There is often a debate on whether or not it’s best to file your taxes on your own or if you should go the route of having a professional handle your filing for you. Both methods come with their own unique advantages and disadvantages. In this article, we’ll go over some benefits with each choice to try and help you to come to an informed decision on your own.
The advantages of doing your own taxes
There are a few advantages that come from choosing to take care of filing your tax returns by yourself. The first and most obvious is the fact that it’s much more cost effective to handle your own return than paying to have someone else to do it for you. If you feel confident in your ability to accurately handle all of the paperwork required to get your return done properly, it’s a great way to save on the sometimes hefty fees associated with going through a CPA or similar service provider.
Another thing to keep in mind is that when it comes to handling your tax return, nobody will ever be as truly invested as you are with your own taxes. While it’s true that in most cases using a professional service ends up with a smooth filing process, human error can and does happen. Your best bet to avoid the risk of this is by handling your own taxes. You can guarantee the fact that you will double check all of your information; you can’t always say the same regarding some professional services.
You should also consider how straightforward your tax return is. If it’s a relatively simple return, odds are good that you can indeed handle filing it yourself. This is especially true for individuals who only have one source of income, are single with no dependents, don’t own any investments or properties, and have no other complex factors to take into consideration. It’s very easy to do an e-file with the IRS in this case.
The advantages of hiring a tax professional for your taxes
On the flip side of the coin regarding the cost effectiveness of doing your own taxes that we mentioned above, there’s a reason most qualified CPAs and tax services charge the rates that they do. It comes down to the fact that they know what they are doing as a result of experience. They’ve been there and done that, so to speak.
This can be a huge benefit to you if your tax returns borders on the more complicated side of things; if you’ve had some major changes happen in your life in the past year, such as getting married or divorced, buying a house, or there’s been a change in circumstances regarding any dependents, you should probably consider seeking outside help. Likewise, if you hold assets such as an investment portfolio or a rental property, these are things best left in the hands of a qualified tax professional.
One of the other advantages a tax professional can provide you with is by pointing out many deductions that you might not be aware you’re eligible for. Indeed, it’s not uncommon for some people to save hundreds, or even thousands of dollars, in taxes by taking advantage of deductibles they weren’t even aware they qualified for. Medical costs, rent and mortgage payments, charitable donations—they can all be deducted in some way most of the time. A tax service will be able to examine your personal situation and find all of the applicable deductions available to you.
A big point to take into consideration as well is the likelihood of being audited on your tax return. The odds of this increase if you earn a higher than average level of income. Reports of IRS statistics show an increased risk of a tax audit once your income passes the $200,000 threshold, and a higher risk again at over $1 million in income. If you’re at an increased risk of being audited due to your income bracket, it might be best to let a tax professional take a closer look at your return.
Perhaps one of the most important things to keep in mind when trying to choose which method to go with is also one of the most basic, and that is how much time and patience that you have available to handle doing your own tax return. If you are simply too busy or can’t be bothered to deal with it, then it only makes sense to have the whole thing outsourced. While it doesn’t take very much time to prepare a straightforward tax return, especially once you are comfortable with the whole procedure, the more complicated returns can be quite a lengthy undertaking.
In the end, it will all come down to your comfort level if filing on your own. If you are determined to save on the cost of hiring a tax professional, you’re aware of specific tax laws relating to you, and you are confident and prepared to handle filing your own return, then it by all means becomes a great option.
On the other hand, if you want to have a guiding hand throughout the whole procedure, and even through the entire year, consider seeking outside help. Tax professionals stay up to date on all of the latest tax law changes; they possess a wealth of experience; and they will be by your side the entire time should you find yourself facing a tax audit. While it ends up being more expensive to go this route, in the long run, a lot of people find the tradeoff to be worth it, thanks to the peace of mind they receive using a tax service.
The final decision rests entirely on you. You could even consider going in for an initial consultation and seeing what options are available to you. If you want to proceed at that point, then by all means go for it. Otherwise, you’re free to just attend that initial meeting and then handle your taxes yourself if you so desire. Hopefully this article has given you an idea and pointed you in the right direction to make the best decision for you.