Every American has to deal with taxes. However, 89 percent of the general public looks for help from software or accountants when doing their taxes. People should always remember to be proactive in this matter.
In short, they should not wait too long to decide whether to hire a tax preparer. At the same time, it helps to avoid the last minute scramble.
There are several important factors that can help you decide whether or not you should file your own taxes.
The benefits of using a financial professional are often insignificant if an individual has a simple and straightforward tax return. Because of this, some people should do their taxes on their own. However, this is only applicable if you do not have rental properties, investments, own a business or have a more complex tax situation.
Using a tax accountant can minimally improve a return when people have straightforward tax calculations. The majority of people begin doing their own taxes for that simple reason.
Doing your own taxes makes you much more knowledgeable about your finances. At the same time, it can get them thinking about money in a different manner. Working through tax forms might help you think about deductions such as donations to charitable organizations that you have made throughout the year.
At the same time, it allows you to determine what would happen if you decided to start a business because you are much more knowledgeable of your financial position. A person who never does their own taxes might not think in detail of the financial sacrifices or obligations a business would entail. They also might not understand the factors that go into that final bill amount or tax refund.
The majority of tax preparation software is very user friendly. Tax software such as H&R Block and Turbo Tax have wizards that help people fill out the forms and collect the required information. At the same time, it gives them access to online advisors and communities if they need help.
A person who does their own taxes can also effectively control the time scale on which they prepare these taxes and make their own schedule. You can often start your return online and simply get back to it later if needed. However, this also has a downside. Although you have more flexibility when it comes to filing and compiling their taxes, doing it yourself does often take a significant amount of more time. The IRS estimates that it takes an average taxpayer 22 hours to file and prepare a Form 1040.
Although you can obtain many benefits from doing your own taxes—such as saving some money—however there are also some reasons why this should be left entirely in the hands of a professional. One of these factors is the possibility of overlooking an important deduction or making a costly mistake.
The U.S. tax code is very complicated. At the same time, there have been 3,400 changes in tax laws since 2000. If an individual has a more complicated tax return, they are more likely to need the service of a professional. Making a mistake on their return can often cost them a huge amount in penalties and interest.
If an individual gets married, has a child, gets a divorce or loses a spouse, they might require help in finding the best filing status for that tax year. Although a number of the calculations are easy, some have time-sensitive dates. As children get older, tax deductions and tax credits might expire depending on their current age. Determining these conditions accurately requires the help of a tax professional.
Starting a hobby venture or new business often requires expert knowledge. People would not want to jump in a pool without taking swimming lessons, and they should not try doing their business taxes alone without some important tips and tricks.
A tax expert can help them find lots of tax deductions. At the same time, professional advice can help them avoid getting into trouble. Those financial savings along with the peace of mind that comes with it can pay for themselves.
In the end, it often comes down to the resources that an individual wants to put into their taxes and how complex their return is. An individual can often find an accountant to help and then terminate their services if they no longer need the advice. However, having a trustworthy and knowledgeable tax professional in their corner can make all the difference in many situations.
License: Creative Commons
Alex Faubel enjoys writing about topics related to business, accounting and technology in career-focused education programs.