Making sense of the federal tax code is no easy task and with so many new changes taking effect, figuring out what you owe may be even more difficult. Tackling the job yourself can save you money on tax preparation fees but it could end up costing you if you make a mistake. Hiring a professional may mean shelling out serious cash but it could be worth if you’re able to lower your tax bill or fatten up your refund. It helps to understand the advantages and disadvantages of either option before you make a decision.
Have Questions About Your Taxes?
A financial advisor may be able to help. Match with an advisor serving your area today.
Get Started Now
Weighing the Pros and Cons
The biggest benefit of preparing your own taxes is the money you’ll save. Tax preparation fees vary but you can expect to pay around $150 or more for a simple return and up to several hundred dollars if your situation is more complex. You can do your taxes the old-fashioned way using paper forms or filing electronically.
There are plenty of websites that offer free or low-cost tax preparation services and all you have to do is punch in the numbers. Depending on the software you use (like TaxAct or ), you may be able to check your return for errors and assess your audit risk before you file. Some companies even offer ongoing support and assistance if you end up getting audited.
Another benefit of doing your taxes yourself is that you don’t have to worry about sharing your personal information with a stranger. If privacy is a concern or you’re not able to find a tax professional you trust, preparing your own return may be the safest option.
In terms of drawbacks, doing your own taxes is typically more time-consuming than handing it off to someone else, especially if you’re having trouble understanding the different tax rules. Even if you’ve got a relatively straightforward return it could still end up taking you several hours to complete. Using online tax software can speed up the process but it can be difficult to get help if you’ve got a question or run into a problem.
The other thing you need to think about is the potential room for error. Putting a decimal point in the wrong place or adding the numbers wrong can throw off your whole return. When the IRS processes your return, the error will become evident and you could find a hefty tax bill in your mailbox. If you’re dead set on doing your own taxes, it pays to go over it with a fine toothcomb before you file.
Questions to Ask Yourself When Choosing
If you’re on the fence about whether or not to get help with your taxes, here are a few questions to think about:
- Has your tax situation changed? If your income and filing status is about the same as last year and your return is relatively simple you’ll probably be okay filing on your own. On the other hand, if you’ve gotten married, changed jobs or gotten a raise it might be wise to get professional help.
- Will you itemize or take the standard deduction? Itemizing deductions for things like charitable donations, business expenses or medical expenses can help you lower your tax burden, but figuring out how much you’re able to deduct can be tricky. If you’re planning to itemize, it may be worth it to pay someone to go over your return. Significantly fewer people should itemize today than before the standard deduction was changed under President Trump.
- Do you own a business? Doing your taxes gets a lot more complicated when you throw business expenses into the mix. Business owners are subject to a different set of tax rules than individuals. So if you’ve made the leap into entrepreneurship, a qualified tax professional can help you navigate the waters.
Ultimately, the right choice is going to depend on how much money you have to budget for your taxes and how complicated your situation is going to be. Tax software can help walk you through the needs of most taxpayers but there are some exceptions and the more complicated your tax situation is, the more likely it is that you should hire a professional.
Risks of Doing Your Own Taxes
Before deciding to do your own taxes you should weigh the pros and cons and determine if it makes sense. For example, if you have a straightforward tax situation and a low budget then you’ll probably want to do your own taxes to save money on hiring a pro. Here are some of the risks to be aware of before starting your taxes:
- Accuracy:While software can walk you through your taxes it can’t do it for you. You still have to enter the data and know how to find what you need. This can lead to mistakes and your taxes could be misfiled.
- Paying More Than You Should:One of the downsides of doing your own taxes is that you could end up paying more to the government than you would if a professional did your taxes for you. This is because they know the law much better than you do and can find all of the tax breaks you qualify for.
- Less Audit Protection:While tax software companies offer various levels of audit protection, it’s not the same protection you would get from having someone else complete all of your taxes for you.
The Bottom Line
Whether or not you should take on your tax return or pay someone else to do it really depends on how organized you are and how comfortable you are with doing it yourself. If you’re confident about your ability to understand the tax code, then doing your own is a smart way to save. If not, it’s probably time to pony up the cash and hire an expert. Ultimately, you have to weigh the value of your time and money against your peace of mind.
Tips for Tax Preparation
- Financial advisors can do more than just manage your wealth. Many also specialize in taxes. They can help you with your tax filing as well as with proper planning to help lower your tax liability. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Looking for an estimate of what you might pay on your tax return? Consider using SmartAsset’s freeincome tax calculator.
Photo credit: flickr,©iStock.com/Steve Debenport, ©iStock.com/Geber86
