When I started my first job in the tax department of a national CPA firm, I was surprised to see people paying quite a bit of money for tax preparation. They were paying around 0 for tax services in order to file a tax return with only a simple Schedule A.
That may not seem like much money, but it was about the equivalent of $1,500 today. That’s when I started teaching people how easy it is to prepare their own tax returns.
Here are some guidelines that can help you decide between filing yourself and hiring a pro to help you:
Do it yourself if:
- Your income is primarily from jobs that provide you with W-2s.
- You earn a little bit of interest and/or dividends from common U.S. stocks.
- You own a house with an original mortgage of $1 million or less.
- You make primarily monetary charitable contributions.
- Your non-cash donations, such as those to the Salvation Army or Goodwill, are valued under $500.
- You have children or other dependents and there is no dispute as to who gets to claim them (i.e., you do not have a combative ex-spouse).
- All your dependents have Social Security Numbers or ITINs and are not filing their own tax returns.
Get professional help when:
- You are self-employed or your income is reported via 1099-MISC.
- You have more than one business.
- You own rental property or rent out part of your home or vacation property.
- You have dependents and are always fighting with an ex over who gets the tax benefits.
- You have just gotten married or divorced, or you are in the process of a divorce at the end of the year.
- You have complicated investments, are running hundreds of trades through your accounts, or have sold securities and don’t have good records to prove your cost for the securities.
- You are running some of your securities trades through your child’s accounts.
- You have bank accounts, property, or investments overseas.
- You have a lot of unreimbursed medical expenses or you have dependents with special needs.
- You have household employees and should be filing payroll reports related to their earnings.
- You have worked in, or have income from, multiple states.
- You have been selling things on eBay but don’t consider that a business.
- You are missing information that is key to finalizing your tax return.
- You have more than three questions about how to handle something on your tax return.
Whether you prepare your own tax return or use a tax pro, you may choose to file your tax return online. In this case, the IRS will only get an electronic report, and believe me, those electronic reports are not that easy to read. Be sure to get a full printout of your tax return from your tax preparer or software. That will be the only full copy available to you, so be sure to save it someplace where you can easily retrieve it.
Eva Rosenberg, EA is the publisher of TaxMama.com ®, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy athttp://www.cpelink.com/teamtaxmama.