Pros And Cons: Filing Your Own Taxes Vs. Hiring A Professional
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!
#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.
#1) 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.
#2) 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.
What Are The Pros And Cons Of Using Tax Preparation Service?
There are various software, websites, and applications programmed to assist people in preparing and filing their taxes. A software developed by a U.S.-based company. While there are advantages of using such a tax prep service, there are disadvantages as well.
- Easier and Smoother Tax Preparation and Filing
- Various Features for Various Tax Needs
- Updated with the Most Recent Tax Laws
- Ability to Save Files/Reports from Previous Fiscal Years
- Costs Less than a Professional Tax Accountant
- Might not Efficiently Address Complicated Situations
- The Output is as Good as What you Input
- You Won’t Know the Bill Until You’ve Finalized Everything
- Improper Usage of Software Might Lead to Unwanted Audits/Penalties
Here are some of the pros and cons of being a tax preparer.
- Suitable for people who likes to follow routines
- Suitable for people who values relationships between co-workers and customers and wants to work in a friendly non-competitive environment
- This career is perfect for people who love to work indoors.
- It is not too difficult to get into this career. Previous work-related skill, knowledge, or experience is required for this career.
- Not suitable for people who likes to work with designs
- Salary is below average
- Long working hours (More than 40 hours per week)
Reasons to Hire a Professional Tax Preparer
Asking the right questions can help ensure you get a good one
For taxpayers who are still wading through tax records and fretting about filing their income tax return, there’s hope. You don’t have to go it alone.
The National Society of Accountants (NSA) has made a Letterman-style top ten list of the reasons why people should hire a professional tax preparer:
- It takes the hassle out of doing it yourself.
- You don’t have to keep up with the many tax law changes or understand complicated tax law.
- Making mistakes can be very costly.
- Your time is worth money – add up the hours you would spend doing it yourself and calculate what that’s worth.
- A tax program in a box cannot represent you in an audit.
- A tax professional can answer your questions to help you make smarter tax-saving decisions.
- A tax professional can help you plan all year and for future years.
- A tax professional can recommend ways to save on taxes
- It gives you peace of mind knowing that a professional is taking care of it.
- It can save you money – if your tax preparer finds even one significant deduction or tax credit you may have missed, it can easily exceed the average $246 fee it costs to have a professional prepare your return.