The idea of sifting through receipts, tax forms, and wrapping your head around tax laws on your own can be overwhelming, even if you use an online tax tool. You can hire an expert, but that can cost anywhere from $176 to $457 or more!
Which is right for you? Asking yourself the following questions may help you decide.
How Complicated are Your Finances?
If your financial situation is straightforward, for instance, you have a single source of income and limited deductions; you might be able to handle your taxes on your own. The IRS provides a free filing tool to assist you in filing for simple tax situations.
But it may be worth hiring a professional if you have more complex finances, including:
- Being self-employed
- Earning income from a state different from where you live
- Having multiple sources of income
- Experiencing life events that affect your tax situation, such as marriage, divorce or the birth of a child
- Navigating deductions for education expenses or medical bills
- Owning or being involved in a small business
Do You Have the Time and Expertise?
If you’re comfortable handling tax forms, records and documentation, you can file manually or use an online service like TurboTax to file electronically.
Even with a tool guiding you through the process, you may not have the time or confidence to do your taxes accurately.
If that’s the case, you can hire an in-person Certified Public Accountant (CPA), enrolled agent, or attorney, or choose an online tax service that includes a CPA assistance.
Are You Up to Date on Tax Law Changes?
Taxation laws can change frequently at the state and federal levels. Doing your own taxes means keeping up to date on the latest tax laws and regulations, especially if you use paper tax forms..
Some websites you can visit include the IRS newsroom and tax blogs like Accounting Today or the Tax Foundation. Fortunately, most online tools have built-in guidance based on the latest rules. And hiring a tax professional can streamline the process and ensure your taxes are accurate, up-to-date and on the correct forms.
Are You Interested In Deductions and Credits?
Many credits and deductions can help you save money and reduce your taxes. For example, some home improvements may qualify for energy efficiency tax credits, helping you improve your home’s value while saving more money.
Similar to staying up to date on tax laws, it can be difficult knowing all of the possible deductions and credits. Working with a CPA lets you turn over receipts and documents to a professional to handle the paperwork.
Do You Have the Budget to Pay a Professional?
There are obvious benefits in hiring a tax professional to do your taxes and help you file federal and state tax returns. But it could cost you about a lot, depending on your circumstances.
The good news is there are other alternatives out there. This can include free versions of popular software like H&R Block or specialty resources like MilTax for active military.
How High is Your Risk of Being Audited?
Many factors can increase the chances state and federal tax authorities look closer at your taxes, including:
- Math errors
- Failing to sign the return
- Underreporting income
- High home office deductions
- High income amounts
If you believe your situation places you at high risk of an audit, a CPA can help you stay compliant and avoid issues and penalties. Otherwise, if your tax profile is relatively simple, you can likely complete your taxes without professional help.
Save More Money with WorkMoney
Deciding whether to file your taxes yourself or hire a professional is an individual choice. CPAs can give you peace of mind and help you take advantage of credits and deductions, but with simpler filing requirements, you may be better off saving money and filing on your own.
At WorkMoney, we’re all about putting knowledge in your hands so you can make the best choice for you and your family. Join our community today to explore more resources to save money and lower your tax liability throughout the year.