Pros and Cons: Filing Your Own Taxes VS Hiring a Professional

 Filing your taxes shouldn't consume your life. Keep reading for pros and cons: filing your own taxes vs hiring a professional.

 33% of Americans file their own taxes each year.

For new and old taxpayers alike, the question around tax season is the same: do I file by myself or do I get someone to do it for me?

What are the merits and demerits of each mode of filing? This article will put everything in black and white.

Your Filing Options

Filing is mandatory, and failure to do so can get you into trouble with the IRS. Americans have two options when it comes to tax filing:
  • Hiring a Professional
These are IRS agents, tax lawyers, and CPA’s. The fee averages a minimum of $100, depending on your location and how complex your tax filing is.
  • DIY
The second option is to do it yourself via the IRS Website or other tax software. The IRS does not charge taxpayers for filing, and taxpayers whose income lies under $66,000 get free fillable forms.

With either method, tax filing should not consume your life. Find out the pros and cons of hiring a professional vs. filing by yourself.

Hiring a Tax Preparer

Hiring a professional to do your taxes comes with a number of benefits. The following are some of them.

1. The Confidence You Have Filed Correctly

Any errors in your paperwork can lead to interests on your balances, an IRS audit, and even penalties. It's for this reason that you want to be sure your paperwork is done correctly.

Hiring a professional gives you the extra confidence that, being experts in the field, your filing is indeed in order.

2. Advice on Deductions and Credits

To reduce your tax bill, you want to take as many credits and deductions as possible. For a layman, doing this research on your own and even understanding which ones you can access is no mean feat.

If you are self-employed, having a professional handle your filing is even more beneficial. Reporting business expenses, self-employment income, and health coverage can be quite challenging.

In such instances, working with an advisor can come in handy.

3. Tax Advisor Fees can Be Deductible

Tax preparer fees are a miscellaneous expense that you can write off.

However, to meet the requirements, your tax preparation expenses must equal over 2% of your adjusted gross income.

Cons of Having Your Taxes Prepared

There are certain things you have to contend with if you decide to hire someone to handle your taxes for you. The following are some of them.

1. Cost

Unlike doing your own taxes, hiring someone to do them for you will cost you money. Small businesses may lack a budget for such expenses.
 
2. Fraud

This happens when you work with someone of questionable credibility.

One way to identify them is that they charge significantly less to do your filing than the market rate. Aside from identity theft, such persons can also make gross, costly errors in your paperwork.

Doing Your Own Filing

If you are able to handle the process yourself, you get to save on the professional fees attached to paying a tax preparer. Even if you use software, usage fees will still be significantly lower than paying a preparer.

Another advantage is that you do not have to entrust your information to a third party and risk fraud. In the process, you also get to expand your financial knowledge base.

Also, do not forget that tax preparers get swamped with work around tax season. As such getting appointment will not be at your convenience. When you file your own taxes, you get to work on your report at your own schedule.

Disadvantages of Handling Your Own Taxes

If you are not a numbers person, this process can be tedious and complicated. This in itself opens you up to errors on your filing.

Also, the tax code is complicated and seems to be getting even more so. Simple concepts, such as deductions, come with a battery of requirements for qualifications, making the entire process even more convoluted.

As such, it is easy to miss out on some deductions and credits that a tax preparer could have alerted you to.
Why You Need to File Your Taxes

If you fail to file your taxes, the IRS files a 'Substitute for Return’ on your behalf. This basically tries to determine what you owe, using your past income and returns.

This is followed by notices to remind you to make payments, based on the amounts on the substitute for return.

With no action from you to resolve this, the IRS institutes a federal tax lien. This is a claim to your property as well as other assets you might acquire in the future as long as you owe the IRS.

Of course, this will negatively impact your credit score.

If you still do not take measure to resolve the issue, the IRS moves on to the final, drastic step.

This step involves the tax levy, which is the legal seizure of your property or assets to satisfy your tax debt. The IRS has the power to garnish your wages and levy your financial accounts until settlement.

With a tax levy, your only options are paying up, allowing the IRS to have its way, or trying to stop the IRS Levy. Read more on this great service.

When You Should Absolutely Pay a Professional

As you can see, there are a lot of considerations to make in deciding whether to get a professional or take matters into your own hands.
However, there are certain circumstances where experts strongly advise you to hire a tax preparer. These include if you have just opened a new business or just got divorced or married.

The Only Sure Things in Life…

...Are death and taxes. The later will be with you each year of your adult life, making it all the more important to develop a working system early on.

Whether you decide to DIY or hire a professional, the critical thing is to file in a timely and accurate manner.

While paying your taxes feels like such a loss, how about looking into ways to grow your finances?

Check out some top stocks in tech you should invest in this year.
 
 
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