Can’t decide whether or not you should file your own taxes?
Tax season is definitely in high gear. A typical question this time of year is whether or not someone should prepare their tax return on their own or hire a tax professional? Even while I was typing this blog article, I got a call asking this very question. We are going to take a little time to give you our thoughts on this question and the other things that come up in that discussion.
Are you a business owner?
Are you a business owner or have a side business? If you answered yes, then you definitely need a tax professional for your accounting and taxes. There are just too many things that could be missed by doing your taxes yourself. It could end up costing you a lot more than hiring a professional.
Don’t own a business?
If you answered No to the “Are you a business owner?”, then the answer is not as simple. This will lead to other questions such as: Do you have rental property? Do you have investments? Do you itemize? Do you have unreimbursed employee business expenses? etc. There are so many variables that can be thrown into your return.
I typically will let someone know that if they only have a W2 from their employment then really they can’t go wrong filing their own return. Whenever you start to itemize (use schedule A) and start to add the other things listed above is whenever your return goes from simple to getting more complex. With that the need for a tax professional goes up. So a lot depends on the complexity of your return in whether or not you should hire a tax professional.
So what should you do?
If you fall into the second category above, then I would suggest you look into talking to a tax professional. Most qualified and reputable tax professionals will offer a FREE consultation. In that consultation, talk with them about whether or not you actually need a tax professional and what they would do differently about your return. Also, make sure you find out about their qualifications. Make sure that they are not just recently hired and “trained” for “seasonal help”. Make sure that they actually are a tax professional for a living all the time. There is some truth to the TV commercial that is out where an individual runs into their “tax professional” working on their plumbing in their house. If in your consultation the tax professional mentions several things they would change or do differently about your return ask them how much that would equate to in tax savings. Then find out how much they are going to charge in order to prepare your return. Don’t forget to take into account your time by not having to prepare the return.
Hopefully all of the above will get you pointed in the right direction of whether or not you should or should not prepare your own return. Another question that we get when asked about this topic is what do you think of using online tax software in preparing your own return? Those online software packages are great and ask the right questions and can be very effective given the person preparing the return understands the implications of every question. Also, that they answer the questions correctly. If you have a business then there are all kinds of tax planning strategies that the online software will not ask you. I have seen people do great preparing their own returns with the online software and I have also seen people leave money on the table. Take advantage of talking to a tax professional and finding out what is best for you and your situation. If you have any questions or would like a Free consultation, feel free to contact us.
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The video version of this blog can be found on Video: Should you prepare your own taxe?