Here's How To Figure Out Whether You Should Do Your Own Taxes
Shutterstock Your options have evolved.
Everyone has to pay taxes.
As to whether you should prepare your own or work with a tax preparer or accountant, however, there's no one-size-fits-all answer.
Since most people's financial situations change every year, it's a question worth asking annually.
Americans have two basic options when it comes to filing their taxes:
1. Preparing yourself, with tax software or through the IRS website. Popular tax software includes programs like TurboTax (from $19.99 ), TaxACT (from $12.99 ), and H&R Block (from $19.95 ). All three programs provide free versions for people with simple tax needs.
The IRS does not charge to file taxes, and while you can print out and mail in your paperwork or request the paper forms in the mail. the IRS encourages online filing and directs taxpayers with incomes under $60,000 to available free filing software like that mentioned above. For people with incomes north of $60,000, the site provides free fillable forms .
2. Hiring a tax preparer to file for you. The only professionals qualified to help you are tax lawyers, CPAs, and enrolled IRS agents. You can search for appropriately credentialed preparers at taxprepareregistry.com .
Preparers generally start at around $100 and vary depending on where you live and how complex your taxes are, and accountants might very well charge at least twice that, with similar variations in price according to location and complexity. According to a survey conducted by the National Society Of Accountants. federal and state tax preparation with itemized deductions costs an average of $261. Get Rich Slowly has a thorough breakdown of the costs of working with different tax preparation companies.
Note that if you itemize your deductions, you may be able to deduct the cost of your tax preparation from next year's taxes.
So, should you prepare taxes yourself or hire someone to help? For most people, it's not just about the price. Ultimately, it comes down to what you're most comfortable with, but these guidelines could help you decide.
Do your own taxes if:
You have a straightforward tax situation without dependents, investments, or significant assets or charitable contributions, and you don't own a business. Those basic, free versions of tax preparation software mentioned above were created for people like you, who have few deductions and factors to take into consideration.
You have the time and patience to deal with it. Taxes probably aren't the kind of thing you should do with Netflix on in the background. Expect to set aside some time to give it your undivided attention — in 2012, the IRS estimated you'd need 16 hours to do all of the preparation work for the basic
You feel comfortable hitting submit and want that control over your money. Taxes are a big deal. If you feel comfortable navigating the software, looking up questions on the (surprisingly accessible) IRS site. and the idea of having to fix any errors doesn't terrify you, then you'll probably feel more comfortable doing your own taxes.
Flickr / Liza How patient are you?
Hire a professional if:
You earn over $200,000 a year. Kiplinger reports that IRS statistics show an increased likelihood of IRS audits once your household income passes $200,000, and even more so if you earn over $1 million annually. If the IRS is going to come knocking, you'll want to make sure everything is buttoned up as tightly as possible — and for most people, working with a professional is probably the best way to do this.
You've had a major life change in the last year. Did you get married? Buy a house? Have a baby? These all impact your tax filing, and, at least the first time you document them on your taxes, you might want someone to show you how best to do it.
You have a complicated tax situation with dependents, investments, or significant assets or charitable contributions, or you own a business. Nearly every financial transaction comes with some kind of tax consequence, and the more transactions you have, the more things you need to take into consideration. People who own businesses, freelance, or are self-employed in particular might want the help of a professional to iron out their atypical tax situations — deductions for home offices, business meals and travel, and vehicles are also audit red flags .
You're planning to itemize your deductions. This point goes hand in hand with having a complicated tax situation. If you have major medical costs, a mortgage, or make large charitable donations (among other factors ) you might save more money itemizing your deductions than taking the standard deduction. Itemizing makes your taxes a little more complicated, which you might not want to take on.
You don't have the time and patience to deal with it. If you feel that the significant time you'd need to devote to doing your taxes would be better spent elsewhere, you might want to outsource. It's probably more prudent than rushing through your filing and making a mistake.
You don't trust yourself to cover all of your bases. If the idea of entering numbers and talking about dependents and deductions makes you break out in a cold sweat, you might want to leave the preparation to a professional.
SEE ALSO: Here Are The Tax Changes You Should Know About This YearSource: www.businessinsider.com