“I am in surgery.” A statement that is often made when a partner is busy dissecting a return or in thorough analysis of financial statements. This comes as a reply to another associate attempting to interrupt the “surgery.” I mention this because many a true word is spoken in jest. Regardless of what these Do-It-Yourself services will pitch to you, even the simplest of returns can become a problem. However, there are some benefits to preparing your own taxes:
1. Developing Tax Knowledge. Like anything else, if you practice something enough, you will eventually become familiar with it. By doing your own taxes, you will eventually develop a general understanding of tax preparation.
2. Save Money. Again, like anything else, if you can Do-It-Yourself, you will likely save money on tax prep fees. According to the National Society of Accountancy, the average fee for a tax return prepared by a CPA in the USA is $261. The average fee for Do-It-Yourself ranges from free to $100 dollars.
Now I know what your thinking. These seem like pretty solid reasons to do it myself. Hold Your Horses! Well then, why should I hire a CPA?
1. A Professional is a PROFESSIONAL. Professional consultant. Professional Financial Advice. Professional Assurance. Professional Peace Of Mind. Your taxes and finances are in the hands of a professional. A CPA has expert knowledge of taxes and finances. A reputable CPA can drastically reduce the risk of filing taxes yourself. A CPA can be a financial advisor and a general consultant that you can turn to for advice on a vast array of topics especially pertaining to your personal finances and taxes. A CPA can be a business and financial strategists providing guidance on investments, estate planning, starting a business, etc. Unless you yourself are a tax professional or a CPA yourself you are not a tax professional. And here is another fun fact for you. The CPA’s at L&A do NOT even dare do their own taxes.
2. Save Money. I know. This reason appeared as a benefit to doing it myself. How strange? But a CPA can find deductions and credits that reduce tax liability that Chris the Mechanic does not know about. One missed deduction can easily justify the fee. Multiple missed possible deductions or credits can means hundreds and even thousands of dollars down the drain. So if Chris the Mechanic filed his return himself and got a $661 refund paying $60 dollars for tax software he is left with $601 in his pocket. Chris hires a CPA and gets a $1000 refund a pays $261 as a fee. Chris is left with $739 in his pocket. Most everyday people will miss possible deductions. We know this because even professionals can sometimes miss deductions.
3. Relieving stress. Taxes and finances are involved and can come with a big bag of worry and stress. Having a professional on your side can ease that worry especially if you build a trusting relationship with your accountant. Your CPA can take the worry and stress off of your shoulders. Coming back to our Chris the Mechanic example, if my car’s engine completely fails, I am going to bring my car to him for the repair because he is a professional. I can be worry and stress free that my car will not explode as I’m driving it because I brought it to a professional to work on it.
In conclusion, the answer to our initial question is “It Depends.” My theory is why assume the risk of filing your own taxes when you can have a professional on your side.