You can breathe a sigh of relief now that Tax Day is behind us. Most taxpayers hardly look forward to tax season. An estimated 52% of U.S. adults find the tax-filing process stressful, according to a recent TaxSlayer survey. But most of that sentiment boils down to feeling unprepared or not equipped to handle their returns correctly. If each year you feel anxious about the process— there are many proactive steps that you can take to make next tax season less harrowing.
One common question taxpayers ask is whether taxpayers should file their taxes with online software on their own, or hire an accountant/CPA with tax prep and planning expertise? Ultimately, there is no universally correct answer to the question of hiring a tax professional, versus preparing your own returns. Your comfort and familiarity with the IRS’s complex rules will be part of your decision. Plus, other deciding factors are your patience level and how much time you can devote to preparing your taxes.
If you own a business, pay employees, invest in the stock market, own multiple pieces of real estate, or even experienced unemployment, a tax advisor and CPA will likely make things easier for you. If on the other hand, you’re a full-time employee who has a salary, receives a W-2 every year, and does not have investments outside of your 401(k), tax software might be sufficient for your needs. For most taxpayers, the reality lies somewhere in between the complexity of multiple income streams, investments, self-employment, and even potential deductions. Sure, do-it-yourself tax prep software can be less expensive than working with a tax preparer. And you don’t need an in-person appointment which may be convenient. There are many reputable tax prep software platforms that are accurate in their calculations. However, tax prep software doesn’t always offer the best value. Working with a CPA or tax preparer is often a better fit for most busy filers with complicated tax scenarios.
When you work with a tax professional you can provide the materials your preparer needs to complete your return in less time than completing the return yourself. If there’s lots of material involved, your tax prep person can receive secure file uploads rather than paper documents.
Do you have multiple sources of income?
Small business owners, self-employed individuals, and freelancers have rather complex tax scenarios. When time is money, it’s sensible to outsource time-consuming, number and data entry to someone who actually understands the nuances, who is on top of the complex IRS tax codes and knows up-to-the-minute ever-changing credits and deductions.
Even if your tax situation isn’t complicated, do you have limited time and ability to meet the IRS tax deadlines? Filing your own taxes can be time-consuming. The IRS estimates at the average person spend 25 hours completing their tax returns. A tax professional will be able to work quickly and efficiently – saving you time down the road.
Ease of difficulty
Filing a tax return cannot only be complicated and confusing but it’s also constantly changing. The federal tax code changes each year making it nearly difficult for the average taxpayer to be fully aware of all changes that may apply to them.
Optimize your deductions or credits
Consumer tax software is not bulletproof in finding every deduction and credit relevant to your situation. An expert tax preparer can help you because they are deeply experienced in tax deductions that you can claim such as Retirement Contributions, Charitable Donations, Mortgage Interest Deduction, Interest on College Education Costs, Self-Employment Expenses, Child Tax Credit, Charitable Deductions, Earned Income Tax Credit, and so on.
Lastly, peace of mind goes a long way. Regardless of how confident you might be in your ability to file your own taxes, mistakes are inevitable. A tax professional performs these tasks daily and is your advocate ensuring you reduce your tax burden. They can help find deductions or credits that may have otherwise been missed, as well as they know the red flags that can signal a potential audit. If you own a small business, have rental property, experience some big life changes such as getting married, retiring, have a new baby on the way, have employee stock options, or even need to make quarterly tax payments, it pays to work with a professional. Peace of mind can go a long way. If you are seeking tax planning, tax preparation, bookkeeping, accounting, and business advisory services, Jeanine Hemingway, CPA is here to help. Located in Austin, Texas, our goal is to provide each client with professional and personalized service. The firm’s staff are experts in the areas of accounting and tax preparation and planning. We combine sound advice and an innovative approach to achieve our clients’ financial, accounting, tax, and business needs.