At more than 73,000 pages, the federal tax code is a complex document and navigating tax law can be a frightening prospect for the average person. Every year, millions of Americans seek professional help in preparing their tax returns but there are still plenty of taxpayers who tackle the job themselves. There are pros and cons to hiring an expert versus doing it on your own and you should weigh them carefully to make sure you’re getting the most benefit.
When It Makes Sense to Do Your Own Taxes
Preparing your own taxes saves you time and money and you don’t have to worry about sharing your personal information if privacy is a concern. If you’re not intimidated by the tax code and you have a good grip on your tax situation, filing your taxes on your own doesn’t have to be a hassle. If any of the following apply to you, you may be better off crunching the numbers yourself this tax season.
- You haven’t experienced any major changes in your filing status or income. If you got married, had a child or made significantly more money than last year, it could make filing more complicated. If, however, you expect your income and filing status to be the same as in previous tax years, you may be able to save some money by doing it yourself.
- You normally take the standard deduction. While itemizing deductions can lead to a bigger tax refund, it’s also an easy way to get bogged down in tax law. If you claim the standard deduction instead of itemizing, it may not be necessary to get outside help in completing your return. If you plan to itemize, you’ll need to make sure you can prove all of your deductions in case you’re selected for an audit.
- You don’t own any property or investments. If you have income from a rental property, received distributions from a qualified retirement account or made money through your investments, your tax filing is likely to be more complicated. If you don’t have any additional sources of income other than from your job, your filing should be fairly straightforward.
Benefits of Hiring a Tax Expert
Tax laws are constantly changing and tax professionals specialize in knowing what the rules are at any given time. They can help you find every deduction and credit possible and look for potential errors that you may not be aware of. A tax expert can offer advice and guidance not only at tax time but throughout the year, which is great if you have a specialized tax situation, such as owning a business or rental property. The following situations are good examples of when a second set of eyes can ensure the accuracy of your return.
- You have a significant amount of itemized deductions. If you have business expenses, charitable donations, mortgage interest or student loan interest, hiring an expert can help you figure out how to maximize your deductions for these expenses.
- You’re in a higher income bracket. With the passage of the fiscal cliff measures, high-income earners are potentially facing some added difficulties in tax seasons to come. That’s because the fiscal cliff deal raised tax rates and lowered some key exemptions and deductions for individuals whose adjusted gross income exceeds certain limits. A tax professional can help you figure out how to make the most of your deductions and develop a tax planning strategy for future years by taking into account the fiscal cliff changes that will impact your 2013 taxes.
- You own a business. If you started a new business last year or a hobby is beginning to generate income, preparing your taxes just entered an entirely new dimension. Business owners are subject to additional tax rules that you don’t have to worry about with your personal taxes and you could end up in hot water with the IRS if you make a mistake in filing your returns.
The question of whether or not to do your own taxes or get professional help ultimately depends on how organized you are and how confident you are in your ability to get it right. Doing it yourself can be a less expensive, less time-consuming way to go but if you want added peace of mind, it may be better to seek professional tax advice.