Tax filing is a stressful experience for many people. They need to take into account a number of tax deductions as well as credits to make sure that their tax return is correct and there are no mistakes. The fact that the US tax code happens to be one of the most complex tax codes in the world also does not help.
You have two options to prepare and file your tax returns. One of the options is to hire the services of a tax preparer for preparing and filing your tax return. The other option is to prepare the taxes on your own. There are a number of advantages of preparing your taxes on your own but there are also some negative aspects of preparing your own tax returns. In simple terms, there are pros and cons to DIY taxes.
One of the biggest advantages of filing your own taxes is that it allows you to save money. You can save a bundle if you file your own taxes instead of hiring an accountant. Everybody is eligible to file their taxes electronically for free on the IRS website, regardless of their adjusted gross income. Also, the IRS will give you a list of multiple companies to guide you through the process of filing your tax return in case your adjusted gross income is up to $57,000.
Once the return is complete, these companies will send it electronically to the IRS. Also, there are specific tax returns such as those filed using a 1040EZ where certain companies will complete your return without any fee.
Another big advantage of filing your own tax return is that you will have peace of mind. Tax preparers and accountants are extremely busy at this time of the year which means errors may occur. Therefore, you will get peace of mind by filing your own tax return as this will ensure that you have made no errors. However, you should file your taxes only if you have proper understanding of the entire procedure, especially if you have a complicated return where you are required to file multiple forms.
You also get a closer look at your own finances when you file your own tax returns. It allows you to make better financial decisions. For instance, donating any unwanted items may be more beneficial than selling them if you fall in a particular income tax bracket.
One of the biggest disadvantages of filing your own tax returns is that you will have to spend far more time in reading and preparing all the information to make sure that you do not make a mistake while filing your return. The US tax code is not simple and it’s difficult to understand completely. Also, you will need to prepare a number of relevant documents such as all the 1099s, W-2, information on capital gains or losses, interest earned, dividends earned, payment for home mortgage, interest as well as real estate taxes to properly file your returns.
There are many tax preparation software available in the market to help you file your returns in an easy manner. However, you may not be able to find sufficient online help when you are not sure about your qualifications for a particular deduction. So, if you qualify for deduction but don’t take it due to lack of clarity, you could miss out on additional savings. On the other hand, you may have to pay penalties if you take advantage of the deduction but it turns out to be incorrect.
Overall, there are a number of pros and cons to DIY taxes and you will need to have a thorough understanding of the whole procedure to make sure that the time spent on preparing the tax return is worth it.