The federal tax code changes constantly. With so many new laws about deductions and credits, it can seem overwhelming to tackle your yearly income tax preparation on your own. If you choose to seek professional help, there’s certainly no shortage of tax preparation services to help you navigate the code as it applies to your personal situation.
Roughly 30% of Americans, however, choose to file their own taxes.
If that many people are comfortable filing their own taxes, it can’t be that complicated, can it? What’s the difference between these two methods of tax preparation, and how do you determine which is right for you?
Here are four questions to ask yourself as you decide how to file your taxes this season.
How Easy Are Your Taxes?
If you’ve always filed with a CPA or tax service, you may not know the answer to this question. A good measure of the ease of your taxes is which IRS form your accountant files for you. If you’re filing a 1040 EZ or standard 1040, your taxes are probably not that complex.
On the other hand, if you have a long list of deductions, own property, maintain certain investment or retirement accounts, or are self-employed, filing may require a good understanding of current tax laws. Unless you have a background in accounting and/or access to free tax advice, complex tax situations are best handled by a professional.
How Comfortable Are You with Filing Alone?
No matter how easy your tax situation may be, you may still not feel comfortable filing them yourself. Rather than risk making mistakes or enduring the stress of dealing with something out of your comfort zone, take your taxes to a professional.
The good news is that many tax preparation businesses such as H&R Block or TurboTax have become extremely affordable. If you have no concerns about filing your tax return accurately, however, filing online will still save you money.
How Important Is It to Save Money on Tax Preparation?
The truth is that no matter what kind of a deal you get, it’s going to cost money to have someone prepare your taxes. Although some tax preparation chains offer competitive rates as low as $50, the average fee will be a few hundred dollars. While this fee is usually deducted from your total refund, it won’t help if you’re already expecting a small refund or owe taxes.
If saving money is important, you may want to consider purchasing some tax preparation software, filing your taxes using an online service, or using resources on the IRS website. Some online tax services offer a free basic version that only requires you to pay a small fee to import previous years’ tax information, or if you want an accountant to review your return before it’s filed. You’ll also have to pay extra for the convenience of filing your state tax return at the same time. As long as you don’t pay for features you don’t really need, this is a much cheaper way to go.
How Much Time Are You Willing to Invest?
Doing your own taxes will require you to spend in time what you’re saving in fees. Tax professionals are paid to be fast and accurate. Since you’re not a pro, you’ll need to take your time preparing your taxes to ensure you don’t make mistakes or leave out important information.
It’s a good idea to gather all the necessary documents you’ll need before you start your taxes, so you can focus on them uninterrupted. Give yourself several hours to complete the task. If you just don’t have the time to do it right, it’s better to pay someone else to.
Are you doing your own taxes this year? Why or why not?