Should You File Your Own Taxes Or Hire A Pro?

Tax season is officially upon us and over the next few weeks we’ll all be receiving various tax forms from our employers, banks, brokers and mortgage companies. Once you’re sitting with a nice stack of tax documents in front of you, the next logical question can be: “Should I file my taxes myself, or Should I hire a pro to prepare them?”

Obviously there is no one right answer for everyone, but let’s look at some factors that should sway you towards or away from preparing your own tax return.

Who Should File Their Own Taxes?

  • Anyone Who Can Do It For Free – If your adjusted gross income (AGI) is $57,000 or less you can file your federal return for free! You can file your return for free through popular services like Turbo Tax or H&R Block or any of the other tax preparation services the IRS is kind enough to provide us with. So if your taxable income is less than $57k and you don’t own your own business,have a lot of investments, rental properties, children or anything else that would otherwise complicate your return, then you should absolutely be doing your taxes yourself. It’s easy and you’ll save a boatload of money over paying an accountant to do them.
  • Anyone Hands On With Their Finances – If you’re a regular reader I’m going to assume you like to be hands on with your money like I am. Doing your own taxes is just an extension of this! If you can handle managing your own budget and investments you can handle doing your own taxes. Using the software from H&R Block or Turbo Tax makes the process incredibly simple and virtually idiot proof. Chances are that if you’re hands on with your finances to begin with you’re already pretty organized and will have the information on your charitable donations and other tax deductions readily available.
  • Anyone Who Wants More Control – Tax accountants get really busy during tax season and your return may not be their top priority. The longer it takes your accountant to get to preparing your taxes the longer it takes you to get any tax returns, tax refund, tax preparing, tax return, federal taxes, irspossible tax refund that you’re entitled to! Some people also have trust issues. While tax accountants are generally very good at their jobs, they are still human and prone to errors just like you or I. Some people just sleep better at night not leaving their fate in someone else’s hands. If that sounds like you, then you’ll probably want to be preparing your own taxes this year!
  • Anyone Who Wants To Save Money – About 5 or 6 years ago I had a rough year. I changed jobs three times, I sold off all the stock I owned in order to pay off  my debt and I moved twice. When tax season came around I was certain that there is no way I’d be able to prepare my return. So I took my taxes to a local tax preparation company and had the pro’s do it for me. Come to find out, my return was still pretty simple. The preparer basically used the same software I could use at home, except they charged me north of $100 for the privilege! (The average cost of professional tax preparation is around $245)
    The software available to do your taxes from home or online is really cheap, accurate, and very easy to use.

Who Should Hire A Tax Professional?

  • Anyone With A Complicated Return – If you have a complex financial situation due to getting married/divorced, having a child, selling a property, starting a business or being a frequent trader in your investment accounts. You might be better off hiring a professional to do your taxes.
  • Anyone Who Struggles Managing Their Finances – If you struggle managing your day-to-day finances be honest with yourself. Doing your own taxes just isn’t for you. It’s better to pay a little extra to be sure they get done right than to make a bunch of mistakes and end up getting audited or missing out on important deductions.
  • Anyone Who Doesn’t Have The Time – Depending on the complexity of your return and how many tax forms you have to enter information from doing your own taxes can get to be time-consuming. While you might have to wait for a professional to get around to doing your return, it could still be a time saver over sitting in front of a computer and doing it yourself. If you don’t want to commit the time, you don’t have to.

Personal Experience and Recommendations

I’ve been doing my own taxes for years now. Over the years I’ve used Turbo Tax, H&R Block and Tax Slayer to do my taxes from home. I’ve found them all accurate, easy to use and most importantly they don’t charge you a ton to file your tax return. Which one you prefer will probably boil down to which interface you feel most comfortable working with.

It’s important to remember that whether you do your own taxes or you hire an accountant to do your taxes for you. YOU are still legally responsible for the accuracy and timeliness of your tax return. The risk of being audited by the IRS is actually very slim but if it does happen it can be a very uncomfortable experience. So if you choose to hire someone else to do your taxes, be sure they’re qualified. The ever helpful IRS even gives a list of points to keep in mind when choosing a tax preparer.

Personally I think that just about everyone reading this can handle preparing their own taxes. The software available now makes it 100 times easier than the days of doing taxes by paper and pencil. If you choose to file your taxes by yourself this year I recommend using Turbo Tax. I’ve used both Turbo Tax and H&R Block in the past and have generally found the Turbo Tax software to be easier to use.

 

Readers : How do you complete your taxes? Do you prepare your own tax return or do you hire an accountant to do them for you? What tips do you have for someone filing a return on their own this year?

 

Thanks for reading! If you enjoyed this post be sure to subscribe by email or RSS to keep up with all the latest posts! 

 

 

 

Front page photo via stockmonkeys.com
Tagged , , , , . Bookmark the permalink.

26 Responses to Should You File Your Own Taxes Or Hire A Pro?

  1. Pauline says:

    I file myself… in 4 countries… my tax situation in each is pretty simple though, so a couple hours each and it’s done.

    • Do you have to pay on just what you earn in those countries, or do you have to pay on your whole income? It seems like it could get pretty expensive with each government wanting their piece of the pie!

  2. Well it is fairly straightforward in the UK although it has got a lot more complex of recent years with all sorts of allowances. We have an accountant for our company and a previous accountant also filed for us but it was very expensive, actually the largest bill for the company as it wasn’t doing much business in those days. So we rationalised and cut that cost considerably. We file for ourselves now.

    @Pauline – you must spend some time just keeping track of expenditure in different currencies too!

  3. We used TaxAct for years, but when push came to shove on the duplex income and expenses (classifying operating expenses vs capital asset puchases vs repairs and accelerated depreciation…) we finally bit the bullet and hired someone to do them for us. It’s not cheap, but I feel the value they provide us is pretty significant.

  4. Martin says:

    I hire a professional. I like peace of mind when he does everything. I have very little knowledge of the taxes and what I can do or cannot do, so i always prepare tons of my paperwork, through it at him and let him do it. I usually pay around 150 for my personal taxes, small business and partnerships. I have been doing it myself for couple of years and it was always a problem…

  5. Integrator says:

    I do my own taxes, but I use H&R Block’s second look service. Its a great service. They found me almost $700 deductions that I missed last year, so the service more than paid for itself. I have a lot of overseas dividend income, investment interest and capital gains which can take a little tweaking to fully optimize.

  6. Laurie says:

    We are blessed to have a super knowledgeable tax guy who does our stuff for cheap. We used to do them ourselves, b/c Turbo Tax seems pretty self-explanatory, but then one year brought our previous return to this guy, and he could’ve netted us over 1k more, so we’ve been using him ever since. He smart, honest and only costs about $100, so to us, it’s worth it. Great post!

  7. The first couple years, my aunt (an accountant) did my taxes, like for everyone else in my family. Then I realized how easy mine were and I started doing them myself. As my taxes have gotten more difficult (like a business in college), I’ve simply learned more and continued doing them myself. If I had to do it all over again, I probably would have become an accountant instead.

  8. I used to do my own taxes until my employer said that they would pay for us to have them done for free. Couldn’t argue with that :)

  9. I have to have an accountant do my taxes. It is a condition of my divorce. My children are in post secondary education and the accountant divies up the education deductions after the children have used all they need to minimize their income.

    My accountant charges $200 for the 3 tax returns of myself and my 2 children. While I think this is very fair and he does a great job I look forward to the time when I can eliminate this expense from my yearly budget.

  10. Andy Hough says:

    I’ve always filed my own taxes even though they have gotten a little complicated now that I have my own business and investments with capital gains and dividends.

    Now that I’m a paid tax expert I guess I should keep doing my own returns.

  11. I’ll be doing them myself using TurboTax. I’ve used them for the last 5 years or so and haven’t had any issues. I could probably save a bit of money if I did it all myself. I made a spreadsheet that calculates my taxes for me and it was within $1-2 last year. Once my wife and I get a house then we might be going the CPA route because I have some extra deductions due to my job that will be pretty significant. Most of the time I’d just recommend using the online software.

  12. Johnny Moneyseed says:

    I am very hands-on with my finances, but my returns were so complicated this year I couldn’t file on my own. My wife and I are both in the military, and from separate states. So, we have to file our federal returns jointly, and each state separately. It fried our tax-man’s brain the first time around (last year)!

  13. Pingback: Alternatives To Paying Income Tax - The First Million is the Hardest

  14. I think having a professional do my taxes is one of the best decisions I have ever made. Both of the last two years I have received a refund and I don’t think I would have if I did my taxes myself.

  15. Pingback: Personal Finance Links – Clocks and Comments Editions

  16. I do my own taxes, but they are relatively simple right now as I’m in school. It works for me.

  17. I did my own taxes for many years. Using tax software made it fairly easy to complete on my own. But now that I just got married, have a small business and a rental property, I just don’t trust things as much. As a result, we are going with a pro.

  18. As an actor, there are years where I’ll have worked in many states which can get tricky. Luckily, my dad is a tax attorney and he does my return for me every year.

  19. FI Fighter says:

    I used to do my own taxes, but this year I’ll be filing with 4 rentals, so there’s no way I want to do that myself… I’ll gladly pay someone since I don’t want to spend that much time doing taxes…

    Also, I’m learning there are a million things you can deduct on rentals, so I want to find a pro who can help me get back everything that I can. I’ve also saved up a folder full of receipts for travel, hotel, car rental/gas, etc. I’ll gladly pay someone to not have to dig through all those details :)

  20. I did my taxes this year using TurboTax. It ended up costing me $60, which is a bargain compared to what a tax professional would charge. My taxes this year weren’t particularly complicated, but as my investment account grows and online income increases it may be necessary in the future to hire it out. We’ll see

    Best wishes!

  21. Shirley Ziepfel says:

    I have been VERY sick and now disabled. We are now 3 years behind on our taxes, we have 4 rental homes. We have all our paper work and receipts, our old account is not doing it any longer and we use to just take every thing we had to her and she would add every thing up and do the taxes. We can not find a account in Hamilton Ohio that does this! All they want are numbers, which I am not in the physical shape to do any longer, we need some one that we can take what we have and let them seperate every thing, put it where it goes, and do the taxes as we have always had done! I do not know what to do! I am just not able to do that ! I keep good records, every thing has the address right by it in the check book or on the receipt, could any one recommend any one that could help? I would BE VERY GRATEFUL IF ANY ONE COULD HELP ME FIND SOME ONE IN HAMILTON, OHIO. Thank you very much.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>