Filing Taxes 2011: Should I Do My Own Taxes?
Way back in the mists of time, I worked for a national CPA firm. They charged $250 for a simple individual tax return. Back then, that was more than my rent—today’s equivalent of over $1,250. That’s a lot of money for a simple tax return!
I thought it was absolutely ridiculous for people to have to pay that much money to get a simple tax return prepared. In the early 1980s, I started teaching people how to do their own tax returns.
Is it still a good idea to do your own tax return? In many instances, yes.
The way tax software is developing these days, you will get a lot of guidance on the routine issues that apply to the life of the average person.
The question is, are you the average person?
None of us likes to feel average. We all know we are special with unique aspects to our lives. Will the tax software help us deal with those things?
In many cases, yes.
I have been looking at software provided by the top online tax-preparation services for this year. Their emphasis is on walking you through the process of doing your tax return, bringing to your attention things you might otherwise overlook.
You should do your own tax return if
- You have a job or two.
- You have no business, not even a little eBay thing on the side.
- You’re a student, full- or part-time.
- You own a home and are paying the mortgage, essentially, on time.
- You have a child (or several) whose exemption is not in dispute with an ex-spouse.
- You have interest income from savings accounts or notes.
- You have routine dividend income, nothing complicated.
- You sell a few batches of stock, nothing complicated.
- You have fully reimbursed business expenses.
- You have a rental property with regular rental income and no big maintenance or repair issues.
You should not be doing your own tax return if
- You have several jobs, sometimes consecutively, sometimes simultaneously.
- You have a business—or several—especially one with losses.
- You are in business with a partner or friend and have never really formalized how all that fits together for tax purposes.
- You are freelancing—where you should really be an employee.
- You have unreimbursed employee business expenses.
- You have a child or children whose exemptions are in dispute with an ex, or with others.
- You have adopted a child or children in the past year.
- You have sold your home at a loss, with short-sale or foreclosure issues.
- You have sold investment real estate or rentals.
- You have high out-of-pocket medical expenses.
- You are a domestic partner or in a same-sex relationship.
Essentially, it boils down to this: If your life is straightforward and uncomplicated financially, you should do your own tax return. If you start having questions and issues, perhaps it’s time to sit down and speak to someone who can help you resolve them.
Stay tuned: we’ll be telling you how to select a tax pro who is right for you!