Should you file your taxes on your own or work alongside a professional? Many taxpayers often opt to file their taxes on their own using inexpensive software platforms to save money.
If you have a straightforward tax scenario, it can be fine to file yourself. There are many scenarios, however, where it is not always cost-effective to file your own taxes and where getting an expert opinion is in your best financial interest. If you decide to work with a tax professional to file your return, you may be eligible to receive benefits that go beyond getting a tax refund.
You Experienced a Significant Life Change
Take a moment to think about your life over the last year. Maybe you bought a home, got married, had a child, went back to school or retired. These are milestone moments both in your life and when it comes to filing your taxes.
Mark Steber, chief tax information officer at Jackson Hewitt, said the most important time to work with a tax professional is when you experience a significant life change — because it changes your taxes.
“These moments have great tax benefits,” said Steber, adding that taxpayers can be eligible for various tax credits, deductions and savings they might not have previously received before.
Tax Professionals Won’t Let You Miss Out
You could spend hours on the IRS website trying to figure out which deductions or credits you’re eligible for. Or, you could work with a tax professional who will ensure you don’t miss out on anything.
Cassandra Kirby, CFP, EA and COO at Braun-Bostich & Associates, said you may receive some of the following benefits when you choose to work with a tax professional:
- Advice on how best to maximize tax savings, including for married couples filing jointly, married couples filing separately or people filing as head of household.
- Information on dependents you can claim. Kirby said this may lead to additional tax liability reductions associated with aspects such as education or child and dependent care credits.
- Tips for how to structure your investment portfolio for tax-advantaged or tax-efficient investment options.
- Advice on estimated tax payments that should be made for future tax years from both a federal and state tax perspective. Tax professionals also may offer ways to reduce quarterly estimates.
- Deduction advice, including whether you should take the standard or itemize. What can you write off if you itemize? What medical expenses are deductible?
- Charitable giving advice. Kirby said a tax professional will help you determine whether you should use a Donor Advised Fund or make regular donations throughout the year.
You’re in a Complicated Situation
There are several complicated situations in which you may struggle to file taxes — e.g., if you own a small business or rental properties. Rob Burnette, CEO at Outlook Financial Center, said tax professionals may offer assistance for those.
If you are the owner of a small business, especially a sole proprietor, you might struggle to provide the required information for Schedule C. Burnette said professional tax preparers likely will use a business-specific checklist to ensure they capture all relevant data.
Some taxpayers also may have one or two rental properties. Burnette said one of the biggest errors he sees is taxpayers not setting the initial depreciable value correctly. Expenses and improvements are not always correctly classified either. Tax professionals may assist in handling depreciation and any losses from real estate rentals.
The Tax Code Is Always Changing
If you don’t fully understand the tax code, that’s, well, understandable. The tax code is always changing. Michael Haller, owner of Haller Group, PLC, said the good news is that tax professionals keep up with it.
“Tax professionals stay up to date on the constantly changing tax laws and often specialize in certain situations or industries,” Haller said. “Tax advisors also have yearly education requirements that keep them informed, which is a huge benefit to you.”
Tax Professionals May Become Your Advocates
What happens if you owe penalties or receive a notice from the IRS questioning your return? A tax professional may be able to assist and navigate the best response. In certain situations, Haller said a tax pro can even act on your behalf.
Depending on the tax firm, Haller said tax professionals may have the ability to help taxpayers throughout the year.
“Whether you are buying a new home or looking to invest in cryptocurrency, a good CPA or accountant will guide you through the tax implications,” Haller said.
This is the kind of valuable advocacy and guidance you would not receive if you chose to file taxes on your own. Unique situations benefit from expert opinions and support found in tax professionals. If you question how capable you might be at filing taxes on your own, consider working with a professional.
“The advice from a tax professional can be invaluable,” Kirby said. “Think twice before deciding to self-prepare.”
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