The new year is here and along with it come tax season jitters. A common dilemma for many taxpayers around tax season is the choice between hiring an accountant or using tax preparation software.
Many factors will play a role in this decision including time, cost, and most importantly, your financial situation.
How Confusing Is Your Tax Situation?
Filing your taxes can be a complex task especially if you run your own business or manage a wide range of investments – situations that would often require the assistance of a professional accountant. For the individual who works on a salary with no investments or financial obligations, tax season doesn’t pose as much of a worry.
But, most taxpayers have neither overly complicated or extremely simple tax situations that will make the decision an easy one. The quick solution is to hand over all your financial documents to an accountant and wait to collect your refund checks. That isn’t to say that there aren’t any benefits if you opt to purchase tax preparation software.
By considering the pros and cons of both choices and evaluating your financial situation, you can best make your decision.
Hiring an Accountant
Professional accountants remain the most knowledgeable counselors for tax preparation because it is their job to stay current on the latest tax laws and regulations.
Arguably the best benefit of hiring an accountant is the time you save. The only work required from you is to provide all the necessary financial documents while the accountant takes care of everything else. If you have tax questions throughout the year, accountants offer year-round availability for advice. The downside to using an accountant is the tax preparation fee. A complex tax situation would mean you’d be charged substantially more.
The personal touch is often the deciding factor for choosing an accountant as he or she may be more inclined to get you the most tax savings.
Using Tax Preparation Software
Tax preparation software has grown to be increasingly popular among taxpayers as society becomes more technologically adept. Popular tax preparation software includes TurboTax from Intuit and TaxCut from H&R Block. Nowadays, it is possible download the software or access the tax preparation programs online and you can file electronically.
The primary advantage of using tax preparation software is cost savings. The fee for a tax filing at an accountant could cost a few hundred dollars while the tax preparation product for a homeowner or investor costs $49.95 through TurboTax or $44.95 with TaxCut. A secondary perk is the educational experience from filing taxes on your own.
On the other hand, tax preparation programs often involve a learning curve which subjects your filing process to human error. The software will check your tax returns for errors but it won’t catch mistakes that seem legitimate. More common, though, is the prominent complaint from software users regarding the amount of time it takes to complete their tax returns by themselves.
What Should You Do?
The first step to making your decision is to self-evaluate your tax situation. Complicated tax situations would most likely require an accountant while a simple tax situation would warrant giving tax preparation software a try.
A wise approach would be to hire an accountant and compare the tax returns with those that you completed with tax preparation software. If you feel like you’ve got a good grasp on the program, you may opt to use the software next year.
Your Tax Situation What should you do?
Complicated. Probably should hire an accountant.
Simple. Consider using tax preparation software.
I don't know. Hire an accountant and match results with tax preparation software. Consider using software next year.