Should You File Your Own Taxes?

by Kevin on January 6, 2012

Tax time just began in the United States. If you’re like me you are compiling receipts, financial documents, and impatiently waiting for W2s or 1099s to arrive in the mail. You’ve probably already seen lots of web advertisements online for special discount codes on tax software so you can file your tax return from the comfort of your own home.

But is it wise to file your own taxes? Would you be better off using a professional to file them for you?

When and Why You Should File Your Own Taxes

Filing your own taxes is almost a rite of passage. You’re finally making enough money to matter! Here’s your form, fill it out, and pay taxes as part of your civic duty. But there are multiple reasons to file your own taxes:

  • You’ll get to see first hand the impact of financial decisions you made throughout the year. Did you donate money and had forgotten about it? Did you take time to set up that Traditional IRA and it saved you $1,000 on your taxes? Or did you put down too many allowances on your W-4 and are now paying the price by owing the government money?
  • You’ll see just how complicated it can be. Even if you only file your own taxes once, I think it is important to see just how crazy all of the forms can be. It can definitely get overwhelming.
  • You want to save money. This might be a bit of a misnomer. You can definitely save money by doing your taxes on your own with paper tax forms. Tax software can run from $10 to $50 if you want to step up, and even that is a saving over the cost of a CPA to do your taxes for you. If money is tight, you can do them on your own.
  • If your tax situation is simple. If you had one job, had no major life changes, don’t itemize your taxes, and take the standard deduction, you can probably get by on doing your own taxes. The more simple, the better.

When and Why You Should Use a Tax Professional to File Your Taxes

It my only take one time of trying to do your taxes on your own for you to throw your hands up in disgust, vowing to never do that complicated math ever again. Enter your local friendly tax professional. While doing your own taxes can be quite the education in complicated bureaucracy, sometimes using a professional just makes more sense:

  • The US tax code is incredibly complicated. It isn’t exactly fun to sit down and flip through pages of instructions in order to fill out one form. It can take a long time to fill out a tax return correctly. Plus, when things are complicated…
  • You are more likely to make mistakes. Tax return mistakes are usually expensive mistakes. Whether it means your return gets audited or you simply miss out on an extra $200 for your refund, you can be costing yourself a lot of money by doing it on your own.
  • A tax professional might save you more money. Yes, tax pros like CPAs do cost money. And they won’t always save you more than you could have gotten on your own. But the return will be accurate, you’ll get your maximum refund, and if you get audited you have someone to blame.
  • If your tax situation is complicated. Run a business? You need an accountant. Changed jobs this year, moved across state lines, had a baby, and started a side business to boot? You need a tax professional to get your return right.

Most of the tax software out there is pretty good. Even if you decide to go it alone, you might consider using a professional to review several years worth of returns at a time every few years. You can always file an amended tax return to get any found money back.

{ 2 comments }

Tony January 7, 2012 at 3:42 pm

I would say that you should probably save the cost of the professional and do your own taxes if your situation is very simple. However, for bit more complicated return, I work through the forms myself to see what I come up with and then have a professional do it. I have always saved more money with the professional preparation than I would have if I had filed the forms I completed.

Golfing Girl January 9, 2012 at 10:56 am

We’ve been doing our own taxes using Turbo Tax for the last 10 years. The software is very user friendly and unless you have a business or other unusual situation it’s the way to go. I am self-employed and declare my golf lesson income, and it’s easy to do with Turbo Tax. I can’t speak for the other software out there, but I would bet they are comparable.

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