Tax season is upon us and you may be wondering if you should file your own taxes or hire a professional. I faced the same dilemma this year since my life has undergone quite a few changes. For the first time since I began working at the tender age of 16, I hired a CPA to prepare my taxes. Prior to becoming a full-time entrepreneur my mother filed my taxes using an online tax software.
My mother is not a tax professional, but she is definitely a money person and handles taxes for everyone in our family. Since business taxes are more complicated and my mom is not familiar with business tax policies, I decided to hire CPA to handle my taxes.
But if your financial situation is relatively straightforward, you could save money and easily file your own taxes.
Here are three questions to consider before opting to file your own taxes or hiring a pro:
How complicated are my finances?
By complicated I mean any of the following:
- You have complicated investments and investment related transactions
- You own any rental properties
- You own a business
- You experienced a change in family dynamic such as divorce, marriage or death of a spouse.
The more complicated your scenario the more complicated your filing process. If your finances are complicated you would benefit from working with someone who is familiar with tax laws and best practices to avoid penalties.
Do I have the time?
Self-filing times vary by individual. Depending on your ability to grasp the software and your access to required documents, it could take you anywhere from an hour or less to a couple of days. Taxes aren’t something you want to rush through so if you plan to file your own taxes you will need to allocate time out of your schedule to focus on your taxes and ensuring that all information entered and provided is correct. False information could result in an audit, fines, or worse.
How comfortable are you with handling financial matters?
There are some people who love doing their taxes, love doing their budget monthly, buy and sell their own stocks, and actually enjoy all things finance.
If you are one of those people, chances are you’re comfortable with your finances. You’ll be fine filing your own taxes,provided you don’t have one of the more complicated scenarios mentioned above.
But if you run from budgets and spreadsheets, it is probably in your best interest to hire someone who enjoys or at least understands the filing process.
There are advantages and disadvantages to filing your own taxes. Advantages include saving money and having a complete understanding of your filing status since you don’t have to rely on someone else for the information. Disadvantages of filing your own taxes include you may overlook exemptions that you qualify for and should you get audited, you might not understand how to navigate the process on your own.
If you would like to file your own taxes, a great option is FREE TAX USA. My mother has used their online software for the past three years and I like the ease of use when accessing current or previous returns. I also like that I don’t have to install anything on my computer to use it and I can access my account from anywhere.
You qualify to file FREE if:
- Your Adjusted Gross Income is $62,000 or less, AND your age is between 17 and 74, OR
- You are active military with an Adjusted Gross Income of $62,000 or less
Additionally if you are located in NYC you may qualify for free tax prep services including online filing, self-assisted prep, and in-person filing with an IRS certified VITA/TCE volunteer preparer. Click here to see if you qualify.
If you decide to hire a professional the common choices are a Franchise tax services such as H&R Block , Liberty Tax, and Jackson Hewitt or a Certified Public Accountant. All Certified Public Accountants do not specialize in taxation, so it is important to make sure that your account does.
Whatever you decide, the important thing is submitting your taxes. Failure to file your income taxes could result in penalties.
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