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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.
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I’ve been doing it myself the last few years but as my blog income grows am feeling less sure about continuing it.
I think its better to go for expert help when you have doubts in your mind.
Thank God I have a CPA that I have been using for years. I tell you it would save me money if I did them myself but first I need to learn how to do it.
One of the benefits of joining a PF network is you’ll learn tricks. Within a year, if you stick around, you’l start doing your own taxes.
I feel lucky that my aunt prepares our taxes. I would feel soooo lost if I ever had to prepare my own!
Is your aunt a qualified preparer?
I thought that I was doing well by filing my family’s taxes on my own until I got a random refund check from the IRS that said I miscalculated my own taxes and was owed more money. That was wild. After that, my taxes have quickly started to surpass my knowledge and comfort level.
Hahah.. nice mistake to have. Who doesn’t love another pay check for doing a mistake.
We have a good friend who is a CPA and he gives us a good deal on our taxes. I probably know enough to do it myself, especially with some software, but I like having it done by a professional in case there is a mistake. It’s tax deductible anyway.
let me tell you that you are doing the right thing. Some things should better be left with experts if we are not confident or knowledgeable enough.
I love my accountant since I have a side business and hate spreadsheets.
I did, however, do my brothers taxes this year and it was simpler than I thought.
haha interesting. You know your finance better than brother’s. I am sure you’ll do just fine with yours too.
We’ve always prepared our own through Turbo Tax or H&R Online and it seems to work well. This year is a NUTBALLS tax year and I contemplated hiring it out, but I still think we can do it on our own and hopefully save some money. I hope we aren’t overlooking any deductions.
No you will do the right thing to go with pros. If you have a small doubt in mind go for help. This is my ideology as well.
We did our own taxes last year and we will do the same this year. We use Ufile which seems to work well.
I think its specific to Canada. use TaxAct here. SO is many others in the blogging world. Is yours free?
I like to do my own tax so I can see how my investments are doing. It’s the perfect time of the year to see all the numbers.
How much time it takes on average?
a week or two… Not all at once of course.
I use TaxAct and I really like it. Even with my blog income in 2011, I was able to complete everything in about an hour. It assumes I know very little (which is an accurate assumption!) and asks questions like, “Did you earn money from working for an employer last year? Did you receive a W2? What does box 1 say?” I don’t worry about messing up because TaxAct has always caught my mistakes.
So far I have been using Taxact and for free. I remember paying initially some 13 bucks, rest is free every year. Multiple times you have to select ‘No’ to the advance option suggestions though. Kind of annoying. But, understand its their business model.
I actually enjoy doing my own taxes. I read through some of the updates on the IRS website during the year so I am somewhat up to date on new requirements. Sites such as Turbo Tax make it doable. I will say if I had a business, I would think twice before preparing my own.
Absolutely true. If its a simple return no harm in trying. A complex return has more need of expert opinion. But, still I’ll reiterate that if you are not confident, hire help. Personally I am ok doing my taxes so far.
If you have to fill out any SE forms or a Schedule C, an accountant probably is a good idea. But if all you have are a couple of W-2s, I see no reason for it to take 20+ hours…Maybe one. Just to make sure you’re getting all the credits you’re entitled to.