By Andrew Stratton
It seems like every year there are more do-it-yourself tax preparation software options as April 15th draws close. While there are plenty of reputable, efficient, and convenient options, an informed consumer should consider the pros and cons of e-filing before going through with it. For many people, the cost of hiring a certified public accountant or other professional to handle your tax preparation is greater than the return. If you do choose to file for yourself, you should know the pros and cons and be wary of common pitfalls that can trip up even the most intrepid of self-reliant DIYers.
The pros of self-filing are probably self-evident. The biggest benefit, of course, is that you'll save money, at least up front. It is also a good way to acquaint yourself with your personal finances and take a hard annual look at your income, spending, and budgetary practices. Some people also get a certain peace of mind out of it. You know the saying, "If you want something done right, do it yourself?" Well, that's all well and good, but it certainly has its limits. When it comes to yard work or thank you cards, it's a solid philosophy. Open-heart surgery, on the other hand, is probably best left to the professionals.
Gauge the seriousness in terms of the financial stake. If your adjusted gross income is under $57,000 per year and you only have one or two income streams, the Internal Revenue Service can direct you to some free or low-cost options. If, on the other hand, you run your own business, qualify for some deductions, or source your income from many independent sources, you might want to think about professional tax preparation services.
For one thing, you should assess the amount of time it will take you to file yourself versus the cost of having a professional tax preparer file for you. Many people look to save money, but few people consider that their time has value. If you have a couple of days worth of work to put together your return, would that time be better spent working on your actual career? The biggest factor, of course, is the bottom line. You may think that it's expensive to hire a professional, but in many cases, it can be extremely costly not to hire a professional. The fact of the matter is that the tax code is a veritable labyrinth of deductions, exemptions, and credits built up over time, often for the benefit of very narrow interests. If it costs you $500 to hire a CPA, but they can get you $1500 more on your return, it's a no-brainer.
Again, maybe you're a student, only work part-time, or have a single modest paycheck with taxes automatically deducted. But if there's a chance that you could end up getting more in the long run, professional tax preparation is worth every penny.