Tax filing deadline is 3 months away, but many Americans will file way before the deadline. That’s because a majority of Americans [75% in 2017] receive a tax refund every year. No doubt you’re eager to get YOUR money back as soon as possible! But first, you’ve got a decision to make. Should you file your own return or hire a tax pro?
It's the tax filing dilemma. You want to get the most deductions and tax credits so you can get the biggest refund. Tax filing software is less expensive than hiring a professional, and there's also some free filing options. But, can they guarantee you get back every dollar you deserve? More importantly, will they keep you safe from mistakes that may trigger an audit?
I filed my own returns for many years. Early on, my financial situation was simple and I didn’t see the need to hire a tax professional. I didn’t want to pay for something I knew I could do on my own. It turns out I’m not alone. In 2017, 55% of the returns filed were done without the help of a tax preparer.
There are people that can and should file their own tax returns, just as there are people who should always hire a professional. Don’t try to save $200 to $300 and end up in trouble with the IRS, or worse, pay more taxes than you should. The key is to know when it’s time to hire a professional and when you should do it yourself. Hopefully, the following guideline will help.
If all of the following apply to you, you can file your own tax Return
- You have basic understanding about tax returns or are willing to learn so you feel confident you’re doing it right.
- You have the time and the patience to do it yourself.
- You have a simple tax situation, unchanged from the previous year.
- You’re single or a married couple who rent an apartment, have no dependents, no significant assets, no business, and made no significant charitable contributions.
- You’re comfortable with representing yourself if audited by the IRS
For those making less than $66,000, you can use IRS Free File to file your return electronically at no cost to you.
If any of the following Apply to you, you should hire a professional tax preparer
- You don’t have a basic understanding of tax returns and are overwhelmed by the notion of filing one.
- You don’t have the time or patience to do it - the average time to file a tax return for those who itemize deductions is 16 hours.
- You have dependents, real estate property, investment income, you've made charitable contributions, or own a business.
- You are not able or willing to represent yourself in case of errors or an audit by the IRS.
The first year I hired a tax professional to file my return he saved me $800. I was glad I spent the $250 to hire him. Of course, not all tax professionals are created equal. Like in any profession, you have the good and the not so good. Make sure your tax preparer is licensed and verified. You may need to interview several to find one that you like and will serve you best. Let me share my personal 3 Must Do’s for a tax professional.
3 Must Do’s for a tax professional
1. Provide more than tax return filing
A good tax professional will not only file your return but sit down with you and help you plan for the future. She will help you plan for income and expenses that will maximize your deductions and reduce your taxes legally, so you can keep more of your income and use it to increase your financial well-being.
2. Steer you from venturing into gray areas
The IRS sees everything as black and white as it relates to its tax laws. You either can or can’t deduct an expense, and there are requirements you must meet for every deduction. A good tax professional will guide you to ensure you stay out of trouble. If a tax professional likes to venture into the gray, you should look for someone else to assist you.
3. Represent you in case of an audit
I like tax professional who will defend you when the IRS comes calling, which is bound to happen from time to time, even if you do everything right. It’s an inconvenience to be audited and can be a very stressful situation. Ultimately, you’re responsible for the information on your return. But, a good tax professional will represent you and often handle the whole process for you, when you provide all the documentation at the time he prepares your return.
Filing a tax return can be intimidating. For some, it’s best to hire a professional to make sure your return is filed correctly. For others, filing is straightforward and fairly simple, and a professional is not needed. Know which one best describes you, so you can get through tax season with confidence, and hopefully a little better off financially.
Will you file your own return in 2018 or will you hire a professional tax preparer?