What You Might Be Missing If You Do Your Own Taxes
Online tax filing software is more popular and accessible than ever, and it's easy to see why. These programs are more affordable than a full-service professional accountant, but much faster and more convenient than filing your return entirely on your own.
But a DIY solution might not be the best option for every situation. How do you decide between buying a program to do your own taxes or using professional tax-prep services? Let's take a closer look.
The ins and outs of tax software
Online tax filing programs offer some attractive benefits that have helped increase their popularity. These tools may take some of the headache out of filing your yearly return, for a reasonable price. They often come with some extra safeguards as well. For example, you might find a program with an accuracy guarantee. Some may offer support in case your tax return requires an IRS audit.
Tax software can also offer some automated expertise, which might be more than you'd have on your own. These companies update their products annually to reflect new tax legislation. They'll help you fill out the right forms and skip the unnecessary ones based on your answers to some easy questions.
But there are a few cons to choosing an online program. The first consideration is the time and effort required. While tax software is often faster than filing your own return with paper and pen, it still requires some significant work on your part. Many programs offer import tools that quickly scrape your tax form data from W-2s and 1099s, but you still have to enter the majority of your information manually.
The other major drawback is access to more robust expertise when you need it. With an online system, you're on your own if you encounter any tricky situations, or you may have to pay an upcharge for additional help. There's no one to think through your personal tax situation and let you know any advantages that a software program may overlook.
The benefits of professional tax help
A tax professional can help in many of the areas where a digital tool falls short. Getting your taxes done by someone with experience means you're less involved in the process. After you submit your tax documents, they'll handle the rest.
Their expertise also means you can get your individual questions answered. You might even get filing advice that can make a difference in how much you owe or how much you get back.
Many tax professionals also have some form of guarantee to stand by the work they do in the event of an IRS audit or penalty. If you're audited with a tax return that a professional prepared on your behalf, there may be support services built into your overall costs. Some tax professionals can even review your previous year's tax returns to make sure you didn't overpay.
Despite these advantages, there are some drawbacks to consider before hiring a tax service. Bringing in outside help means giving up some control. You'll have to rely partly on someone else's timeline. That means you might have to start the process earlier to get it all done by the deadline.
Cost is perhaps the most important consideration. You'll likely pay more upfront to have a tax professional complete your return, even if you end up getting more back because they helped you spot tax breaks or deductions you'd otherwise miss.
Choosing what works for you
A DIY tax software program may cost you less money than a professional's services. However, whether or not this costs you more in the end is a different question.
Besides looking at the cost of each option, look further into your personal tax situation and determine just how complex it is.
You can handle simple tax situations using a software program with relative ease. But if you have a more complex scenario, the amount of time and effort you need to ensure you've covered all the details may be more than you're willing to put in. Owning a business or going through a major life event during the tax year, a divorce or selling a home, can open you up to tax deductions, credits and even penalties that a tax software program may not pick up.
If you're confident you have a good grasp on your tax situation, filing on your own may be the best bet. But if you feel like you need help, the cost of professional tax preparation might be worth it. If an expert can help you find deductions and credits you'd otherwise miss, those returns might outweigh the extra you spent to work with them.
A few financial insights for your life
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.