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One of the biggest questions we see every tax season: Should you pay someone to do your taxes?
A tax refund is an important part of this question. Most people are hoping for a refund and look forward to direct deposit (who gets a paper check anyway)?
But filing taxes can be difficult, or so the mainstream media, commercials and more will tell you. So should you pay someone to do your taxes?
As with most things, the answer is: it depends on.
It depends on a few factors and we'll explain whether you should pay someone to do your taxes or whether it makes more sense to do it yourself. And if you pay someone, who should you pay? Does working with one of these big companies like H&R Block even make sense?
Here's what you need to know:
When it makes sense to raise your own taxes
For many Americans, paying taxes makes sense. Honestly, actually filing your taxes is very easy (especially if you're financially organized). If you can read a form and enter information on a computer screen, you can do your taxes.
There are many free tax software options if your income is under $79,000, and even if it is more, tax software prices are very reasonable (much cheaper than a paid tax preparer). When we compared major tax software options, the average price for paid versions was around $60 for itemized deductions. And in our survey of how much Americans paid to file taxes, the average was about $50.
If you have a straightforward tax situation, it makes sense to do this yourself as it is much cheaper. So what does a simple tax situation look like? Here are some common examples of when it makes sense to do it yourself:
- You're single, have a job and not much else
- You don't own a business
- You don't have complicated investments
- You have the patience to sit down and do it
You should also have a basic understanding of how taxes work. If you haven't already, perhaps because you're filing your taxes for the first time, take it slow and learn what you're doing – it will really make the years to come easier.
If you should pay someone to do your taxes
If you're paying someone to do your taxes, you should look for help that involves MORE than just data entry. Yes, a tax preparer is there to file your taxes, but the preparation process can involve many moving parts. And that expert you hire should be able to help you with that.
Some common examples of when it makes sense to pay someone to collect taxes:
- They earn over $200,000 per year
- You have had a life event, for example a marriage, a divorce or children
- You have founded a company
- You own complicated investments like partnerships or trusts
- You have questions that you cannot answer
The goal of paying someone to do your taxes should be two-fold. Of course, we handle your actual taxes. And get help and advice. The most common areas where a paid professional can help include:
- Optimize your accounts to reduce your tax burden
- Make sure you are eligible for credits and deductions or that you are taking all the credits and deductions for which you are eligible
- Keep accurate records of complicated investments, such as: B. Partnerships
- Help optimize your business structure to reduce your taxes
So when deciding whether you should pay someone, keep these thoughts in mind when discussing your situation.
Where to get your taxes done
Now that you know when it makes sense to pay someone to do your taxes, the question is where should you get it done?
It is important to consider the costs of filing taxes. For a simple return (which you should probably make yourself), it starts at $100 or more. According to a recent study by the National Society of Accountants, the average cost of getting your taxes done is $261. If you need help with a variety of financial topics, expect to pay around $350 to $500 to get your taxes done, but that includes advice.
For most people who “should” have their taxes done by a professional (as opposed to those who simply do but don’t need to), a CPA typically makes the most sense. But even if you go with a company like H&R Block, you want to make sure you know who you're working with and whether they're qualified. Some unscrupulous accountants have a tendency to mislead.
The IRS requires all tax preparers to register, and you can find their information online: The National Directory of Registered Tax Preparers and Professionals.
Make sure you vet who you're working with, regardless of the company – big or small, public or private.
Also, make sure you build a good relationship with this person. They should be able to help you with your tax questions. If they can't answer you or help you, that's a sign that you need to find someone else. If they just want to do the data entry, you shouldn't pay them several hundred dollars.
If you owe a lot of taxes (or need to pay back taxes), you may want to contact a tax debtor. Check out Solvable and get help >>
Last memory
Finally, remember that even if you hire someone to prepare your taxes, you are personally responsible for the accuracy of the information provided. The tax advisor can help you, but you have to make sure it is correct.
One of the biggest mistakes I see every year are typos – especially from people who use the big, mass-market tax preparation companies you see on TV. These data entry professionals (because they rarely offer advice or help) can cause errors. You can misspell your name, mistype your Social Security number, and more. All of this will cause delays in your tax refund.
Make sure you review your tax return thoroughly before filing it, whether you do it yourself or pay someone to help you.
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