With the tax filing deadline of April 18 looming, are you still trying to decide whether to file your own taxes or hire a professional?
In this post we’re breaking down the good and bad of hiring a tax preparer, plus the perks of filing taxes on your own. Get comfy!I'm learning the pros & cons of DYI tax prep. Click To Tweet
#1) Confidence your tax return is filed correctly. We all want to avoid problems with the Internal Revenue Service (IRS). A mistake on your tax return can lead to penalties, interest on your balance or even an audit. Not fun.
An advantage of working with a qualified tax professional is the peace of mind that what you’re filing is void of any major errors.
#2) Getting one-on-one advice on deductions and credits. Your goal is to take as many deductions and credits that you qualify for to reduce your tax bill.
Researching the rules for tax deductions and credits on the IRS website is enough to give anyone a headache—including me. This is where an expert comes in handy.
Guidance is particularly helpful for anyone who’s self-employed. Reporting self-employed income, business expenses, health care coverage and other items can be challenging. You may find it helpful to work with an advisor, at least the first year you file to learn the ropes.
#3) Tax advisor fees may be tax deductible. Tax preparer fees are a miscellaneous expense. Depending on how many other miscellaneous expenses you have annually you may be able to write off tax preparer fees.
Examples of other miscellaneous expenses are costs that help you bring in income like courses for work and unreimbursed business expenses from your job.
Your miscellaneous expenses in total (including tax preparer fees) have to equal over 2% of your adjusted gross income to take this deduction. If you meet this requirement, the write-off is another incentive to pay a little more for a tax advisor.
OK, pros aside—let’s take a look at the cons of hiring a tax preparer.
#1) A tax advisor costs more money. The major drawback of working with a tax preparer is the cost. If you're on a tight budget, using a Tax software like TurboTax is cheaper. Fortunately, it’s also user-friendly.
TurboTax has several versions of the product that’ll work for beginners and experts. If you’re a sole proprietor or small business owner looking to maximize your deductions, there are editions of the software that will work for you as well. The price of TurboTax ranges from $60 to $150, depending on the version you need.
TurboTax comes with an Audit Meter to help you avoid the dreaded IRS audit. Another benefit is the software is constantly updated with the latest tax laws, so you’ll have assurance your tax return is compliant.
I bought the latest version of Turbo Tax at Office Depot for Superman (my Honey), and he did his own taxes for the first time. He was so excited because it cost way less than his normal tax advisor.
#2) Fraud is rampant. When you work with an expert that offers a service for less than the going rate, there’s a greater risk of identity theft or errors in your tax return. You need to invest in someone with the right credentials and stellar testimonials to make sure they’re legitimate.
Extra Tip: If you do taxes on your own, use a shredder to get rid of documents you don’t need in order to avoid fraud. If you don’t have a shredder, head to your local office supply store to do bulk shredding. I’ve found a deal just for you: At Office Depot and OfficeMax retail locations, you can get a coupon for five pounds of free bulk bin shredding now through April 23. Check out Office Depot’s 2015 taxes guide for your free coupon.
#3) Tax preparers make mistakes, too. You can’t sit back and assume your tax preparer will do everything correctly.
Just last year, someone I know trusted a tax preparer for the first time. In January, she got a letter from the IRS stating her tax return for 2014 was never actually filed. Even if you pay a preparer, you must review your final tax return and request confirmation that your return is filed.
Since you’ll have to go the extra step to review your preparer’s work anyway, it may make more sense to learn how to file taxes on your own.I'm learning that I can do my taxes myself! Click To Tweet
The Final Verdict
It’s worthwhile to hire a qualified advisor for review before filing if you have a complicated tax situation, but don't choose the cheapest preparer around. You'll get what you pay for, guaranteed.
On the other hand, if you have some confidence in your ability to work step-by-step through an intuitive tax software like TurboTax, you’re fully capable of saving yourself money doing it on your own.
I did and still do file them myself. My father is an accountant and when I was 18 he told me that it was time I learned how to do my own taxes. He gifted me TurboTax and I haven’t looked back since.
Have you filed your own taxes? Have you used TurboTax before? Do you have any questions? Share in the comments below.
My Lisa Rule: I have 4 sisters and Lisa is the baby (well she’s not a baby anymore). Of all of my sisters I’m the most protective over her. Before I share any product or service with you, it must pass my Lisa Rule.
What’s the Lisa Rule? If I would not advise Lisa to use a product or service, I won’t advise you to. YOU are my Lisa. I feel protective over you and your financial journey.
Office Depot’s tax products pass my Lisa Rule. Yes, Office Depot sponsored this post, but I would not recommend a product or service that I didn’t believe was helpful and useful. If fact, I've used TurboTax since I was 18 and my father (who’s an accountant), bought it for me and showed me how to use it.