We’re almost halfway through tax season, so if you haven’t filled out your tax forms yet, it’s time to get going! If you’ve got money coming back to you, you surely don’t want to wait longer to get it, and if you’re going to owe money, well… you’ll want to know sooner so you can start planning for that. Could it be that you’re unsure whether to do your taxes yourself or take them to a professional? In that case, we’ve summarized the pros and cons of both scenarios for you here.
What to Know About Doing It Yourself
If you choose to tackle your tax return on your own, you’ll be in good company. According to a CBS report, nearly half of all Americans who file taxes do it themselves. Many of today’s tax preparation software options are very thorough at a reasonable price. And, if your adjusted gross income (AGI) is below $66,000, you can file electronically for free, using the IRS Free File Software Lookup Tool.
Doing your own taxes tends to make the most sense for those with a fairly straightforward financial situation. Don’t have any dependents, don’t own a business or major assets, and don’t make significant charitable contributions? You sound like the model customer for whom free tax preparation software was made. Still, do consider the pros and cons before making your final decision.
This one is obvious. But if you want the hard facts on how much cold hard cash you can save by filing yourself, here’s a stat for you: In 2017, the average cost for professional preparation of both state and federal taxes (1040 with itemized deductions) was around $261. The cost for professional preparation of a simple 1040 without itemized deductions averaged at about $152. That’s according to a National Society of Accountants’ survey, published by the IRS.
Learn valuable information.
As you carefully pore over a year’s worth of your financial records to prepare your return, you may gain a clearer understanding of how you’re actually doing, money-wise. You’ll also be learning about tax credits, effective rates, and deductions — all things any financially savvy adult should be familiar with, whether they hire out their tax return or not.
It can be a big time commitment.
Tax preparation software does make it easier, but filing your taxes is still an activity that’s best done without any distraction. Between gathering the necessary documents, filling out the forms, and doing some tax planning, the average non-business filer spends about eight hours preparing their return. That being said, the simpler your finances, the faster you’ll likely be able to finish the job (for a 1040EZ the average time drops to five hours). Bottom line: If you don’t have the time or patience to do your taxes carefully and thoroughly, then hire a pro.
You could miss out on credits that you’re not familiar with.
Tax laws change, and tax filers go through big life events (hello new house, spouse, and/or baby). It can be all too easy to overlook potential credits and deductions when you’re not a full-time professional dedicated to keeping up with these kind of things. A professional tax advisor is educated to help you get the most possible benefit out of your tax return.