Should I Do My Own Taxes Or Pay Someone
There arent many people who can say they enjoy doing taxes, but they are one of those things that everyone must do.
Doing your taxes can feel like a chore, but its important to make sure that its done properly instead of quickly. Taking time with your taxes could save you plenty of money that you would have otherwise paid to the government.
Because taxes are so complicated and can take such a long time, many people wonder whether its worth paying someone else to do their taxes. This article will cover the pros and cons of doing taxes yourself vs. paying someone else.
The Case For Doing Your Own Taxes
You don’t have to be a tax expert to file your own tax returns — especially if you have a simple tax situation.
Let’s say you’re a 28-year-old single woman who earns $50,000 per year in W-2 income. If you have no dependents or children and no other sources of income, you’ll have one of the easier tax returns. All you have to do is complete the basic personal and tax questions and transfer the numbers from your W-2 to your tax return to determine how much you owe or receive as a refund.
Filing online makes the process easier and helps you to avoid the most common filing mistakes. Free tax software is available through the IRS, allowing you to file your taxes for free at any of the partner tax sites. You just have to meet the annual income requirements to qualify for the service. The tax software is really easy to use and does all the necessary calculations for you. If you’re comfortable using the software and submitting your tax return on your own, this is a great way to save money at tax time.
How Do I File My Taxes Online
Filing your taxes with TurboTax Free is quick and easy. First youll be asked to set up a profile and follow a simple process to find all the credits and deductions youre entitled to. With the CRAs Auto-fill my return, you can also import your tax info directly from the CRA. This service pulls info from your income slips , government benefit slips, RRSP receipts, and unused tuition credits. All the relevant info will be populated from these forms into your tax return saving you time and effort.
If you decide not to use CRAs Auto-fill my return service, or if you have additional info to enter that isnt captured through the import, you can find all the forms you need quickly and easily through TurboTaxs search feature.
You can also easily look for all the credits and deductions that apply to you using the search bar in TurboTax Free. If youre not sure where to start, heres a list of common credits, deductions, and expenses you may be eligible for:
Once youve entered all your info for the year and youre ready to file, our software will guide you through the steps to NETFILE your return online or print and mail your return. Well also give you step-by-step instructions on how to pay the CRA if you owe taxes.
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Choose Your Preferred Tax Return Software
There is no shortage of DIY online tax software options that will get the job done. If your return is fairly simple, you can probably get by with free software. In contrast, complex returns often require a more premium version capable of handling income from a rental property or other self-employment or foreign property.
Learn Which Credits And Deductions You Can Take
Getting a sense of which can help you pull together the proper documentation. Here are a few to consider:
- Savers credit. If you are not a full-time student and are not being claimed as a dependent, you may be eligible for a tax credit if you contribute to a retirement plan. The amount of the credit depends on your filing status and adjusted gross income. For the 2021 tax year, if your filing status is single, you may be eligible if your adjusted gross income is $33,000 or less. If you are married and are filing jointly, you may be eligible if your adjusted gross income is $66,000 or less. However, these numbers are subject to change in future tax years.
- Student loan interest. You can deduct up to $2,500 in interest payments, depending on your modified adjusted gross income.
- Charitable deductions. Donating to your alma mater or a favorite charity? Generally, you can deduct those donations if you itemize your taxes.
- Freelance expenses. If you are self-employed, you may be able to claim deductions for work-related expenses such as industry subscriptions and office supplies.
If you think you may qualify for additional credits or deductions, check the IRS website.
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Are You A Prime Candidate To Go It Alone Here Are Two Types Of People Who Should Consider Doing Their Own Taxes And Two Types Who Should Probably Get Some Help
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For some people, tax season poses little worry, and the process occurs painlessly. Simply populate the requisite fields on your 1040 with info from your W-2, claim the standard deduction, sign on the dotted line and e-file. After that, the check is in the mail, so to speak.
For others, preparing taxes presents a stressful situation. Imagine handling numerous W-2s, 1099s, navigating the new qualified business income rules and tracking a laundry list of write-offs related to your business, side hustles, real estate holdings or other income sources. While certainly not impossible to DIY with the best tax software, this can still serve as a time-consuming activity. In some instances, it may make sense to outsource your tax preparation to a professional simply to avoid the headache or mistakes.
When debating which path you should follow, the most common decision point boils down to how comfortable you feel doing your own taxes. If you are a seasoned tax DIYer who digested tax reform well and knows what to expect on your return, proceed on your own by downloading your forms for free or purchasing a copy of tax software from TurboTax or the like. However, if your tax situation is complex, or you dont have the mental fortitude to go it alone, consider hiring a tax pro to handle your return.
Do You Even Have To File Taxes
Whether you have to file a tax return this year depends on your income, tax filing status, age and other factors. It also depends on whether someone else can claim you as a tax dependent.
Even if you dont have to file taxes, you might want to do it anyway: You might qualify for a tax break that could generate a refund. So give tax filing some serious consideration if:
You qualify for certain tax credits.
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You Experienced No Changes From Your Previous Tax Situation
If nothing major occurred to your tax situation this year, relying on your work from last year with numbers from this year might make sense. This is, of course, if your situation was easy to handle last year.
In the event you didnt experience anything material changing in your life , and the time requirement doesnt present a challenge, DIYing your taxes might make sense. This is especially the case where hiring a tax professional doesnt fit in your budget.
If nothing changed, in all likelihood, you can roll forward most of the information and elections included on last years return. However, make sure to track any other sources of income or deductible expenses you may have experienced.
What Options Do You Have When Filing Taxes:
When filing your taxes, you have many options. You can do it yourself, which will allow you to save on accounting services, but you will spend your valuable time. At the same time, you can hire a professional who can spend his time but will charge you a fee for his services. My advice, if you can afford an accountant, go for it.
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Paid Personal Tax Software Options:
When we look into paid options, you can choose Turbotax or UFile. Both will cost you around $20 for the simple tax return. The software is continually improving, getting all the updates as soon as tax law changed and trusted by thousands of Canadians. The process is usually straightforward and will navigate you from one step to another, where you have to answer questions and indicate your earnings. In the end, you will see if you have to pay taxes or get a refund and see the balance. The last step is to send your tax return to CRA, which software will do for you.
Your Decision Could Determine How Rewarding Or Draining Tax Season Will Be For You
There comes a time every year when you’ll have to pop the big question: Should I file my own taxes or hire a professional? The answer usually defaults to the infamous response: “It all depends.” Life changes could affect the credits and deductions you qualify for and what new tax forms you’ll have to add to your list.
Since hardly anything having to do with taxes is ever as straightforward as we would like it to be, here are some items to consider when evaluating if it makes sense to do your own taxes or hire a professional.
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How Much Will It Cost To Hire An Accountant To Do My Taxes
According to the National Society of Accountants, a typical accounting firm charges $323 to file Form 1040, the basic individual income tax form, with itemized deductions. Adding more forms to your tax return means paying extra. For example, if you form your own practice and file Form 1120 for corporations, that means paying an extra $913 on average.
Reasons To Stop Doing Your Own Taxes
Software cant stop you from committing human errors. And life gets complicated for everyone, from Airbnb hosts to widows.
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Doing your own taxes really isnt like changing your own oil.
Even if you enjoy such tasks, getting either one of them wrong as a do-it-yourselfer can be expensive. But as complicated as a car engine may be for a relative novice, an encounter with the tax code offers so many more costly ways for things to go spectacularly awry.
This tax season, consider the danger of human error: namely, your own.
Here are nine situations that may persuade you to turn the task over to a pro.
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Where Should You Get Your Taxes Done
There are many places that you can look to if you want to get your taxes done.
Many companies, like H& R Block and TurboTax, offer tax software to help you do your own taxes or connect you with a professional who can prepare your taxes for you.
One of the best places for medical professionals to look when getting their taxes done is a private tax company. There are many CPAs who start their own companies to offer tax services. Some CPAs choose to specialize in providing tax services to certain groups of people, including doctors.
Working with an accountant who has chosen to specialize in preparing taxes for doctors or other high-income individuals means theyll likely have seen similar tax situations to yours and will be well-equipped to help you design a tax plan.
Review Your Documents From Last Year
When doing taxes yourself, you might want to review the information from your previous years federal and state tax returns. Much of the information will likely be the same, including employer federal ID numbers, childrens Social Security numbers, and even some of your credit or deduction options. The IRS also uses your prior-year AGI to verify your identity when you e-file, which means youll want to make sure you have the information you submitted last year on hand.
Starting with an old return can help you enter information quickly and accurately. One great tip for doing your own taxes is to use a software program such as TaxAct that can often import old tax data. That way you dont have to enter it again, which can save time and reduce the potential for typos and other errors.
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Making Mistakes On Your Taxes Is Costly
The IRS is not a mistake-friendly branch of the government. When you submit your federal taxes, they expect them to be completely accurate, and if theyre not, it can cost you a lot of time, hassle, energy, and cash.
Filing an inaccurate, incomplete, or late business tax return can result in:
- Hefty fines
- Additional penalties
- An audit, which is a huge time investment
Basically, tax mistakes are costly from every anglefrom a time perspective, an energy perspective, and a financial perspective. Even with audit defense, you can spend significant time dealing with an audit.
A tax professional knows the ins and outs of filing business taxesits literally their job. And while theyre certainly not immune to making mistakes , the chance of a tax specialist or a company like H& R Block making a mistake on your taxes is significantly lower than if you went the DIY route.
What Software Do Tax Preparers Use
Thomson Reuters UltraTax CS is a leading professional tax preparation software that automates your entire business whether for individual tax preparation or business clients.
Filled with powerful time-saving tools and features, UltraTax CS gives preparers access to federal, state, and local tax programs including individual, corporate, partnership, estates and trusts, multi-state returns, and many others.
UltraTax CS also offers seamless integration with other Thomson Reuters solutions, including CS Professional Suite and Onvio Firm Management, connecting your entire practice and ensuring that youll never lose time doing a task manually.
From cloud computing to advanced data sharing and paperless processing, UltraTax CS meets all your tax workflow needs with a customizable, end-to-end solution.
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There Are 2 Ways To Prepare And File Your Taxes
Americans have two basic options when it comes to filing their taxes:
1. Do it yourself with tax software or through the IRS website. The IRS does not charge to file taxes. If you’re well-versed in tax law you can or request the paper forms in the mail. However, the IRS encourages online filing and directs taxpayers with incomes under $72,000 to its free filing portal, which lists 10 qualified tax preparers that offer free services .
For people with incomes north of $72,000, you can still find free filing options if you have straightforward income. A more complex situation like self-employment or complicated investments means you’ll likely have to pay an online tax preparer, which can range from $25 to $100 or more for federal and state filing.
2. Hire a tax preparer to do it for you. The only professionals qualified to help you are tax lawyers, CPAs, and enrolled IRS agents. You can search for appropriately credentialed preparers at taxprepareregistry.com.
Preparers generally start at around $100 and vary depending on where you live and how complex your taxes are, and accountants might very well charge at least twice that, with similar variations in price according to location and complexity. According to a survey from the National Association of Tax Professionals, the average charge for preparing and filing a tax return is $216.
All You Need To Know Is Yourself
Answer simple questions about your life and TurboTax Free Edition will take care of the rest.
Estimate your tax refund andwhere you stand
Know how much to withhold from your paycheck to get
Estimate your self-employment tax and eliminate
Know which dependents credits and deductions
Estimate capital gains, losses, and taxes for cryptocurrency sales
See which education credits and deductions you qualify for
The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
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That Word Divorce Now Applies To You
Filing taxes after a divorce can get contentious for any number of reasons, not the least of which is that your ex-spouse may get a new accountant with sharp red pencils ready to correct your past tax return handiwork.
You could defend that work yourself, to try to head off a demand that the two of you refile all the returns. Or you could hire your own ace to smooth things over and return to your favorite software next year.
Best Free Tax Software Option
There are plenty of free tax return software programs to choose from. In recent years, our top pick here at MapleMoney has been SimpleTax, which is now called Wealthsimple Tax, after being bought by the robo-advisor giant.
What I love about Wealthsimple Tax is that it offers a broad range of features at no cost. And filing your return is so simple that you can complete the entire thing on one page of their website. The following is a list of Wealthsimple Tax features:
Wealthsimple Tax Features:
- Handles self-employment, New to Canada, CERB benefits, etc.
For more information on free tax return software, check out our free tax software guide.
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