Should You Do Your Own Taxes?

When it comes time to file your tax return, one of the most important questions to ask is should you do your own taxes? Or should preparing taxes be done by a professional? Since most people's financial situations change every year, it's a question worth asking annually. There are basically two main options.

Preparing Taxes Yourself

Consider these pros and cons before you do your own taxes.

Popular tax software includes programs like TurboTax, TaxACT and H&R Block. All three programs provide free versions for people with simple tax needs and will guide you through the steps of how to do your own taxes. The IRS does not charge to file taxes. You can print out and mail in your forms, however the IRS encourages online filing and directs taxpayers with incomes under $60,000 to free software as mentioned above. For people with incomes north of $60,000, the site provides free fillable forms. When you have a simple straight forward return without any dependents, investments, business income, foreign income, sale of an asset or any other complex tax situation you can probably file on your own.

The Pros and Cons of Preparing Taxes Yourself:

The pros of preparing your own return are that you will save you on tax preparation fees. It will also allow you to complete your return at your own pace and potentially file as early as late January. When you have a simple straight forward return without any dependents, investments, business income, foreign income, sale of an asset or any other complex tax situation you can probably file on your own.

The cons of preparing your own tax return are, that you will have to spend many hours and even days on preparing your return, and that you may miss out on some important deductions and available tax strategies that can save you thousands of dollars and minimize the risk of an IRS audit.

Hiring a Tax Preparer

A tax professional can offer some nice benefits when it comes time to do your taxes.

The only professionals qualified to help you are tax lawyers, CPAs, and Enrolled IRS Agents (EA). Hiring a tax professional is going to cost you some money in preparation fees but it can save you loads of time and thousands of dollars in tax liability. The IRS estimates the average tax taxpayer will spend about 16 hours to prepare form 1040. The tax professional can get it done in a fraction of that time. Tax professionals know tax law in ways that you never will and they know where to find exemptions and credits that you might not even know about. A great tax professional will ask you the right questions and give you guidance about how to save money in the present and in the future. Don't pay someone to just fill in the blanks on your tax returns; it’s the tax advice and analysis that matters.

A tax professional can also remove the stress associated with preparing your own tax return allowing you to focus on other activities. The tax professional can also defend your tax position in case you get audited by the IRS.

In conclusion, if your income situation qualifies you to use a 1040EZ, there's no reason for you to hire someone to do your taxes. But as you grow financially — adding investments, a home, a spouse, a second income, start up a business, etc., you probably want to use a tax professional. The more complicated your tax returns get, the more likely you'll want to hire a professional. Even if you would rather do it yourself, it's probably a good idea to have a professional do your tax returns every three or four years. A tax preparer might find deductions you could have used in those previous years, giving you the opportunity to amend those returns and get more money back!

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