Tax Professional or DIY Software?
As we ring in the New Year, thoughts often turn to taxes and getting that refund. Again, it’s time to consider whether it’s better to get a tax professional or do your taxes on your own. Here are some things to consider to help you make that decision:
Expertise vs. Risk
Let’s face it, many people are great at DIY or Do-It-Yourself. For example, some of you can easily fix a leaky faucet. It helps to have some technical knowledge, especially when tempted to opt for what you expect is “the cheaper way out”. You think, well, I’m pretty smart, I should be able to figure this out. The truth of the matter is maybe you do, but consider what will you do if something goes wrong (and what is the impact if you don’t even know there is a problem). What happens if during your weekend fix-it project, you make the leak worse and you have to call the plumber. Now it’s at higher emergency rates, not to mention the time involved to fix this now that it is a bigger problem. It comes down to your technical knowledge and your appetite for risk.
There are many types of tax preparers, generally differentiated by varying levels of training and experience. Most are now required to take at least a basic competency test. Despite extensive tax training by some, I have typically found that basic fees aren’t significantly different among preparers. So, find someone you feel comfortable with, who will prepare your returns on your schedule and lead you through the information to be provided. The average basic personal return is about $100-$250 depending on the itemized deductions, number of states filed in, and generally the number of forms needed. DIY software tends to cost at least $60 when you include the state and often charges extra for e-File. Then you need to add in your time.
The Time Factor
The IRS annually gives an estimate of the time the average person would need to prepare their return. For 2010, this estimate was 23 hours for a basic return and 32 hours to prepare a return including small business (Schedule C) or rental income (Schedule E). How much do you value your time?
Tax preparers filing more than 11 returns are required to offer e-File to their clients. Because they use the service so often, most preparers use good software interfaces and can easily transmit returns without error. Many are well-equipped to resolve transmit problems, causing no additional time or worry to you.
Regardless of the path you choose this spring, being informed about your options is a great first step to you making a good decision. Best of luck in this filing season.
Business and tax tips are not a substitute for legal, accounting, tax, investment or other professional advice. Lisa Aldrich’s CPA practice focuses on helping business owners build success and personal wealth through a full-range of professional accounting, tax and financial reporting services. Contact her at email@example.com or 774-264-8576.