Tax Software Vs. An Accountant: Which Is Right For You?
With every important job comes the question of whether or not individuals should do it themselves or hire a professional. While the ever improving selection of tax preparation software certainly makes it easier to do your own taxes, it has hardly put Certified Public Accountants (CPAs) and other personal tax preparers out of business. (For related reading, see 10 Steps To Tax Preparation.)
The Advantages of Using Tax Software
There is no way around the fact that you will pay less for a software package than you will to hire a CPA or another qualified tax professional. The price of tax preparation software ranges from the $10-$120 range to websites that offer the service for free. On the other hand, the least expensive tax preparers will cost at least $100 and a CPA is likely to charge at least twice that amount.
Once you have all the necessary documents in front of you, it is possible to complete your own taxes in less than an hour. In contrast, the best accountants will usually take from several days to a few weeks to process your paperwork and file your forms.
Good tax preparation software walks you through the process very quickly and easily. For those who have only a few deductions, sources of income, or investments, there is little need to sit down with an accountant to sort it all out. (For additional reading, check out 6 Sources For Free Tax Help.)
The Benefits of Hiring a Professional Accountant
According to Denver CPA Carl Wehner, accountants pay around $1,000 to $6,000 for their software, which is far more sophisticated than the products sold to consumers.
Like a good family doctor that knows your medical history, you can develop a relationship with an accountant so that he or she understands your family's financial situation and future goals. According to Wehner, who has been preparing taxes for 45 years, "A tax professional is often able to make valuable tax savings suggestions that a software program just can't anticipate." The value of this advice can easily exceed the additional cost of consulting with a professional.
Accountants Can Answer Your Questions Year Round
As a trusted professional, a good accountant will be able to answer important questions that arise not just during your annual consultation, but at other times during the year.
A CPA Saves You Time When Handling Complicated Issues
Taxpayers who find themselves at the center of complicated business and investment matters may even have the skill to sort through their taxes on their own, but is it worth their time? A professional tax preparer is so familiar with the system, he or she can quickly and easily accomplish tasks that might take even skilled taxpayers hours of research. For busy non-tax professionals, their time can generally be better spent earning money in their area of expertise.
The Bottom Line
Ultimately, there is no universally correct answer to the question of hiring a tax professional or doing your taxes yourself with software. Your comfort and familiarity with IRS rules will be part of your decision, but the complexity of your finances should be the key deciding factor. Those with a single employer and few investments may save hundreds of dollars by preparing their own taxes, while those with business income or rental properties will find the expense of hiring an accountant to be worth their peace of mind and potential tax savings. (For more information, check out Tax Deductions You May Be Missing.)