Tax professionals are a very important group of people in the finance world, but not everyone who files taxes needs to hire one. Don’t waste your money paying an accountant to enter your name, address and Social Security number on your tax forms. You shouldn’t even pay them to type the numbers from your W-2 form–you can do that yourself. And here’s a secret: Most tax professionals don’t even want to spend tax season printing out Form 1040-EZs for people with very simple returns.
When You Should Use Tax Return Software Instead of an Accountant
If your tax situation is simple, you’re not in a high income tax bracket and you don’t want a lot of tax planning, online or from-the-box tax preparation software is probably just what you need. Tax software asks you questions and leads you down a path, prompting you to look for things you wouldn’t have thought of yourself. It has built-in help files to answer your questions and it won’t let you file your return if certain questions are not answered, or if it determines your return is incomplete.
Think of it as your robot accountant–pretty good at what it does, for a robot.
When a Tax Professional Is Better
Individualized Attention: Real, live tax professionals, however, can do so much more. They interview hundreds of clients per year, and with that experience they know what to ask and how to find deductions you may never have heard of. They may not spend as much time as your tax software program asking seemingly off-the-wall questions like, “Did you have any oil and gas royalties this year?” but they’ll make more of an effort to zero in on your unique situation.
Planning: Where tax professionals really shine, however, is in tax planning. There’s only so much you can do about your tax bill once the year is over. The damage is done. A tax professional can not only answer questions like, “Should we be buying tax-free municipal bonds?” or “Should I incorporate my tiny little business like they say on the radio?” but they can help you plan so next year’s tax bill is less painful. They also excel at retirement and estate planning.
Complicated Situations: Also plan on seeing an accountant if you are in a dispute with the IRS or owe them a lot of money, if you have a situation not clearly delineated by IRS instructions, you own a business or your situation is complex.
If you’re still not sure, go ahead and run the numbers with tax software. If you’re done in no time and you’re happy, great. If several hours later, you have a new appreciation for professional tax preparers, it’s time to make an appointment. As with any financial or legal issue, when in doubt, talk to a pro. It will be money well spent.
