Should I Do My Taxes Myself

Ever wonder if you could save money by doing your taxes yourself? We outline some basic guidelines that helps you decide for yourself.

Transcript:
We’re all familiar with the widespread popularity of the DIY craze, but the success of “doing it yourself” can be hit or miss. The question on many people’s minds when it comes to taxes is . . . DIY?

The answer primarily depends on how complicated your financial situation is. Like . . . if you have a brokerage account, or you have taxable mutual fund accounts, or you own your own business, filing taxes is complicated enough that most people don’t want to figure it out themselves.

Now, for those who aren’t itemizing deductions and plan on filing with a 1040EZ, yeah, you could probably do your own taxes, but if that’s not you, and you’re trying to make a decision about hiring someone to do your taxes, it’s best to think in terms of time and money saved.

Simply put: if you do it yourself, then you don’t have to pay someone else; so you save money on the front end, but you also might miss some deductions that would have saved you more than the cost of the tax pro, which, if you think about it, actually costs you money on your return; it’s a net loss. Hopefully you wouldn’t miss anything, but one of the major problems with doing your own taxes is that the tax code is complicated . . . this complicated Not to mention all the case law that informs how to interpret that tax code, which brings me to my next point: Time.

Making a mistake can cost you money, but the due diligence to avoid mistakes takes time. If you expect your situation to be complicated and want to save yourself that time, there are tons of great CPA’s, Enrolled Agents, and Tax Attorneys who do that kind of stuff every day. Tax professionals come with a variety of other benefits too, like audit protection, just as an example, and, even though less than 1% of Americans are actually audited, you’d probably appreciate the peace of mind. But before you hire someone, be sure to ask what all’s included in their fees. Here’s a list of questions to ask:

Do you charge extra for electronic filing?
Do you charge extra if I need a copy of my tax return later in the year?
Does the fee include meetings where I can ask questions on how to minimize my taxes?
Do you charge an extra fee for audit protection, or is it included?
Will you correct mistakes free of charge if I’m audited?
Will you charge if I have any follow-up questions later in the year?

Make sure they’re registered with the IRS and have some experience in preparing tax returns, too. If you have a financial advisor, maybe ask them for a referral. Regardless of whether you decide to do it yourself or to hire a professional, E-filing is highly recommended. The error rate on E-filing is less than 1%, and you get your refund way faster.

So, if your finances are more complicated, then filing yourself is still an option, but it might not save you time or money, but, if your finances are relatively simple, filing yourself can save you money, especially if you E-File.