Many Americans out there take on the task of doing their own taxes every year. While this may be ok for some, self-preparing taxes rather than having an accountant prepare your taxes could be a costly mistake. I have personally met numerous taxpayers who tell me the horrible stories of expensive audits and/or tax bills that they had to pay that could have been easily avoided had they hired an accountant to handle their income taxes for them. Also, I run into many who do not seem to be able get the best results from doing their own taxes. If you are unsure whether or not you should continue to do your own taxes, or are unaware of the benefits of allowing an accountant to do your taxes, then here are 8 reasons one should probably stop doing their own taxes and have a tax professional do them.
1. Doing your own taxes can be difficult.
For many people taking on the task of doing their own tax return can be very stressful. Those people generally will bow out and leave this work to a professional. There are others who do not allow the idea of completing their own taxes get to them. They just dive in and do it themselves. Both of these groups of people mentioned could be on a level zero when it comes to understanding income tax law. The latter group especially because they do not realize how difficult it could be to do taxes. They put themselves in a vulnerable position by completing the work with little knowledge.
Lets for a minute imagine that once a year you must decide whether to hire a criminal lawyer to handle a case of yours or just represent yourself. How many people would just take a stab at winning the case on their own? I believe most would go with the criminal lawyer. What most people do not consider is that the tax code is law, a legal matter, and largely the professionals who are trained to handle tax law have had to do a lot of learning, much like a criminal lawyer. So, in many cases it can be a difficult to handle your own tax situation and it may be best to allow the trained professionals to do so.
2. DIY taxes vs hire an accountant.
If you are looking to just get your taxes done because you are required to each year, and you do not have a complicated tax circumstance, then might be ok for you to file your own taxes. Notice I said it might be ok, not that you should file your own taxes. The reality is that there is a difference between being able to complete and file your taxes and completing and filing the best tax return possible. While a free tax software may ask you probing questions that will ultimately lead you to finishing your tax return, the software can not be a critical thinker and make decisions for you that a professional could to make your tax results better. Check out this blog which discusses using Turbo Tax vs a Tax Professional.
3. Tax Law are always changing.
Understanding the tax code takes a significant amount education and practice, and even then, there will be many things that one will not know until it crosses their path. This is not only because the tax code is complicated, but also because how large the tax code has become. In 1913 the tax code was only 400 pages long, maybe the only reason why they were called “the good ole days”, lol. By 1969 the tax code had grown to be 16,500 pages. That is a tremendous amount of additions to the code. If you think about how much our country changed in that time period, this may kind of make sense. Let us fast forward to 1984, in this time frame you might expect some additional growth too right. The tax code had increase to 26,300 pages by 1984.
Now let us talk crazy numbers, by 2004 the tax code was 60,044 pages long, and grew to be 74,608 pages long by 2014. So as you can see there are much to know involving the tax code, and to top it off the tax cuts and jobs act of 2017 had the most changes to the tax code than any other time to date. Considering all of this, while one might believe that they have a handle on doing their own taxes, the tax code is always changing and in most cases the only people who keep up with those changes are the professionals who must do so in their careers.
4. Taxes are more complicated if you are self-employed or own rental properties.
If you are self-employed or have rental properties, then you have much more to be concerned with than the average taxpayer. Understanding what can be deducted and how it can be deducted is very important. For example, if you purchase equipment for your business or do an improvement to your rental property, then normally that expense would need to be depreciated over time. This type of expense would need to be categorized properly and depreciated over the appropriate time period. One of the big concerns that most taxpayers have is just trying to figure out what all they can use as a deduction. This is one of the simpler questions, but there are much more complicated topics that will arise when dealing with the taxes of those who are self-employed or own rentals properties.
5. Peace of mind.
When thinking about the previous topics that I have discussed, what it all mostly boils down to is having peace of mind. When a knowledgeable tax professional does your taxes, you can be more sure that the best tax return will be filed, and you will not be getting an unwanted letter from the IRS. This is not to say that it is impossible for you to receive a negative letter from the IRS after a professional files your taxes, but even if you do, there is someone who understands tax law who can assist you with the issue. It is worth mentioning that while the industry standards for IRS audits is 1%, Molen and Associates proudly has a 0.1% percent audit rate.
6. How much does it cost to hire an account to do my taxes?
The price of tax preparation can vary by large amounts across several companies. The cost also varies based on what type of entity the tax return is being filed for, such as an individual or a business. According to Investopedia, the average cost of hiring a tax professional to file an individual tax return ranges from $176 – $457. The price increase in that range is mostly due to itemizing personal deductions, having self-employed income, or having a state tax return included.
It is also important to note that there can be situations where two different taxpayers own a business, but one of the businesses had total revenues of $30,000 while the other had total revenues of $500,000. In a case like this you might expect much more working time to go into doing the tax return for the taxpayer with the higher revenue total. This will also affect the price one may pay to get their taxes done.
One of the most important things to remember when considering the cost is, all tax accountants are not created equal. As it is true in all other professions, there are levels to the product or service that you pay for and receive. There are tax professional who have degrees and professional credentials like CPAs or EAs, and there are some out there with many years of experience. On the other hand, there are some tax professionals who have little experience and do not have the professional credentials. So, in a case where the price is just too low, then it might be true that your expectations of the tax experience should be low as well. See the links below for additional information on choosing a tax professional and the fees associated.
7. Is it worth it to hire an accountant for taxes?
When most are battling with the idea of self-preparing taxes or having an accountant do your taxes, the decision is based on the cost vs the value received. I agree that this should be of high importance to you. If you have a valuable tax professional, then making this decision is a piece of cake. The value you receive from having a worthy tax professional do your taxes greatly out ways the cost. A tax professional can save you dollars by helping make sure you take advantage of all deductions available to you. This keeps you aware of tax law changes so that a big change does not surprise you and cost you tons of tax dollars. A tax professional will be sure to be compliant with all the tax regulations to avoid any repercussions from the IRS.
In many cases the few examples I named lead to thousands of dollars in savings vs the hundreds of dollars paid to have your taxes professionally done. One of the biggest things a tax professional can do for you is look out into the future and plan for the tax reality that you desire. By doing this you can take control of your own narrative to create your tax story. Truthfully, when you really take advantage of all the services of a quality tax professional, the value received can be priceless.
For all your tax needs, Molen and Associates can be your go to professionals. We offer great services by valuing our clients above all, being heavily involved in furthering your and our education, and offering awesome service at super competitive rates. Contact Molen and Associates for your income tax needs today!
Tax Advisor, Accounting, EA