A struggle that many people experience at tax time is Deciding Whether to do their own taxes or hire a tax pro. To reach the correct decision ? and make this a less stressful experience tax time ? it?s important to understand the different types of tax professionals, and the pro?s and con?s each one brings to tax preparation. We?ll explore when it may make sense to do your own taxes, and then look at situations when you should strongly consider hiring a professional. Making an informed decision simply makes good financial sense.
Convenience time, cost, and the degree of complexity in a person?s tax situation are the primary factors that need to be Considered when choosing to do your own taxes Whether or hire a pro. The lowest cost option, of course, communication is always doing it yourself Whether it?s pen and paper or using a tax prep software. The downside is that you?ll end up spending several hours of your time on the task. Furthermore, dealing with today?s complex tax code on your own means you run the risk of making a mistake that could adversely affect how much taxes you?ll end up paying. Equally important, so you may not recognize a tax savings or beneficial financial opportunity. On the other side of the coin, a good tax professional -. For a fee-almost always saves both time and effort a person and can potentially offer advice and expertise that can reduce one?s tax obligations Types of Tax Professionals
Tax professionals, generally speaking, can be lumped into four main categories: retail tax preparers (tested as H & R Block), certified public accounts, enrolled agents, and tax attorneys. An Enrolled Agent is someone who is federally licensed to taxes prepared and is Considered an expert in the field of taxation. Tax attorney?s, being the most expensive of the professionals, are commonly used in situations where the taxes are highly complex, as seeking tax shelters. Retail to tax preparers may be enrolled agent or a CPA, or (as is most common) neither of the two. Statistics show that 60% of all Americans have their taxes done by a professional
Hiring a Tax Pro -. For the argument
The greatest value in using a tax professional is in their expertise. Navigating through all the complex tax rules and regulations requires a knowledge and skill most people simply not possess Thurs. A good tax advisor will ask the right questions, dig into your financial picture, and come up with the best result for your tax scenario. Additionally, tax experts should be able to Provide sound financial advice ? especially in the areas of IRA?s, capital gains, and tax shelter. For some of us, using a tax professional is appealing if only for the time savings and not having to endure the headache of preparing the forms ourselves. But one caveat to always keep in mind ? not all tax advisors are created equal. Hire a bad tax advisor and you can expect to have bad things happen. Be sure to Actively engage a prospective tax advisor with questions, ask your friends or family for referrals, and always double check the math to Ensure a correct tax return. . Whether using a tax professional or doing your own taxes you are ultimately responsible for what is reported on your tax returns
Examples of when it?s strongly suggested to use a tax professional / p> first You own or have sold a business
Second Investment gains and losses you have
Third You work in one state, and live in another
4th You have income (including dividends) from foreign countries
5th You have investment rental properties
6th You have a tax-free exchange of property
7th You may be exposed to the alternative minimum tax
8th Your marital status changed
Using a Tax Professional
Pro?s
Saves you time
Convenience ? you do not have to deal with forms
Normally a fast process. Electronic filing tax refunds mean you get quicker
In case of an IRS audit ? a tax per Will Provide assistance in working with the IRS
Organization of documents ? easily accessible historical filings
Advice and information ? both tax and finance related
Expertise in tax laws and regulations that the average layperson does not possess
Con?s
Cost ? a recent National Society of Accountants found that the survey revealed average tax preparation cost of a federal itemized deductions in 1040 with a form, and state taxes is $ 229 The tax preparation fee without itemized deductions was $ 129 With more forms, and more complex taxes, the fee only goes up from there.
Not all tax professionals are equal, be aware that they can make mistakes as well
Doing Your Own Taxes -. For the argument
Paying a tax advisor good money to enter numbers into a computer simply does not make much sense. We can all agree on that. Well, for some people, completing your own tax returns is certainly a viable option. Most experts agree that for people who are single, with one job, and limited assets, doing taxes on their own (with only pen and paper) is a viable option. But as the level of complexity Increases ? the chances rise that you want to make a mistake or possibly miss tax saving opportunities. Tax preparation software, Which fills the role of a tax professional to a limited extent, certainly helps with Minimizing mistakes. Leading software products tested as TurboTax or H & R Block?s At Home are fairly easy to use and light on the pocketbook. They serve as the role of tax preparer in that impassive, as you use the software, you are prompted with questions and presented with useful tips and guidance. However, if you enter incorrect information, as in the case where you may be confused with A Certain question, you could end up costing yourself some money or at least a missed opportunity to save money. Even if you decide to do your own taxes, consider having a tax preparation expert do your taxes every 4 or 5 years to see if you?re missing any savings opportunities.
Pro?s
Cost ? minimal outlay required if using software
Con?s
time and effort ? be prepared to give up several hours of your time
Lack of tax expertise ? risk of missing opportunities for tax savings
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