plan. They’ll use their experience and expertise to evaluate the nuances of your tax layers and whether they are still ideal from the ’70s, ’80s or today. They’ll apply the complexity of court cases and law to your specific circumstances, and they’ll do it with full documentation and audit preparation in the event a tax authority scrutinizes your positions. 

You see, the IRS doesn’t accept “the software suggested using this amount” as a valid reason when they grill you about which law you’ve relied on for your position. 

While software, like a proper saw, can act as a tool in your project, the most important part of the process is the expert you rely on for advice. As a business owner, you will want to carefully vet which advisors you want to trust. This can be uncomfortable for the majority of tax professionals who want to offer tax planning, yet lack the background or education. The ability to decrease your taxes using laws, loopholes, credits, and deductions is NOT a minimum requirement in any accounting degree program. Most tax professionals have no specialized training in tax reduction. And the IRS won’t come tap you on the shoulder when you missed out on what you could have done in the past and issue a refund.

What I’m trying to say is if you want an attractive bathroom while enjoying your free weekends and saving money, hire the expert who knows how to use the skill saw. Your wallet (and most likely your family) will thank you for it.

Ready to find out how much an expert Certified Tax Planner can do to proactively reduce your taxes? Find one near you!

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