As tax season approaches, many taxpayers face some of the same questions and concerns each and every year. And among the most commonly asked questions are these two frequently recurring ones:
- Is it hard to do your own taxes?
- Should I do my own taxes?
To help provide answers and insights regarding these often-posed tax questions, this blog article examines some of the leading advantages of filing your own taxes DIY and of hiring a professional some scenarios in which most taxpayers are likely to be comfortable preparing and filing their own taxes — along with others in which they might not.
Looking for helpful insights about DIY tax filing vs. hiring a professional? Read on for more information.
When self-filing might be a good option
For many American taxpayers, going the do-it-yourself route using IRS-approved tax-filing software to file electronically can be a time- and money-saving option. This is often the case when the taxpayer works a single job and there are minimal complicating factors affecting their tax returns, which typically makes the tax-preparation process relatively simple and straightforward.
Further, to help make this option more approachable, most tax-preparation software simplifies the process by walking taxpayers through preparing their returns step by step. And once their returns are prepared, taxpayers whose adjusted gross income is $79,000 or less are eligible to use the IRS Free File program to submit them.
Top advantages of DIY tax preparation and filing
Some of the leading advantages of preparing and filing your taxes without the help of a tax professional include:
- Reduced costs: Of course, when you prepare your own taxes, you avoid the charges that come with hiring a tax professional. Further, the cost of purchasing tax-preparation software is, in most cases, substantially lower than that of hiring a professional — and there are even a number of free-of-charge options available.
- Personal financial insights: When you prepare your own tax return, the process inherently forces you to explore and scrutinize your spending, saving, investments, and other financial moves for the tax year. This can provide valuable insights into your financial well-being and the efforts you’re taking to grow your wealth. It also offers an excellent opportunity to reflect on your financial goals and how you might be able to better achieve them.
- Available assistance: For those who might need extra guidance when preparing their taxes, a wide range of assistance is available. Among them, the IRS’s Interactive Tax Assistant (ITA) is a great free resource for getting answers to tax-related questions. And for qualifying taxpayers, the IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs can provide preparation of basic tax returns free of charge.
… And when a pro might be needed
In other cases — and especially when the taxpayer has a limited tax knowledge and the return is more complicated — getting expert help might be a better way to go. Some common examples of situations where a potentially complicated return might make getting a tax professional’s help worthwhile include:
- When the taxpayer has worked multiple jobs or has worked in multiple states over the course of the tax year
- When the taxpayer has sold investments or a major asset such as a home or a business over the course of the tax year
- When the taxpayer is self-employed or operates a side business
- When the taxpayer has collected rental or business income, received investment income, or paid expenses related to any of these over the course of the tax year
- When the taxpayer has been previously audited
- When the taxpayer has recently experienced a major life change such as a marriage, a divorce, the birth of a child or the death of a loved one
- When the taxpayer is seeking to maximize his or her taxable contributions to a retirement account
- When the taxpayer is seeking to reduce his or her overall tax liability (such as with itemized deductions)
Top advantages of hiring a tax professional
Some of the leading advantages of preparing and filing your taxes with the help of a tax professional include:
- Time savings: Even the simplest of tax returns can take hours to prepare, especially for a non-professional. But with the help of a professional tax preparer, returns can be completed much more quickly. And apart from the time spent answering the preparer’s questions about personal finances and collecting the needed forms and documents, the taxpayer can avoid the bulk of the time investment and heavy lifting.
- Expert advice and minimal mistakes: Certified tax professionals are highly trained at preparing taxes and have a deep understanding of tax law. Especially in cases where the taxpayer’s financial situation includes complicating factors such as stock sales or a job loss, having access to such a professional’s expert knowledge can help the taxpayer limit his or her tax liability and avoid making costly errors.
- Audit assistance: In the unlikely case that a taxpayer is audited by the IRS in the wake of a tax filing, having the backing of a tax professional can be a big help when trying to navigate through the audit process unscathed.
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