Filing income taxes is no small task to undertake. You must compile income earnings reports, tax statements, receipts for deductions, and certain legal documents in order to get started. Once tax preparations begin, you must also significant amount of free time to go through the nuances of the ever-changing IRS laws. These facts are true whether you meet with a tax professional or file on your own, but which choice is better for you? There are pros and cons to both.
Hiring a Tax Pro
Theoretically, a tax preparation specialist spends years studying tax law. Because laws change every year, a pro knows to stay on top of those changes, ensuring that you will have as little tax burden as possible, all while helping you to avoid an audit. Another bonus is that you can hand over your paperwork and go about your day while your taxes are done for you.
On the downside, professionals can be fairly costly. Likewise, if you hire a service that relies on a high volume of clients, you may not receive the hands-on care for which you are paying.
You Should Hire a Professional if any of the following are true:
- You earn more than $200,000 per year
- You have overseas banking/investment accounts
- You are a business owner
- You practice day trading
- You have a large number of deductions
- You have little free time on your hands
- You are not confident with your own accounting skills
DIY Tax Filing
There are a lot of reasons to skip the professionals and do your taxes yourself. It is less expensive, the timing is flexible, and you have the ability to be as meticulous as you wish. Conversely, doing taxes yourself means that you must have the time and care to do a thorough job. Tax law is extremely confusing, even to professionals at times, which makes a proper job even more difficult. If you are audited, you will need to hire a tax attorney who is unfamiliar with your earnings.
Tax preparation software helps with understanding the complexities to income tax filing. Many choices also give you the option of hiring a tax consultant or audit representation. Unfortunately, these can sometimes cost nearly as much as hiring a pro from the outset.
You Should Hire a Professional if some or all of the following are true:
- You earn under $200,000 per year
- You have few income streams to report
- You need flexibility with your hours
- You have a quiet space to work
- You have little money to spend on a tax pro
- You are adept at math and organization
- You enjoy accounting-related tasks
If you are still unsure about filing your taxes yourself, and you have some flexibility with your time, it may be wise to start your taxes at home. You can begin with a free tax preparation program or by completing free forms online. The IRS provides these items for you here. Once you get started, you may be able to judge more accurately if you can and should file your own taxes.
Even if you plan on hiring a professional, it is a good idea to understand tax law and deductions as completely as possible. One of the best ways to learn is with hands on experience.
Tax Prep Help
Some may be able to have the best of both worlds. The Volunteer Income Tax Assistance program provides tax help from certified tax preparers to people who want to file their own taxes. The program is free to those who qualify.
You may qualify for VITA if you…
- Earn under $53,000
- Have certain disabilities
- Are a senior citizen
- Do not speak English as your first language
Even if you don’t qualify for VITA, you may receive assistance through Tax Counseling for the Elderly if you are 60 or older. Click here to find the closest VITA or TCE center.
If you don’t qualify for free tax help under VITA or TCE, but you still want to file your own returns, you do have another option for answering any of your tax questions. The IRS has an Interactive Tax Assistant with FAQs and a searchable database. The ITA takes you through a step-by-step process pseudo-interview process with a goal to answer your questions thoroughly and with no fees.