By Coach Fin
By now the W2s, 1099s — and maybe other mysterious forms — have hit your mailbox. Should you sort it out and prepare your taxes yourself? Or hand it all over to the nearest certified public accountant (CPA)? The short answer is: it depends.
Three reasons to do your own taxes
- It’s free and easy for simple financial situations.
- If you earn up to $69,000 per year, the IRS encourages using their Free File Online service.
- If you earn more than $69,000 per year, you can use their Free Fillable Forms online, but you have to know how to do taxes.
- You can use TurboTax Free Edition or H&R Block Free Online service if you have a simple tax situation that only requires a 1040 without additional schedules. You’ll take standard deductions that apply to you and won’t itemize deductions.
- You can save money even if your situation is more complex.
TurboTax and H&R Block offer different levels of online filing for more complex situations. The fees are much lower than what CPAs typically charge. A paid version might be a good choice for you if you:
- Want to itemize deductions
- Own rental property
- Are self-employed or own a small business
You’ll need to be ready to set aside time to gather paperwork and answer questions that guide you through the steps and schedules that might apply. The more complex your situation, the more time you’ll need.
- You enjoy numbers and financial insight.
If you like crunching numbers or getting more insight into your financial outlook, you might enjoy doing your own taxes.
So generally - if your situation is straightforward or you enjoy details, doing your own taxes might be for you.
Three reasons to hire a tax pro
- It’s complicated.
If your financial situation is complicated it might be easier (and give you peace of mind) to rely on a CPA. Your case might be complicated if you have:
- Had multiple jobs in the last year
- Had a mix of employment and freelance work
- Cashed in investments or have many kinds of investments
- Own multiple homes or properties
- Own a business with employees
- You had a major life change.
It’s tough to think about emotional life events as tax events. But a marriage, child, divorce, death or new business can affect your taxes. A professional can help you determine the best way to file to maximize or minimize the impact.
- You don’t have the patience for numbers and paperwork.
If you don’t like crunching numbers or sifting through paperwork, turning it all over to a tax pro may be the way to go. You’ll have more time to do the things you enjoy.
Sometimes it’s worth hiring a tax professional to prevent mistakes that could cost you more later. If you’re dealing with a new or unfamiliar financial situation – or you don’t have the time or interest in doing your taxes yourself – a tax pro can be the right option.
Learn more about taxes
Taxes are an important consideration as part of your overall financial plan. Not sure where it fits or where to start? Drop by your nearest Cinfed branch and chat with a coach. Or take this quick tax class from our Financial Education Center.