Everybody has to pay taxes. But figuring out whether you should do your own taxes or hire an accountant to help you is a question that is particular to your specific circumstances. It’s also worth it to ask yourself every year whether or not you should do your own taxes, because financial situations can change over time. You have the option of using one of the best online tax services or through the IRS website or hiring a qualified tax preparer to file for you. Here are some tips to help you decide which option is right for you.
It’s best to do your own taxes if you have a fairly simple financial situation. This means you don’t have any dependents, investments or significant assets, and you don’t own your own business. Tax preparation software is made for people in this situation, because it is very straightforward and doesn’t account for many deductions and other factors. Check out reviews, such as our Turbo Tax review, to find the service that meets your needs.
You also need time and patience in order to do taxes. The IRS estimates that you’ll want 16 hours to prepare your basic 1040 form. This involves gathering all the necessary paperwork and figuring out your expenses and deductions, etc. It’s also important for you to feel confident navigating the software and confident that you are submitting your taxes without any errors or oversights.
If your household income totals over $200,000 per year, it might be in your best interest to hire a professional. Sometimes, they can help you get the biggest refund. However, the rate of audits is much higher for those with an income over $200,000, and in the event of an audit, you want to make sure your whole financial situation is covered as thoroughly as possible.
It’s also best to work with a professional if you have had a major life change in the last year, such as getting married, buying a house, having a baby, etc. All of these events impact your tax filing and will need to be documented on your taxes. A professional can show you the best way to do it.
If you have a more complicated tax situation that involves dependents, investments, contributions, etc. or if you run a business, you’re probably best off working with a professional who knows the guidelines for all of these scenarios. The same applies if you are planning to itemize your deductions and take more than the standard deduction. This can be a red flag for the IRS, so you want to make sure you are properly calculating everything.
Doing your taxes online is much cheaper than hiring an accountant — professionals will generally cost $100-$200 or more depending on your income and other variables. But hiring a professional can help take some of the pressure off if you have a complicated tax situation and aren’t sure how to properly file yourself.