With the economic crisis hitting a big part of the world, spending that extra few dollars on filing tax returns can be something you should consider saving. But, before that, let’s consider when its better to prepare your own taxes.
MSN Money suggests asking three question to yourself
1. Do you have time to prepare your tax? On average simple tax return takes 20+ hours of preparation. If you can’t spend that much time, I suggest you hire a professional
2. Do you have fees to pay the consultant? One thing to remember, the tax preparation fee can be waived from your taxable income. On average the tax can be filed with $200 fee
3. Do you know the tax codes? Do you know what deductions to claim and income is taxable? If not, don’t take risk, hire an expert.
If you have answered all the above questions in affirmity, you can go on reading the benefits and drawbacks of preparing your own tax return.
Pro’s of preparing own taxes
With all of the new programs available to individuals these days, even small businesses, there is no reason to have someone else file your taxes.
These software programs are designed for the NON business or number minded persons! Programs such as Turbo-Tax take you step by step through the process. Gone are the days of having to write in every line of each form, and struggling to understand what the form is actually asking you to list.
Tax preparation software has come a long way in the past few years making it so easy it is impossible not to be able to understand the process.
They have a simple format that is called ‘guide me’ that asks you simple questions, allows you to query the experts, the program or the governmental agency should you have questions, right there on the spot, and guides you through the process like a tax expert holding your hand.
For about 1/4th of the price of a tax preparer, you can download a tax program and be on your way to completing your taxes within hours (as long as you have all of your documents.)
And near the end of the program, they offer audit advice, as well as re-checking for expenses you might have forgotten, and they check each form for accuracy.
Some programs that are available for the 2011 tax year are:
Turbo Tax – the most used tax preparation software.
Tax Cut – by H&R Block
Tax ACT - Which is a free service, but not as trusted or reliable as the two listed above – but heck, it’s free!
Tax Works – listed as a professional tax preparation program.
And you can file for free at IRS.
Con’s of preparing own taxes
Tax professionals are adept and educated in the industry and know the ins and outs of filing taxes. Some can even help you get passed over an audit by staying out of ‘red-flag’ areas on tax returns.
Tax professionals also keep up with the latest laws and rates, such as mileage deductions that are commonly changed at the last-minute, and most programs don’t have the updates. They are up to date with the newest trends and what causes audits and filing mistakes.
Also, tax preparers can help you realize deductions and expenses that you may have never even known or considered were deductible. Yes, most are very good at what they do if you can afford them!
However, filing your own tax returns can not only save you some cash, it can ensure that you file in the quiet of your own home, not forgetting documents, or getting flustered at the questions asked by tax professionals – plus you can E-file right from your computer, receiving a refund in days instead of weeks!
Kristy Ramirez is a personal finance writer for Life Insurance Finder a nifty Australian website where you can learn all about the best income protection policy for you.