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.
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 to $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. The upfront savings of using tax software over an accountant is one of the most attractive benefits of filing your own taxes.
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.
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. These more advanced programs have the ability to quickly scan your information and organize line items and forms correctly. By automating much of the data entry and organization, there's less chance for human error to hurt your tax return.
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. For example, a tax accountant can provide you advice on tax-friendly ways to save for your children's education, or how to reduce taxes on your capital gains.
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. Even if your tax situation is straightforward, hiring a professional will save you the time and stress of doing your taxes.
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.
TaxesThe earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
TaxesThere are occasions when software will suffice, and others that require an accountant’s expertise. Here how to decide which is right for you.
TaxesUse this quick parental guide to help your child learn the tax filing process and establish good habits.
TaxesThese tips will help you get a larger refund this year, while teaching you how to pay less taxes going forward.
TaxesA combination of new taxes and expiring tax reductions and new surtaxes are conspiring to make your 2013 taxes – and your 2014 tax planning – a bit more interesting than usual.
Personal FinanceIncome tax brackets have been updated for the 2014 tax year (those taxes due on April 25, 2015), and for a change, a little bit of inflation may be a good thing for some filers.
TaxesThe American Taxpayer Relief Act brings about new tax rules for the wealthy that people such as Warren Buffett have been calling for over the last few years.
TaxesYour volunteer ventures could earn you some welcome tax deductions, along with the satisfaction of helping others.
TaxesCheating on your taxes is asking for trouble. You might get away with it, but you’re playing with fire and likely to get burned.
TaxesAll taxpayers need to know three things when filing a 1040: which form to use, how to file and where to file. After reading this, you'll know all three.
A portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined ... Read Full Answer >>
Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
Traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). ... Read Full Answer >>
While your fire or homeowners' insurance premiums may be included in your property payments, they are nondeductible expenses, ... Read Full Answer >>
Cafeteria plans are employer-sponsored benefit plans that provide both taxable and nontaxable, or qualified, benefit options ... Read Full Answer >>
While the U.S. Internal Revenue Service (IRS) conducts some of its tax audits using random selection based on a statistical ... Read Full Answer >>