As tax season comes around, it is time to start considering whether it is best to hire a professional or work out your taxes personally.
While the decision ultimately rests with personal preferences or complexities on personal taxes, it is possible to work out whether a professional might be the best solution before spending hours on the return only to run into problems. In some situations, hiring a professional might be the best solution to get the most savings.
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When to Handle Taxes Personally:
While hiring a professional can simplify taxes, it is not always a necessity. In some situations, it is possible to personally manage the taxes. A few situations that make sense to file personally include:
- Filing a 1040 EZ
- Simple tax data
- No itemized deductions apply
- Taxes have few or no complications
It is usually best to file taxes personally when the account does not have complications. For example, students in college who are working a part-time job and do not have many deductions they are able to apply to the tax account might not need professional help because the taxes are primarily a matter of putting the numbers in the appropriate columns.
Though complications in taxes like numerous itemized deductions or a move to a new state in the middle of the year might need some professional help, some complexities do not require professional help as well. Anyone who has worked with a professional in the past and learned about the complication to taxes previously might also prefer working out the taxes personally the next year.
Methods of Filing Taxes Personally:
Anyone who feels that their taxes are simple enough to manage personally or who have previously worked with professionals and feel comfortable working out the taxes later will want to know the available options to file the taxes. The methods of filing taxes include:
- Working with tax e-filing software
- Obtaining the tax paperwork and sending through the mail
- Filing through the IRS website
For many individuals, the simplest method of filing taxes is through software programs that are available. The software programs will cover federal and state taxes and help simplify the information by asking questions. The only requirement before starting with the software is organizing the W-2 forms, any 1099 forms or other tax documents needed for filing purposes.
When to Hire a Professional:
Though simple taxes are easily filed without a professional, many individuals will want to work with professionals to get their taxes in order. A professional understands more about tax laws and potential deductions that might apply to personal situations, so any complications to the taxes will work best when a professional is involved.
In a few situations, a tax professional is the best individual to file the paperwork. Complications that might require the assistance of a professional include:
- Owning a business
- Showing investment capital gains or losses
- Working in a different state than residency
- Filing numerous itemized deductions
- Changes to marital status in the last year
In most cases, major changes to family situations, investment complications or difficulties due to state related taxes will need a little help from professionals. It is also best to seek professional assistance when tax preparation is simply uncomfortable.
Benefits of Working with Professionals:
Working with a professional has some benefits that make it an appropriate choice in some situations. The major benefits of working with a professional include:
- Simplicity of filing
- Filing speed
- Financial advice
- Guarantees of help in case of auditing
The debate of whether to hire a professional to file taxes or work it out personally is ultimate a matter of personal comfort levels. Those who feel comfortable with taxes or feel the cost of a professional is not worth the benefits can file personally. Those who want peace of mind or have complications will want to hire a professional.