Even CPAs and tax professionals dread this time of year.
I believe everyone who receives a paycheck should know how to do a basic tax return. The basics aren’t that hard. At some point in life, however, you are going to move way beyond the basics.
Standard versus itemized deductions, miscellaneous deductions, unreimbursed business expenses, child and dependent care credits, education related tax credits, capital gains and losses, passive income, dividend income, earned income, tax exempt income, unemployment comp, workers comp, medical expenses, taxation of social security benefits, student loan interest, domestic production activities (what the…?), IRA and Roth IRA distributions, fees, extensions, penalties …..
My head wants to explode just thinking about it. Even if you use the best tax planning software, doing your own taxes can still be a headache.
Below are 5 reasons why you should hire someone else to do your taxes this year.
You would rather eat glass. Most people would rather do just about anything rather than complete their tax return. Gathering up receipts, collecting important tax documents like your W-2 and your 1099’s, reading various IRS publications and instructions… it’s a giant headache. Life is short. Spare yourself the agony and give yourself permission to delegate this important task to those rare folks who actually like to do taxes and are good at it.
The likelihood of making a mistake is high. The U.S. tax code is over 10 million words. Since 2001 Congress has made more than 5,000 changes to the tax laws. The instructions alone for the 1040 are more than 100 pages long. The possibility of making a mistake is high even if it’s just a simple math error. If you do decide to do your own taxes, at least get some good tax software. Turbotax reports that paper returns are 41 times more likely to suffer a simple math error than returns filed using software.
Your time is valuable. The IRS estimates that the average person spends up to 13 hours doing their taxes. Other sources peg that number at closer to five hours. The National Society of Accountants reports that the average person will spend about $273 to have a typical 1040 tax return done for them this year. This fee usually includes Schedule-A and a state income tax return. Those prices aren’t cheap, but offloading this chore to someone else may be money well spent and it’s a great way to leverage your time for other activities.
You’re self-employed. If you are self-employed, you have a few things going for you. First, any money you spend on tax prep is deductible from your gross business income. Second, your tax return is likely to be much more complicated since it may also include additional deductions as well as a tax return for your business. Third, your tax professional can provide advice and other services that could ultimately lower your tax bill. In some cases, hiring someone else to do your small business tax return may actually save you money.
You had an unusual year. Even if you love doing your own taxes, are comfortable with the process and confident in your tax prep skills, hiring a tax professional can make a big difference if you’ve experienced an unusual life or business event in the past year. If you got married or divorced, had a death in the family, bought or sold investment property, moved, started a business, closed a business, exercised stock options, inherited financial assets or experienced any number of other significant financial events, hire someone to do your 2016 tax return. They can get you through an unusual year and you can get back to doing your own taxes next year when life returns to normal.
You may qualify for FREE help. OK, this is more than 5 things. So, if you prefer to pay for stuff you can get for free, go ahead and skip this part, but if you are 60 years old or older, have an income under $54,000 or are disabled, you may qualify for free tax assistance at a Volunteer Income Tax Assistance site near you. These sites are staffed by Certified IRS Volunteers and they can provide help with basic tax preparation services.
The days are getting longer and Spring is near. If you want to spend your weekends doing your taxes, that’s your business. But if any of the above applies to you, consider hiring someone else to complete your 2016 tax return.