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 possible 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?