Has your situation in life changed? Things like starting a business, getting married, retiring, divorcing, filing for bankruptcy and starting a family not only have an effect on your life in general but can also change your financial situation and the way you file your taxes. If it seems like more than you can get a handle on or you just feel like you could use some advice, that’s when it may be time to call in a professional.
Here are four things to consider:
- What’s your time worth? The IRS estimates that the average taxpayer spends 13 hours preparing their tax return, including record keeping. You’ll still have to gather forms and documents like receipts, charitable deductions, medical expenses, and unreimbursed job expenses for your tax preparer but depending on the form you’re required to file, hiring a professional could save you more than a few hours. If you file a short form like the 1040 or 1040 EZ, you’ll spend around 5 hours preparing your taxes, including record keeping.
**(Source: IRS, 2014 Form 1040 Instructions, “Estimates of Taxpayer Burden.”)
- How’s your patience? Even when your return isn’t particularly complicated, it still takes time to figure out whether or not you can claim certain financial expenses. Add to that the fact that the tax code is constantly changing and it can be incredibly frustrating to try to figure out the nuances of all the possible deductions and credits. If your life is incredibly busy and you’re filing one of the more complicated forms, it may be more of a headache to do it yourself. If your finances are relatively uncomplicated, you might want to save the money and do it yourself.
- How do you feel about computers? Many of the software packages are user-friendly but even free e-filing still requires basic computer knowledge. If you’re comfortable with a computer, you’ll probably do just fine.
- Do you want to spend the money? Preparing your own tax return can be absolutely free. Every tax form is available to download or fill out online through the IRS. You can also call 800.829.3676 and they will send you the forms via snail mail. If you choose to use one of the software packages on the market, like TurboTax or TaxAct, a quick Google search shows you can spend anywhere from $20 to nearly $200, depending on the kit you purchase. The cost of having a finance professional prepare your return can vary wildly depending on your financial situation. Paying someone to prepare a 1040 for you will be less expensive than paying someone to prepare a form that might require additional forms like Business Schedules.
The choice to file your own taxes or to pay someone to do it for you is ultimately a very personal decision. It really all comes down to your knowledge and comfort level with all the factors involved. You may choose to use a professional one year and not the next. It’s best to consider that decision each year depending on how your life may or may not have changed.
Sources: Forbes Magazine, IRS