Convenience vs. Costs: Should You Do Your Own Taxes or Hire a Tax Preparer to Lend You a Helping Hand?
When it’s that time of the year again and doing your tax chores is imminent, many start wondering if they should do them themselves or consider hiring a helping pair of hands. As with most things in life, there is no straightforward answer, since every option has its own pros and cons. Today, we’ll be looking at both and help you determine the right one for your needs.
How familiar are you with the process?
Do the terms such as W-2 and 1099 ring a bell? Do you know what your deductible expenses are? If not, you could either spend your time researching this or get someone else to do it for you. On average, you should expect to spend at least 10 hours on it, which is something you should factor into your decision-making process.
How much time do you have on your hands?
Are the deadlines approaching fast and you still have nothing to show for it? Then learning it all from scratch might be off the table completely. In cases such as these, go with a tax preparer like Gudorf or anyone who’s known to have quick turnaround times.
Tax preparation software could make things easier
Tax software is a great option if you’d like to do your taxes yourself, but don’t really have the technical knowledge to fill out the forms. By asking you a couple of questions, it generates and fills them out for you based on the answers provided. As such, it’s a very user-friendly solution.
How much will a tax preparer charge?
A tax preparer will charge you somewhere around $170 for a typical 1040 Form. However, should you want to itemize your deductions, you can quickly expect to pay an extra hundred bucks on top of it.
What are the different types of tax professionals?
You might not have heard of it before (and you certainly wouldn’t be the only one), but there are 3 main types of tax professionals.
Tax attorneys: the type of tax professionals you need for the most complex of cases. They will help you solve the most demanding tax issues such as tax violations, business partnerships, etc.
CPAs: if you have a complicated return, these tax professionals will help you take care of it or at least review it before it is filed.
Enrolled agents: a large portion of them are former IRS employees. They should be able to assist you with most types of tax returns.
Have you had any capital losses?
Capital losses can easily result from stock trading, for instance. But did you know that you can deduct up to $3,000 from capital losses? Knowing this could help you alleviate some of the financial stress, but you do have to know the correct filing procedure. In most cases, hiring a tax preparer is the easiest and most time-efficient way out.
These are some of the most important considerations to make when deciding whether to do your own taxes or hire a tax preparer. In the end, it boils down to the age-old question of time versus money. Generally speaking, you should spend whichever resource you have more of.