Should I Prepare My Own Taxes or Hire a Professional?

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prepare taxesIt stings enough to have to pay taxes, so it is only natural to want to save a little money when it comes to paying for tax preparation. Who wants to pay an extra couple hundred bucks for the privilege of sending our hard-earned dollars to Uncle Sam? You don’t necessarily have to pay to have your taxes prepared, but there can be some benefits to doing so.

First, the basics. Americans have two choices when it comes to preparing their income taxes:

  1. DIYPerhaps with help from tax preparation software such as TurboTax, TaxAct, or H&R Block. All tax software starts with a modest price tag of about $20 or less that increases with the complexity of your tax situation. There are even trustworthy free programs for the simplest tax needs. The IRS does not charge for filing taxes. If you like to do things old school, you can request that they send you the forms via snail mail. Or you can print them out yourself. Either way, you’ll snail mail them back when you’re all done. But if you really want to impress your friends at the Internal Revenue office, efile. They’ll love you. Besides, filing electronically is the safest and most accurate way to file—and if you’re expecting a refund, you’ll get it more quickly.
  2. Pay someone to prepare your taxes for you. More than half of American taxpayers go this route. For this option, you’ll need a tax attorney, a CPA (Certified Public Accountant), or an enrolled IRS agent, all of whom are well-versed in tax law and adept at completing tax forms. You will want to make sure he or she has a PTIN (preparer tax identification number) from the IRS. If you’re not sure of your tax preparer’s credentials, you can check for yourself on TaxPrepareRegistry.com. You need someone you can trust with all your financial information—your income and assets, your family dynamics, your personal identification information. Even these legitimate tax preparers can make mistakes, but your chances of getting an accurate tax return with the biggest possible refund are better, and there’s better accountability.

How to Decide Whether or Not to Hire a Professional to Prepare Your Taxes

But now, how do you know which is better—DIY or professional tax preparer? It’s a legitimate question worth asking. And its answer isn’t the same every year for every tax payer. Unless of course you are terrible at math and tax forms—then the answer is a no brainer: pay someone to do your taxes. You’ll save yourself money and headache.

Fortunately, there are some simple questions you can ask yourself that will inform your choice:

When You May Want to Consider Doing Your Own Taxes

If you answer yes to both of these questions, then you’re probably safe to prepare your own taxes with one of the tax preparation software programs we mentioned above, or a similar program. You will find even the IRS website not as intimidating as you might think. They do a good job of walking taxpayers through the process (and they’re free!).

Are my taxes going to be pretty simple?

Are you a full-time employee of one employer who deducts a withholding tax from your paycheck? If you are not self-employed, don’t have multiple freelance jobs sending you a stack of 1099s, don’t have lots of assets, business deductions, charitable contributions, or a long line of dependents, then you can probably handle the basic forms yourself, even if you are not generally a tax savvy kind of person. The software navigates you step-by-step through the forms, eliminating line items that don’t apply to you along the way. Most of these programs offer a free service for the simplest forms.

Am I patient and methodical?

Taxes can surely make the most zen of us want to pull our hair out. But if you enjoy pushing up your sleeves and embracing a good challenge, and you have the patience to sift through your own paperwork and documents as well as the websites or forms, then you might actually like the satisfying feeling of preparing your own taxes—as well as the additional savings. Pop up some popcorn, put on your favorite playlist, and get to it. There are worse ways to spend an evening.

When You Should Probably Consider Hiring a Professional Tax Preparer

On the other hand, there are some compelling reasons to hire a professional to do your taxes. Consider these important questions, and if you find yourself answering yes, it’s probably best to make that phone call:

Do I anticipate complexities with my taxes?

If you have multiple 1099s or own your own business, that’s reason enough to hire a professional. Things can get complicated very quickly with the various forms and rules for different types of employment. Those who are self-employed have expenses to track and document. Itemizing your deductions instead of taking the standard deduction makes for more complex tax preparation as well. In addition, if you’ll be reporting lots of assets and charitable contributions, or things like alimony or investments, then a professional is more likely to cross every T and dot every I correctly—all of which reduces the likelihood of your getting audited and may decrease the amount you owe or increase your return. In other words, the more complex your tax situation, the more likely it is that hiring a professional tax preparer will more than pay for itself.

Have I had any major life changes this past tax year?

Did you get married or divorced—both of which may require a change in your filing status. Maybe you welcomed a new baby into your family? Start a new job—lose an old one? Move across the country? Buy a house? Sell one? Start paying for a child’s college? Any of these major changes can trigger a required tax documentation. Professionals are equipped to help you identify those things and make sure they are correctly included on your tax return.

Does my household income exceed $200k?

Financial security is a wonderful thing, so it’s great to be bringing in a solid income. But it also means your chances of getting audited by the IRS are higher if your household income is north of $200k. One in every 154 tax payers making less than that in 2016 were audited. By contrast, 1 in 59 were audited if they made $200k or more. Over a million in income—1 out of 17! Of course, if you’re honest on your tax return, you needn’t fear an audit, though it can be a very inconvenient headache. Hiring a professional tax preparer can ensure that all of your documentation and paperwork is in one, convenient place in case of an audit, which will minimize the disruption.

SC Telco understands how overwhelming tax season can feel. Our service experts are available to help you sift through your financial details so that you can better determine how to prepare your income tax return. We want you to rest easy, knowing that your forms are correctly completed and your chances of audit are slim. And hopefully you get the added perk of anticipating a refund from your favorite Uncle! That’s Sam, in case you forgot!

Call us or come in to one of our conveniently located branches when you are ready to talk taxes.