Should You Do Your Own Taxes, or Hire a Professional?
When it comes to deciding whether you should do your own taxes, or hire a pro, there are as many opinions as there are people it seems. Whether you feel better getting an accountant to go over all of your numbers, or you don’t feel comfortable letting anywhere near your paperwork, the decision and time that it takes to complete your taxes – is completely your own. If you are still on the fence as to whether you want to turn to the pros or take the DIY approach on your returns this year, here are a few things to keep in mind when making your decision.
How Much Time Do You Have?
Did you know that over the past 16 years, the IRS has made more than 4,500 changes to the tax code? With all of those changes, it is no wonder that people have had difficulty keeping track of what information goes where. While it is true that the IRS has created a number of forms that are designed to help people take care of their own returns, it can be difficult to be 100% certain that you are submitting your taxes as complete and correct as possible.
Perhaps this is one of the primary reasons that so many people turn to the professionals when it comes to completing their taxes. Even the simplest return can be time-consuming. For example, if you have calculated business expenses or automobile usage than you are going to likely be putting in some extra time running (and re-running) those numbers. This time, for many, is precious and spending it re-calculating formulas can easily impact the little time that so many have to spend with or taking care of loved ones.
How Tech Savy are You?
In recent years, the trend of e-filing has become a phenomenon of the sort, with the IRS claiming to have served more than 1 billion people – compare that to the 25,000 returns that were e-filed back in the mid-1980’s. That is approximately 80% of all taxpayers in the United States that file electronically.
Now, there are a number of programs out there that assist with e-filing and make it as easy as possible. Programs such as TurboTax Tax ACT and e Smart actually provide users with the option of either e-filing or printing their paperwork. However, if you do not have at the very least a basic knowledge of computers e-filing can be an incredibly complicated task.
How Much Money are You Comfortable Spending?
When it comes time to prepare your taxes, there are a number of ways to do so, all of which come at a varying cost. If you decide to prepare your returns on paper and mail then in it is free (aside from postage). The IRS has forms available for free download through their website. You can also order these forms over the phone at 1-800-829-3676.
If you decide to use a software program, generally beginning your tax return is free. The cost increases, however, if you need additional forms. Depending on your return there may also be potential e-file fees to consider as well. Generally, filing your income tax return this way costs anywhere from $25-$150.00. The good news is that if you think ahead and are able to itemize, there is a chance that you can deduct certain fees for this software off of your taxes in the upcoming year.
The option of having a professional handle your taxes is obviously going to be the most costly. The exact cost varies and is dependent upon your location and how complicated your return is. That said, the IRS estimates that the average taxpayer will pay between $270 and $420 to complete their tax forms.
Regardless of which option you decide upon, it is important to note that the IRS does not charge for e-file. Any fees that you are charged that are associated with e-file might be imposed by the professional that you have hired or the software program.
The Worry Factor
Once you are done, what happens? Depending on what route you take, the tax program or professional might offer you audit support at an additional cost. The reality is that only you can answer the question of “How confident and comfortable will you be walking away from your return should you decide to go routes a, b or c?
It is important to know that, unless there is a case of fraud or an under reporting income, an individuals tax return can be audited for up to three years. This means that the IRS may challenge what you’ve reported for up to three years after the date of filing or Tax Day
Conclusion
If you decide to take on preparing your own return the reality is that you are generally just inputting numbers and doing basic and repetitive calculations. The other side of the reality is that you are completely responsible for all of those calculations and all other aspects of your return. This might be suitable for you if you’ve filed your own return before.
Most software packages do a decent job of summarizing your tax liability and providing you with the basic information that you might need to know for the next tax year. If you feel that that is enough guidance and information for you, doing your own tax return via a software program might be the right choice for you.
The reality is that the decision of whether you should file your tax return on your own or with the help of a professional is a personal one. There are a number of factors that need to be considered, and your decision might vary from year to year depending on what events have taken place. After all, changes to your life such as getting married, having a baby, getting a new job, selling a business, increasing your contributions to your IRA or starting school can all have a large impact on your tax return. When events such as these take place, often it makes sense to have a professional help out.