The tax deadline, April 15th, is right around the corner.
You may still be deciding whether to do your taxes on your own or find a tax professional, like an Enrolled Agent or a CPA, to help you navigate the forms.
According to the IRS, over half of the returns filed during the 2018 tax season were filed by tax professionals. Does that mean that finding the best places to do taxes is the right move for you? Not necessarily.
What’s important is that your taxes are done accurately and you take advantage of all deductions and credits that you’re legally allowed. When you do that, you can maximize any refund you might be entitled to and that windfall can help grow your savings account.
Read on to decide whether you’re better off hiring a tax professional or going the DIY route.
The benefits of hiring a tax professional
- A tax preparer can give you money-saving advice. A good tax professional will not only help you find all allowable deductions for the current year, but they’ll give you advice for making smart tax decisions in the future.
- A tax advisor can save you time. The average taxpayer spends 11 hours on their taxes: five hours of record-keeping, two hours of tax planning, and four hours of form completion and submission. If you hire a professional, you’ll still need to do the recordkeeping yourself (they don’t dig through your paperwork to find things), but they can help you save time on the preparing, filing, and tax planning.
Not all tax professionals offer the same services or quality of work. So, make sure you learn what to expect from each type of tax preparer.
The benefits of DIY tax prep
- You can do your taxes as soon as you want. Instead of having to work around your CPA or Enrolled Agent’s schedule, you can file your tax return as soon as you’re ready. This is helpful if you know you’re receiving a tax refund and you want to get it as quickly as possible.
- You can save money if your tax situation is straightforward. If you qualify to file a short return like the 1040 EZ, you might be able to do your own return and save your funds to hire a professional if your taxes get more complicated down the line.
If you choose the DIY route, the IRS provides free forms for everyone, and free online filing for people who earn less than $69,000.
What should you do?
When you’re trying to figure out how to do taxes online or the best places to get taxes done, these 5 questions will help you decide what to do.
1. How complicated is your tax situation?
If you take the standard deduction, filing on your own is likely a fast and easy option.
If your situation is complicated, however, you might benefit from some tax help. For example, if you own a rental home, run a business (or have a side hustle), or have significant investment gains or losses, you may want to talk to a CPA. An accountant can help you file your taxes correctly and identify deductions that you qualify for.
2. Do you itemize deductions?
When you file taxes you have two options: take the standard deduction (set by the IRS) or itemize deductions.
Itemizing deductions adds to your tax filing complexity because there are additional forms that you need to file and more backup you need to keep as proof for each deduction you take.
Fewer people now itemize deductions because the Tax Cuts and Jobs Act (TCJA) increased the standard deduction. In fact, the Tax Foundation estimates that prior to the TCJA, 31.1% of filers itemized deductions. Post-TCJA, they estimate that only 13.7% of filers itemize deductions.
3. Is it worth the cost to you?
The cost to hire a tax preparer can vary. Depending on your situation, it might be worth it as you’ll save time and have peace of mind that your forms have been filled out correctly.
If you don’t take deductions, the average cost for preparing and filing your Form 1040 and state return is $176, according to the National Society of Accountants. The price goes up to $273 if you itemize deductions. And if you’re self-employed and need to file a Schedule C, the price jumps to $457.
Of course, these prices vary by location and complexity. But these average costs should help you think about whether it’s worth it to you to outsource this or do it yourself.
4. Can you benefit from advice?
One of the big benefits of hiring a tax professional is they can give you financial advice for the future. For example, if you think you might be selling a home or starting a business, a CPA can help give you advice on the most tax-efficient ways to approach this. They can also suggest ways to minimize your tax bill in the future, potentially saving you more money.
5. Do you want to go the DIY route?
If the idea of spending a weekend organizing your paperwork and reading tax instructions sounds fun, plan to do your taxes yourself. But, if there’s no way you want to spend time learning about the tax code, that’s a good sign it’s time to have someone else prepare and file your taxes.
Where can you get your taxes done for free?
Once you’ve asked yourself the 5 questions above, you might still want to know the answer to this question: Where can I get my taxes done for free?
If you fall into specific income, age and other categories, there are a couple of options for getting free tax prep help.
For example, if you make less than $56,000 per year, have a disability, or speak limited English, the Volunteer Income Tax Assistance program (VITA) offers free tax help. Volunteers are certified by the IRS and can provide tax preparation and free electronic filing for people who qualify.
For taxpayers who are 60 or older, there’s also the Tax Counseling for the Elderly (TCE) program where volunteers are specifically trained to help you with questions related to pensions or retirement.
To find a free tax location for either the VITA or TCE program, use this search tool on the IRS website.
Lastly, remember this: Whether you hire a professional or go the DIY route, taxes are due by April 15th!