Many people file their own taxes each year - and if you have a simple tax return, you can save money by doing it yourself or using online tax tools to help you file. However, if your taxes are a bit more complex due to things like itemized deductions, investments, being employed in more than one state, or running a small business, you may benefit from working with a tax professional. You might also consider seeking professional tax help if your tax situation has changed significantly over the past year. If you’ve experienced a major life change such as marriage, divorce, bankruptcy, job loss, a home purchase, the birth of a child, or the death of a spouse, a tax professional can help you determine how it will impact your taxes.
Let’s take a closer look at some of the potential advantages and disadvantages of doing your taxes yourself.
Advantages of Doing Your Own Taxes
Benefits of Hiring a Tax Professional
Let’s take a closer look at some of the potential advantages and disadvantages of doing your taxes yourself.
Advantages of Doing Your Own Taxes
- Saves you money. It can be expensive to hire someone to prepare your taxes. Doing them on your own can save you money. You can file your taxes for free using the IRS’ fillable forms, and filers using Simple Form 1040 can use TurboTax’s Free Edition. The IRS also provides free guided tax software for taxpayers who meet certain income thresholds. There are also many low-cost tax preparation tools out there that are less expensive than hiring a professional tax preparer or accountant.
- Allows you to better understand your finances. Doing your own taxes forces you to examine your finances closely. Diving into your finances can lead to positive changes, such as creating a budget, putting more money towards retirement, and reaching savings goals.
- Potential for errors. Filing taxes can be complicated, and making a mistake could have a big impact on your taxes. Errors on your taxes can result in paying more or less than you owe, and they could potentially trigger an audit by the IRS.
- Lack of assistance. When you file your own taxes, you don’t have a professional to help provide tax guidance or answer questions. This could result in missing deductions that you qualify for and paying more than you should on your tax bill.
- No audit protection. Around 1 in 500 tax returns are audited by the IRS each year. If you end up being audited after filing your own taxes, you won’t have a professional who can speak on your behalf or help guide you through the audit process. Responding to an audit on your own can be stressful and overwhelming. Some online tax tools do offer protection against audits, or audit support, but these features typically come with an additional cost.
Benefits of Hiring a Tax Professional
- Saves you time. Outsourcing your taxes to a professional can save you a lot of time. While you’ll likely still have to collect your tax documents and answer some questions related to your finances, you won’t have to agonize over individual inputs, calculations, and deductions.
- Cuts down on errors. When you hire a qualified professional to do your taxes, you can typically be confident that your tax return will be free from errors.
- Helps you maximize your tax savings. Most tax professionals have a deep knowledge of tax laws and yearly updates, helping to ensure you don’t miss a deduction or tax credit that you qualify for. This knowledge can help minimize your tax bill. A good tax professional or accountant can also provide guidance on optimal tax withholdings or retirement contributions to help reduce your tax burden in the future.
- Can provide audit assistance. Typically, if you hire a professional to do your taxes, they will work directly with the IRS in the event of an audit. This can help to alleviate the stress and confusion associated with an audit, and ensure it gets resolved as quickly as possible.
- Requires due diligence. None of the benefits listed above will matter if you hire someone who isn’t qualified to do your taxes. Hiring a tax professional involves doing your homework to ensure you end up with someone knowledgeable and trustworthy. You’ll need to do some research and read online reviews to find a professional you feel comfortable with. Asking family and friends for recommendations is a good place to start.
- Can be expensive. If you have a relatively simple return, the cost of hiring a professional may not make sense for you. It can be an expensive service, especially if you are on a tight budget. While the cost varies by professional, and often depends on how complicated your return is, hiring an accountant or tax preparer to do your taxes could cost anywhere between $100-$450, or more.