Molly McClusky for US News World Report writes: Ask any accountant, and they'll tell you that you should always hire a professional to prepare your taxes. But the continued popularity of online software prep programs would imply otherwise.
For many Americans with simple tax returns, an online tax preparer like H&R Block or Jackson Hewitt may be the smart way to go. Self-filers who use such sites praise their ease, expediency and cost as benefits. But filers with more complicated returns – moved and need to file in multiple states, started their own businesses or had a dramatic change in income or investments – may need some extra help.
So when should you call in the professional tax hitters, and when can you do it yourself? We spoke with three U.S. News readers to find out.
John Platt, writer, Oregon
When John Platt made the leap from a steady marketing job to freelance life, and a move from New Jersey to Maine, he also knew it was time to find a good certified public accountant. Platt had always self-filed, but things were different now. "Moving and starting this new business, there were just all these questions that I just didn't feel comfortable having a computer try to answer for me,” he says. “There were new rules, new states, and things that, for me, are business deductions, that I hadn't known."
Now living in Oregon, Platt says some of the tips his CPA gave him helped him prepare throughout the year for tax time. He says that although a CPA was more expensive than filing online, (typically a flat rate of $250 in Maine) the additional cost of paying an accountant made sense. "For me, it was worth it for the peace of mind, of knowing that I was on the right path," he says.
Would Platt ever go it alone again come tax time?
"I would consider going back to self-filing. I'm pretty good at pulling things together, and if I keep up with that, I don't see why I shouldn't be able to go to an online system again," he says.
Marcus Sarofim, environmental scientist, the District of Columbia
Marcus Sarofim, a federal employee in Washington, did his own taxes using online tax prep software until his last year in graduate school. That year, Sarofim says he missed a key filing section, which flagged an audit. What followed were complicated dealings with the IRS, and ultimately, a heftier tax bill.
"That was really a wake-up call for me," Sarofim says several years later.
When Sarofim graduated and moved out of state to accept a fellowship, he knew his taxes were about to get more complicated. He was now responsible for filing two state returns, plus he had to account for a bump in salary and the expenses associated with moving. With the memory of the earlier mishap still fresh, Sarofim says opting to take advantage of his employer's group relationship with a local CPA was a no-brainer.
"I really like the convenience of having one person designated to helping me," he says. "We meet for coffee, I hand him an envelope, and we walk through my return each year. I know that if something were to happen, he'd be there to handle it, because that's his job."
Like Platt, Sarofim says the additional cost for hiring a professional is worth the peace of mind, and says the accountant has most likely saved him money by finding the right deductions and avoiding costly errors. Would he ever go back to self-filing? Sarofim hasn't ruled it out, but he is happy with his current situation and doesn't see an immediate need.
Steve Singer, lawyer, New Jersey
Unlike Platt and Sarofim, Steve Singer had always used his father's accountant, and finally made the switch to online tax prep several years ago. "I just felt like my accountant wasn't very responsive. He lived far from me, he didn't return my phone calls, and I feel like I was doing most of the work preparing all the information anyway. It just wasn't worth the cost," he says.
Singer says that when he switched to tax prep software, he instantly felt more comfortable and confident. "I felt like the program was more interactive than my accountant. It walked me through the process, and it found me deductions I didn't know I was eligible for. If I had questions, I knew where to go for answers," he says.
And, of course, he was paying significantly less than he had with an accountant.
Would he ever switch back to a CPA? Singer says he hasn't ruled it out. He shared concerns about new rollouts of his preferred online tax program and is looking at its competitors. But for now, the ease of self-filing trumps the challenge of finding a responsive, effective CPA, at a fraction of the cost.
To Self-File, or Not to Self-File?
Each of these readers has different life circumstances: one is married with kids, one is coupled without children and one is single without children. One has been in steady job for many years, one recently changed employers and one runs his own business. Then there are moves, college funds, mortgage payments and investments to account for.
Most importantly, each has a different level of comfort in managing his own taxes and a different approach to money and finances. Each has adjusted his filing preferences, and might likely do so again.
When should a tax filer get additional help? Platt and Sarofim made the switch when large changes in their lives and careers were about to impact their taxes. Singer switched back to an online tax preparer at a time when his life was less in flux. While there's no hard and fast rule, like many things in life, the answer lies in the moment when the complexity of a tax situation exceeds the time, energy and knowledge required to properly manage it.
And, like the tax code, that formula can change from one year to the next.
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