Who Should Do Your Taxes This Year?
Tax season is underway. As soon as your W2s and 1099s arrive in the mail and your documents and receipts are organized, it’s time to decide who will send that return to the IRS. If you’re comfortable with numbers and your return is simple, you can do it yourself using a free IRS form or tax software. If you’re the least bit shaky or have multiple income streams, choose a tax pro. Here are the pros and cons to every filing option.
Tax Preparation Software
The IRS offers free e-filing forms online. If you need a little guidance, tax prep software is a good budget choice. Find coupon codes for e-file.com, e-Smart Tax, H&R Block, TaxAct and TurboTax. Many services offer free preparation and filing for basic accounts.
Pros: This is a hassle-free way to plug in the numbers and file electronically.
Cons: You’re on your own when it comes to accuracy, although some offer live online help and auditing assistance guarantees.
Need a pro?
It’s important to note that the IRS doesn’t certify people who do taxes, except for enrolled agents. The only federal regulation is the penalty a preparer might pay if your return is prepared incorrectly. That’s a time-consuming and costly problem to fix. It is up to you to check credentials.
Storefront tax preparation
H&R Block, Liberty Tax and Jackson Hewitt offer convenient walk-in service as well as seasonal pop-up stores in strategic places.
Pros: Aside from convenience, these services can be less expensive than hiring a CPA or enrolled agent. They are best for people with a simple return. You can get refunds quickly.
Cons: Most well-known storefront preparers have training programs, but are staffed by people with a wide variety of experience levels. Ask your preparer about his or her state credentials and experience. Find out if the business offers help if you are audited or have questions later.
Certified Public Accountants
CPAs are certified by state to act as a public accountant. They must pass a test and have experience as a noncertified accountant and can represent you before the IRS. They can also give tax advice throughout the year. Learn more about CPA qualifications here.
Pros: A CPA is a good bet if you have a corporation or several income streams. If your taxes are complicated by the sale of a house or business, they can help you minimize your liabilities.
Cons: Not all CPAs are trained in tax law. Their services might be higher than a storefront preparer, but it’s a good idea to do a cost comparison.
EAs are IRS-certified preparers and can practice in all states. They can also represent you in tax court, if it comes to that. They are required to take 72 hours of continuing education courses every three years to stay licensed. Learn more about EAs here.
Pros: This is a good choice for those with complex returns and tax resolution problems. In many but not all cases, they can be a low-cost alternative to tax attorneys in proceedings and audit hearings.
Cons: Some EAs specialize in certain areas of tax law. Find one appropriate to your circumstances. They can be more expensive than hiring a CPA.
Certified Financial Planners and Financial Advisors
In addition to helping you manage your finances, financial advisors and certified financial planners take the time to obtain the extra certification needed for tax preparation. Some are enrolled agents and others are accountants. They specialize in this area or do this as niche work for the company that does your financial planning.
Pros: If you already work with a planner, he or she has the advantage of knowing you and your financial landscape intimately. He or she can therefore give you personalized guidance in minimizing your tax liability and developing long-term strategies.
Cons: Make sure your planner or advisor has the relevant certification in tax law, such as CPA or enrolled agent licensing, or tax certification from the National Association of Certified Public Bookkeepers. Look for depth of experience in this specialty.
Only about 1% of taxpayers are audited, but it pays to be diligent because you don’t want that possible headache. And with tax laws changing, it’s important to be up to speed on what you might owe from last year. Do it yourself or hire a pro, but get it done by April 18, this year’s extended tax deadline.