Almost half of e-filed tax returns are prepared by paid tax professionals, while the remaining half is handled by self-prepared individuals. Here are some factors that can help you decide whether or not you want to employ a tax professional or if you want to use a software package.
Look at the complexity of your finances
Generally, it’s better to have a tax professional handle your complicated situation than not. For instance, if you have a lot of complex financial issues, having a professional handle your taxes might be beneficial.
Running a business
Whether you’re an entrepreneur or a part-time worker, there are certain rules that you should follow when it comes to running a business. For instance, if you’re an owner of a business, you might have to consider the various ways that can be used to write off the costs of equipment. Although software can help you with certain situations, getting personalized advice is not always possible.
You had a major life event
Suppose you had a major life event, such as a divorce, selling your business, or acquiring a property. In that case, a tax professional could help you navigate the various rules affecting your tax situation.
Tax software can help you manage your time and keep track of your transactions, such as the type of securities you bought and sold, with forms such as Form 1099-B.
A tax professional can also help you keep track of all the other details required to include in your return, such as your tax basis. They can also assist you with filing restricted stock or employee stock options transactions.
Your Tax Proficiency
Getting the proper preparation and filing of taxes can be a daunting task for some people. However, for others, it’s a routine that they need to do each year. If you’re not sure if you’re ready to handle the task, consider looking into tax preparation software. Tax software or an online preparation site can do the calculations for you. You don’t have to be a math wizard to use this method, and you don’t have to be a tax expert to complete the return.
The actual time that it takes to prepare and file a tax return is different depending on the situation. The IRS states that it takes an average individual about 13 hours to file a tax return with a form 1040 or 1040-SR. If you don’t have that extra time, then a preparer is better. The fees you pay for tax preparation vary depending on the professional’s services and the complexity of your return.
The cost of filing a tax return can also influence your decision. The IRS states that it costs about $240 to file a return. This includes all the forms and schedules included with tax preparation software.
Tax professionals’ fees vary depending on their qualifications, the type of software they use, and the complexity of your return.
If you cannot afford to hire a professional to prepare and file a tax return, you can still do it yourself through Free File, a free service offered by the IRS. This service allows individuals with an adjusted gross income of $73,000 or less to prepare and file a tax return online.
If you have so much income that you can’t use Free File, you can use an online preparation site or buy the software. The prices will vary depending on the type of software you need and your return’s complexity. Some companies also provide free software versions designed for simple returns.
The complexity of your tax situation and the amount of money you’re willing to spend are two of the most important factors you should consider when choosing a professional to prepare and file a tax return. If you meet the income requirements of the IRS, then you can get free software. However, if your situation is more complex, you should use a tax preparation service with a more expensive package.