As I mentioned, it could be a very complicated season - late law changes, the Affordable Care Act rules, and much reduced IRS resources. It's the perfect storm for potential taxpayer confusion, problems filing tax returns, and delayed refunds. Whether you need IRS help or not, filing electronically and as early as possible is one of your best defenses against delays. Of course, in any tax year with issues, changes, and new rules it could be best to let someone else prepare your tax return. So how do you know if you should do your own return or hire a tax pro?
Step one, either way, is organizing all your documents- you know the ones in your mailbox that have, "IMPORTANT TAX DOCUMENT" stamped on them. Take those and your canceled checks, receipts, and last year's tax return and do a quick review of your tax situation. These documents can help you determine if you have a simple return, which you might choose to complete yourself, or if you have a more complex return that might be best prepared by a trusted tax pro.
Let's look at the do-it-yourself (DIY) approach first. If you have a couple W-2s and some 1099's, you can probably do your own return; you might miss something like a tax credit or deduction, but the odds are you will get it mostly correct. Most of the DIY tax preparation software is user friendly, walking you through the forms in a question and answer format, or allowing you to enter data directly from the forms you received. DIY is convenient; you work at your own pace, grabbing an hour here and there. Another advantage of DIY is the cost savings. Generally, if your income is less than $60,000, you can file for free right from the IRS website: Free File: Do Your Federal Taxes for Free. Certainly, there are good software products and some even reasonably priced. However, do not be fooled - YOU will be doing the work, taking the risks, and relying mostly on YOUR tax knowledge; AND, if IRS has questions, you are on your own. America is founded by risk-takers and adventurers, but is your tax return where you want to take risks or be adventurous?
A tax pro is a good idea if you; had significant life changes (think marriage, babies, and moves), own rental properties, are self-employed, have many deductions, or you have questions about the impact of the new healthcare laws. Another reason to seek a tax pro - you have better things to do. Taxes take time and they are complex, the average taxpayer spent more than 23 hours to prepare and file a Form 1040 last year and Accounting Today reported that average tax preparation fees were $246. Being a numbers guy, that averages to less than $10.70 an hour. A tax pro ensures you get every deduction or credit you are eligible for, even the complicated or lesser-known ones, so that you get every penny that is yours. Combine the low price with not worrying about reading form instructions, forgetting a deduction, missing a credit, or worst-case scenario, making a mistake and that money is well spent. Not to mention that if you were to be audited, you would have professional help.
For many hard-working Americans, preparing their tax return is the largest financial transaction of the year. Whether you prepare your return or you have it professionally done, make sure your tax return gets all the attention it needs to be done right. After all, it is YOUR money and you want the biggest refund you are entitled to.