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Is doing your tax filings yourself an excellent use of your time or should you hire a professional to handle your income taxes? As the annual tax season appears on the financial horizon, it’s crucial that you answer the question for yourself so that you can file your tax returns on time. Let’s examine the pros and cons of each method.
Is doing your own tax work possible? Let’s face it; there is such a powerful sense of satisfaction that comes with completing something that you’d rather avoid. How often, for example, have you finally visited the dentist after putting it off for months, only to feel relieved and proud as you said goodbye to the dental receptionist on your way out the door? Successfully finishing your taxes by yourself can give you a similar feeling of accomplishment.
Along with the exhilarating delight that you’ll feel from handling your own financial life, there are many perks involved in working through the relevant tax forms. There are significant pros in completing your tax obligation without the aid of a professional:
- Lower cost. There’s no denying that it’s much less expensive to do your taxes yourself. The prices involved in preparing your taxes range from zero to the cost of a software package like TurboTax®. Plus, Firefly members can save up to $15 on TurboTax. By contrast, the National Society of Accountants notes that the average price of using a professional to file the itemized Form 1040 and state tax return in 2017 was $273.
- Financial knowledge. Preparing your taxes will force you to examine your yearly finances and will give you greater insight into how you’re growing your wealth. A good time to re-evaluate your goals and how to better achieve them.
- Achievable. The truth is that, for many individuals, self-preparing your taxes is often not too difficult. The Tax Cuts and Jobs Act has streamlined the tax process for many people. For example, there is now the new Form 1040 instead of the multiple variations of 1040 that existed in previous years. Along with one type of Form 1040, the increased standard deduction amounts could lead you to ditch itemizing deductions on your tax return, making it relatively straightforward to do your taxes. Another reason that you can confidently tackle your tax work is that the tax preparation software packages make determining your tax liability a pretty painless exercise. Indeed, the balance notes that buying one of these packages is akin to working with a “virtual accountant at your elbow”.
- Free Help. You can also tap into a wide range of free tax advice if you need extra guidance. Check out the Interactive Tax Assistant tool on the IRS website for help with all of your tax-related questions. Lower-income Americans can get help through the Volunteer Income Tax Assistance program. Additionally, you can find trustworthy assistance within your community.
When is hiring a tax professional the smarter choice?
Did you know...
Firefly members can save up to $15 on TurboTax®
federal products this tax season.
Although you can prepare your taxes, there are undoubtedly relevant reasons to hire a professional to do the work. A tax professional, commonly a certified public accountant (CPA), understands the intricacies of the tax code and knows how to minimize your tax liability legally.
There are significant benefits that you’ll receive when you hire a professional to prepare your tax returns:
Finding a tax preparation expert.
- Save time. No matter how uncomplicated your tax situation, there is no getting around the fact that it will most likely take you many hours to accurately complete your taxes. Although you’ll still need to spend time speaking with your professional tax person, you’re going to save a bunch of hours if you let someone else handle the work.
- Top level advice. You can count on a professional to have a thorough understanding of advanced tax law. Determining tax liability is often complicated, and a professional can help to navigate you through the tax code in a way that limits the amount of money that you will owe. If your financial situation includes anything unusual this year, such as a job loss and stock sales, it’s a good idea to talk to a professional.
- Fewer mistakes. Does the thought of IRS agents knocking on your door keep you up at night? If so, you’re a prime candidate for a professional tax service. Tax laws are involved, and it’s possible to unknowingly make mistakes on your tax filings if you’re unfamiliar with the law. A professional is less likely to mess up your taxes.
- Audit help. The fact that very few Americans undergo audits each year doesn’t mean that it’s impossible that you’ll receive a tax audit letter. You’ll avoid the knee-shaking scenario of being confronted by the IRS on your own when you have professionals take care of your taxes. If you hire a (1) CPA, (2) enrolled agent, or (3) tax attorney, the professional will stand up for you during your audit. The knowledge that you might come through a potential review unscathed is reason enough to hire a professional to guide you through a challenging tax environment.
- Planning. Perhaps one of the best reasons to trust a professional with your tax information is the opportunity to get expert advice that can help you reach your financial goals. Many times you can obtain financial planning advice from your CPA. The possibility of mixing tax preparation into overall investment management is beneficial if the CPA is well-trained in financial planning
Finding the right professional to work on your taxes is not as simple as walking into the first tax help store that you see advertised. Check out “Choosing a Tax Professional: Need someone to prepare your tax return
?” on the IRS website to learn more.
Filing tax returns each spring is a nerve-wracking experience for most people. Is doing your own tax returns right for your situation? Are you better off choosing to work with a tax professional? There is no absolute answer, and your decision depends on how you assess the relative benefits of both options. Take time to think through your best approach each year and feel confident about the path you take – you’ll be happy you did once you’ve filed.
Updated January 2020
Contents of this blog article are intended to provide you with a general understanding of the subject matter. However, it is not intended to provide legal, accounting, or other professional advice and should not be relied on as such. Information may have changed since the publication date.