When to Hire Someone to Do Your Taxes
Advancements in tax software make it easier to file your taxes without the help of a professional, as does this year’s increased standard deduction and simplified 1040. But there are still plenty of circumstances when you’d want to hire someone.
These situations might include:
- You’re a freelancer or you have multiple income streams
- You started/own your own business, or sold a business
- You do business in a foreign country
- You got married or divorced
- You inherited money
- You’re retired
- You take care of an elderly relative
- You want year-round tax advice
- You have significant investment income/losses
- You buy health insurance through a health exchange
- You’re rich (if you’re single earning more than $250,000 or married and earning more than $300,000 jointly, per Marketwatch)
What does tax prep cost?
If you don’t have any itemized deductions to claim, the average cost of having a professional prepare Form 1040 plus your state tax return is $176, as per the National Society of Accountants. For a 1040 with a Schedule A for itemized deductions and a state tax return, it’s $273. And for an itemized 1040 with a Schedule C, which is a profit and loss statement from business activities, plus a state tax return, it’s $457.
Of course, these are just averages. If your tax situation is really complex, you could pay a lot more.
When to file on your own
As a general rule, if you’re planning to claim the standard deduction, there’s really no reason to hire someone to prepare your tax return. All you need to do in that case is list your income from your W-2 and 1099 forms and see where that takes you. In other words, if you can read and copy over numbers, you’re all set. You can either pay a modest fee for software (like TurboTax) and submit your own electronic return, or print out a paper return and send it in by mail. You’re generally better off going the electronic route, though, as it will help you avoid errors, capitalize on the deductions and credits you’re entitled to, and get you your refund faster, assuming you’re entitled to one.
Furthermore, if you earn less than $69,000, you’re entitled to file your taxes for free. You can do so through the IRS’s website.
Now if you’re planning to itemize your deductions but they’re all pretty straightforward, then you can still get away with filing taxes yourself. For example, if you’re simply copying your mortgage interest total, deducting property taxes, and listing your charitable donations from the past year, that’s not incredibly complicated work. In fact, the bulk of the hassle involved is gathering that information in the first place, so unless you’re truly intimidated by the notion of messing up your taxes, you can probably spare yourself the fees associated with hiring a professional.
Prepare Your Taxes First, Then Pay Someone To Do Them
One option to consider is preparing your own return and then hiring a professional tax preparer to also do your return or review your self-prepared return.
You’ll get all of the benefits of preparing them yourself (even though the tax software may cost you some money) and you can then compare it to the return completed by the tax professional.
You may find your DIY return matches the one you pay to have done. If it doesn’t, you can talk with your tax preparer about discrepancies and see if hiring someone to do your taxes is worth the money.
Don’t forget to talk with your tax preparer about any planning you can do to help reduce your tax liability in the future too.
Should I Pay for Professional Tax Preparer?
You may still have time to make decisions about doing your own taxes or paying a professional tax preparer to do them – or doing both. But putting your taxes off once you have all of your documents organized usually doesn’t make sense.
Tax time is stressful for some people and waiting to do them can cause even more anxiety.
For most Americans, federal tax returns are due on April 15th – better known as Tax Day.
But, remember filing early will help you get your refund faster and cut down on identity fraud. And if you find out you owe money after your taxes are completed, you can wait until Tax Day to file and pay the taxes due.
Knowing what you owe will allow you to take control of your finances, develop a plan to pay your taxes, and hopefully avoid taking on debt to pay the tax bill.
Finally, remember, even if you pay someone to prepare your taxes, you personally are responsible for the accuracy of the information provided. The tax preparer can help you, but you need to make sure it’s right.
One of the biggest errors I see every year are typos – especially from people that use the major mass-market tax preparation companies that you see on TV. These data entry professionals (because they rarely offer advice or help), can mess up. They can misspell your name, mistype your Social Security number, and more. All of those will result in delays on your tax refund.
Make sure that you do a thorough review of your tax return before you file – no matter if you do it yourself or if you pay someone to help you.