How To Decide If You Should Do Your Own Taxes Or Hire A Pro
It’s that time of year when people tend to wonder if they should do their own taxes or hire a professional. Since most people’s financial situations change every year, it’s a question worth asking annually.
By: Sylvia Slezak | Feb 2020
US Tax Forms
photo by csp_lobzik
Preparing your own tax returns may seem easy and a good way to save money, but there are a few questions to ask yourself first. Do you have the time and patience to prepare and file a return? Is this the first time you would be filing your own tax return? Do you have a basic understanding of taxes? If you intend to use an online software, do you trust a virtual preparer to cover all your bases? If the answer is no, then it’s probably worth the cost of hiring a tax professional.
Here are a few simple guidelines to assist you in deciding to do your own taxes or to hire a professional.
Two basic options to filing taxes
Do it yourself through the IRS website or with tax software. If you’re well-versed in tax law, which most people aren’t, you can print out and mail in your paperwork or request the paper forms in the mail. The IRS encourages online filing and directs taxpayers with incomes under $69,000 to its free-filing portal. The portal lists ten qualified tax preparers that offer free federal filing services. That is only for federal and not state. Typically there is an additional charge for state filing. - If you have straightforward income that is over $69,000, you can still find free filing options. With a more complex situation, such as self-employment or complicated investments, you’ll likely have to pay for online tax software ranging from $25 to $100 or more for federal and state filing.
Hire a professional tax preparer to file on your behalf. Keep in mind that the only professionals qualified to help you are tax lawyers, CPAs, and enrolled IRS agents. Use the Tax Pro Registry to make sure your tax professional is properly registered and has been issued a PTIN (preparer tax identification number) from the IRS. Don’t put your business and personal tax returns in the hands of an unlicensed, unverified Tax Preparer to be subject to IRS scrutiny. Only CPAs, Enrolled Agents, Lawyers and RTRPs (registered tax return preparers) are permitted to prepare tax returns. As of January 1, 2011, all Paid Tax Preparers are required by law to register and obtain a PTIN from the IRS. - The fee for preparers vary depending on where you live and how complex your taxes are, but generally they start at around $100. Accountants tend to charge at least twice that, with price variations according to location and complexity. According to the National Society of Accountants’ 2018-2019 Income and Fees Survey, the average tax preparation fee for a tax professional to prepare a Form 1040 and state return with no itemized deductions is $188. Itemizing deductions bumps the average fee to $294.
The question still remains: “Should you prepare your own taxes or hire someone to help?” For many, it’s not about the price. It’s about what you’re most comfortable with. Based on that, here are two “if this, then that” scenarios as to who should prepare and file your taxes.
Prepare Your Own Taxes If . . .
- You feel comfortable submitting the form. If the idea of having to fix any errors doesn’t terrify you, and you feel comfortable looking up questions on the IRS website and navigating the software, then you’ll probably feel more comfortable doing your own taxes.
- You have the time and patience to deal with it. Expect to set aside quality time with your undivided attention. Be prepared to spend up to seven hours, if not more, gathering forms and preparing your tax return. If you’re a business owner, then the amount of time increases to twenty hours spent on your taxes. Realize that this isn’t something you think you can multi-task with. You’re dealing with tax returns and an error can trigger a red flag that can be the beginning to a bitter end.
- You have few deductions. There are no dependents, no investments other than retirement accounts, and no significant assets or charitable contributions, therefor filing your taxes yourself won’t be an issue.
- You are self-employed or own a business. You have experience with business-related tax forms and understand that business income adds another layer to preparing and filing a tax return, or you want to save money on accounting services, and have no problem preparing your own taxes.
Hire a Professional If . . .
- You have no time nor patience to deal with it. You feel that your time would be better spent on something other than devoting significant time to doing your taxes.
- You are planning to itemize your deductions. If you have major medical costs, a mortgage, or make large charitable donations, you might save more money itemizing your deductions than taking the standard deduction. If it’s your first time, itemizing can be tricky to navigate on your own.
- You’ve had a major life change in the last year. Did you buy a house, get married, have a baby? All of these impact your tax filing.
- You don’t trust yourself to cover all of your bases. If you break out in a cold sweat at the thought of of entering numbers and talking about dependents and deductions, then you might want to leave the preparation to a professional.
Your Final Decision
Even if you hire a profession, you will still have to do the majority of work yourself. It’s up to you to gather all your tax-related documents, and the sooner you start, the more information you will have to make the best decision. No matter what route you decide to take, when your tax return is completed, you should set aside time to review it and proof for errors. A professional will certify accuracy and help you down the road in a tax audit, but the return filing is still only as good as the information you provide. Once you file, you will also want to keep a copy of your tax return and their related documents for at least three years in case the tax agencies have any questions.
If you still have tax questions, connect with a tax professional featured on CityOf.com to provide the services you are seeking.
Disclosure: This post is brought to you by the CityOf.com Marketing team. We publish articles providing information that can help you make smarter decisions with your time and money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your time and money is up to you.
