When doing your own taxes makes sense... and when it does not
People often ask me whether they should do their own taxes or hire a tax professional. I am a big believer in the do-it-yourselfer spirit. But, you have to know your limits. It’s worth going over the primary reasons why some people should get help with their taxes and others can continue going it alone.
Should you do it by yourself?
You work for only one employer who gives you a W-2 tax form each year.
You don’t have any complex investments such as a partnership, a trust or extensive stock holdings.
You like numbers, are willing to investigate annual changes to the tax code and double-check your work.
Should you seek help?
You own a business or rental property.
You trade investments frequently or have a complex portfolio.
You have undergone a major financial impact during the tax year, such as a divorce or death of a spouse.
You are supporting a child between the ages of 19 and 24 who is a full-time college student.
You don’t have time or inclination to do it yourself.
You are still legally responsible for your return even though you hire a professional. Here are some tips when hiring a tax professional:
Ask how they charge: Avoid preparers who claim they can obtain larger refunds than other preparers. If your returns are prepared correctly, every preparer should derive substantially similar numbers.
Ask what preparers will need: Reputable preparers will expect you to provide receipts and other paperwork if they need it to justify the return they’re preparing for you.
Make sure you know who’s preparing your return: It is okay for you preparer to have onsite staff assistance, but the person you hire needs to be the person who reviews and signs off on you return.
Investigate your preparer’s credentials and record: Check with the state’s board of accountancy for CPAs, the state’s bar association for attorneys or the IRS Office of Professional Responsibility (OPR) for enrolled agents.
Stay aware of tax scams: Newspaper business sections and news programs focus on abusive tax shelters and scams. So does www.IRS.gov. If you have a preparer encouraging you to get involved in tax avoidance strategies that are overly complex, check them out before you agree to jump in.