Reasons To Reconsider Doing Your Own Taxes
Many people feel that doing their own taxes saves them money, but that is not always true. While it is possible to save money with DIY approaches and software, costly mistakes are also possible.
Tax season is plagued by advertisements for tax software and promises of low tax bills. The commercials are accurate to an extent. The DIY approach is more straightforward for some people and results in similar outcomes to using a tax professional. However, the results vary by the complexity of the filer’s income.
Consider the potential pitfalls before you decide that tax software or DIY methods are suitable options. If you have several income streams, a complex portfolio, or other personal issues that pertain to taxes, hiring a professional might be your best option.
To Err Is Human
Whether using software or paper forms, neither will be of much use to the filer using incorrect data. Your taxes are only as accurate as your information and where you place it.
Some people only have a single income source, making the filing process more straightforward. However, when dealing with income from pensions, social security, investments, etc., the process becomes increasingly difficult. Add the complexity of specific jargon and new tax laws to the equation, and you up the ante of potential pitfalls or errors.
Unfortunately, while some errors will work in your favor, the majority will result in a higher tax bill, plus any potential penalties. DIY filing methods almost always leave money on the table.
Love, Death, and Taxes
Taxes are not a simple calculation of how much you earned versus what you owe. The analysis involves many nuances, including marriage, dependents, deceased loved ones, employment status, savings, investments, mortgage payments, charitable donations, etc.
Most people have more to their financial story than cash in and out. You have goals, obligations, and missteps. The key to making your economic story work for you is talking to someone who understands tax law.
A tax professional should not be some random stranger. They should become a professional you develop a relationship with who knows your goals and needs.
When a professional is familiar with a client, they can help them make financial decisions throughout the year, decisions that benefit them come tax season. These professionals should be a part of every major financial decision, so they can help you build a healthy and stable future.
Time Is Not Equal
When was the last time you filed? Many people file taxes annually, but some people do not. There can be legitimate reasons for not filing, such as not making enough money to owe anything. Still, if you cannot remember the last time you filed taxes, you could be in for a rude awakening.
Failing to file, especially in years you owed money, can result in penalties, including late fees. Additionally, filing for past income will not be as simple as submitting an easy form. Tax laws change every year, so you will be subject to past laws for any year you failed to file.
The muddiness of filing late taxes is often reason enough to hire a professional. Still, a professional can help to ensure that late taxes are accurate, providing the best potential for savings.
DIY software and easy forms are tempting, especially when you want to save a few bucks or have an uncomplicated financial portfolio. Still, these methods often mean paying more than is necessary. Whenever possible, hiring a tax professional is a better choice.