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Tax season is upon us. Are you thinking About Preparing Your Own Tax Return or hiring a professional? Before You Make A Choice, Consider These 6 Points.
Reasons Why You Should Do Your Own Taxes
1. It’s cheaper To Do Your Own Taxes
TurboTax, the hands-down leader in online tax preparation software fees start at for simple federal and state tax returns and goes up to 0 for the most premier level of software. Most people won’t file for , but most people won’t also need to spend 0.
I’ve also used TaxAct, which is considerably cheaper than TurboTax, but it’s also a lot more cumbersome to navigate and not as user-friendly. But, if you have simple taxes, you could probably get by using TaxAct.
On average, DIY filers will spend between – 0 to prepare your taxes
Whereas your run-of-the-mill tax preparer will cost you an average of 0 and up to almost ,300 for the most complex returns, according to a National Society of Tax Accountants survey.
I’ve done my own taxes for years using TurboTax software. Their software is straightforward to use, even for more complex returns.
2. You Build Tax & Financial Acumen
Outside of cost, learning the basics of tax preparation is a skill that pays dividends for life. Sure, you may struggle a little the first time you do your own taxes, but understanding the mechanics of tax preparation can help raise your own financial awareness and even learn how to reduce your tax obligation in the future.
Learning tax basics such as differences between itemized vs. standard deductions, marginal tax vs. effective tax rates, and taxable vs. non-taxable income are tax concepts that will be applicable for the rest of your life.
TIP: Tax-deferred retirement accounts are the easiest way to reduce your taxable income
3. You Can File On Your Own Schedule
Setting up a meeting with a tax preparer can be burdensome, especially during a rise in COVID rates. Appointments are limited, and the closer it gets to the filing deadline, it will become nearly impossible to get an appointment with a professional.
There is nothing worse than waiting until the last minute to do your taxes, and you can’t get an appointment with a preparer (frustration rising!)
When you do your own taxes, you can file your taxes from your couch in usually an hour or less for most filers.
Reasons Why You Should Not Do Your Own Taxes
- Your Financial Situation Is Complex
If you itemize your deductions, have multiple sources of income such as capital gains, business income, real estate, and have multiple dependents, or are the owner of different legal entities such as an LLC.
Additional Complexities Include:
- Starting a business
- Getting divorced
- Having a child
- Buying a house
- Selling a house
If you meet more than 3 of these criteria listed above, it may not be worth the time and patience needed to prepare your own tax returns.
Is it still possible to do your own taxes?
Of course! But, it will be much more time-consuming, and you’ll likely encounter more questions during the preparation process that you may be unfamiliar with. In situations like this, hiring a professional may be the right choice.
Plus, if you prepare your taxes incorrectly, you may end up owing or receiving an amount you are not obligated to, which can cause headaches down the road.
2. You Do Not Have The Patience
For the most straightforward returns, it will probably take about 30 minutes to prepare your taxes online. However, the more factors you add, the more time gets added. You may need to do a little research, even though Turbo Tax generally guides you through the process. But that said, a little research is always required, and Turbo Tax is still subject to human input error.
Sometimes paying a professional is the most stress-free way of getting your taxes filed.
3. You Have Peace of Mind That A Professional Is Preparing Your Taxes
When you pay someone to prepare your taxes, there is a certain peace of mind that your taxes will be correctly done and on time. Knowing an expert is doing your taxes is more critical than shelling out a few hundred bucks for some people.
Plus, an expert should be able to answer any tax-related questions you may have. An experienced preparer will also navigate complex situations and keep you sighted on any new tax laws or changes.
The Bottom Line
Deciding to do your own taxes or hiring a professional is an entirely personal choice. I have seen individuals with straightforward financial situations hire a professional, and at the same time, individuals with complex financials prepare their returns themselves.
It comes down to what you are comfortable with and whether you have the time and patience.
When I first prepared my tax return, I used TurboTax, and I was so surprised it was so easy. After that, I haven’t paid a tax professional for 10 years.
Do you do your own taxes or hire a professional? Comment below and let the RWPF audience know your rationale
