Surveys have shown that more than half of Americans don’t understand their taxes — even when they’re doing them. Should you do your own taxes, or is it better to hire a CPA?
It’s often tempting to do your own taxes so you can save money. But in the long run, you could be losing out. Everyone’s situation is different, and it’s important to understand your unique needs so you can make the best choice for filing your taxes.
We’re here to help. With this guide, you’ll be prepared to get your taxes done in the best possible way — just ask yourself these questions first!
Do You Understand Taxes Well?
People who do their own taxes might do well if they understand their tax situation. For example, if you’ve worked as a tax preparer in the past, you’re probably in a good position to do your taxes yourself.
Of course, as the numbers above show, many people who do their own taxes don’t understand their tax situation. In that case, you’re better off hiring someone — otherwise, you could get yourself in trouble with the IRS.
Did You Have a Big Life Change Last Year?
Some years come with bigger life changes than others. Maybe you retired, bought a house, or got married last year. This can seriously impact your tax situation — do you know how to navigate the changes?
If you’ve had changes that will affect your taxes, it’s best to hire outside help, even if you usually do them yourself. Otherwise, you could make costly mistakes while doing your taxes.
Do You Have Lots of Free Time?
Free time comes at a premium for lots of Americans. Your time is valuable — you might have a side gig that you work at for spare cash, or just need time to rest and recharge after a long week.
Doing your taxes yourself will cut into your free time. Is that a loss you’re willing to take?
You might feel like you’re saving money by not hiring a CPA. However, don’t forget that your time is also valuable. When you add up the hours you’ll spend doing your taxes, versus doing something like working, you might find that you’ll actually lose money by doing your own taxes.
Do You Know a Tax Expert?
If you run into a challenging situation, is there someone you can call for help?
Knowing a tax expert gives you a way to figure things out while still doing your taxes “on your own.” But if you don’t have someone like that in your life, you’ll be stuck reading random advice on the internet as you try to navigate your questions.
That advice may not always be valuable, depending on the source. In fact, it can lead you astray. Before you try doing your own taxes, you’ll want to make sure you have a reliable resource you can turn to for technical information.
Do You Run Your Own Business?
If you run a small business — even if it just started this year — it’s not a good idea to do your taxes by yourself.
Personal taxes are complex. Business taxes are even more so. And the mistakes on a business tax return can become even more expensive.
Make sure to hire a CPA if you’re running a business, no matter what.
Is Your Tax Situation Simple?
If you just have one job, no dependents, no investments, and no other complications, your taxes might be pretty easy. In that case, you’ll be able to handle doing them by yourself.
However, many people have more complicated situations today. You might have multiple jobs, charity contributions, and other factors that make your taxes more difficult. In that case, a CPA can help you navigate all those challenges.
How High Is Your Income?
People with low income often benefit more from doing their own taxes (although this isn’t always the case).
The reason? Less income means you’re less likely to get audited. Of course, if you don’t make a lot of money but your tax situation is still complicated, you’ll want to hire a CPA. But people who have lower income levels and also a straightforward tax situation will often succeed in doing their own taxes.
Worried about the price? Some services like Anthem Tax Services are surprisingly affordable, so don’t discount the option.
Are You Planning for Future Generations?
Tax time can often go hand-in-hand with estate planning time. If you’d like to start thinking about how you’ll provide for the next generations, this is a great opportunity to start working with a CPA.
While you might find some estate planning software out there, this is a task you should always do with a professional. You already need to do your taxes, so why not find someone now who can help you master both tasks?
Do You Feel Confident About Your Taxes?
Do you feel totally confident and prepared about doing your own taxes? If that’s the case, you might do well on your own.
However, if you’ve been procrastinating on starting your taxes because of nerves, it’s time to stop waiting and hire a CPA. The best way to do taxes is to get them done. A CPA can help you feel good about submitting your taxes, not terrified.
Will You Itemize Your Deductions?
Even with the new higher standard deduction, a few people might still choose to itemize their deductions. However, this can quickly become complicated, and it’s best to leave this task in the hands of a CPA.
A CPA can also help you decide whether or not itemizing your deductions is a smart move. Sometimes, this choice can help you save a significant amount of money.
Knowing Whether to Do Your Own Taxes
As you can tell, deciding whether or not to do your own taxes depends a lot on your unique situation. Answering these questions will help you make the best decision. But when in doubt, always hire a CPA.
Need motivation to finish up your taxes? Check out our favorite ways to de-stress after you’ve gotten them done!