The Advantages and Disadvantages of DIY Taxes

It is not easy to understand the nitty-gritty of the federal tax code. Considering the new tax regulations being passed now and then, it may be very difficult to determine how much you owe the state. Preparing your own tax returns can translate to huge savings in tax preparation fees. However, the reverse is true if you were to make even the slightest mistake. While hiring a professional to do the preparation for you may amount to coughing a lot of cash, it may work in your favor if it helps increase your refund or decrease your tax bill. Here is a look at the pros and cons of both options.

Pros of DIY Taxes

One of the main upsides of preparing your own taxes is that you save money. The average cost for hiring an expert for tax preparation is $150. The price is even steeper if your financial situation is complicated.

You can either opt to prepare your taxes electronically, or using paper forms. There are many websites where you can get free or cheap tax preparation services. Some of the common software for tax preparation are H&R Block and TaxAct. Just by punching in some numbers, you will be able to review your audit risk and check your tax returns for errors before filing.

The other benefit of preparing taxes on your own is that you won’t be concerned about sharing personal information with strangers. It is hard to find someone you trust to prepare your taxes. In this case, preparing taxes on your own is the safest way to ensure your personal information is not leaked.

Cons of DIY Taxes

One of the major downsides of preparing your own taxes is the amount of time spent, compared to hiring a professional to do it. Considering the different tax laws, preparing taxes could take you several hours to complete, even if your returns are simple. While online tax software will be easier and faster for you, it becomes a challenge when you are stuck and need assistance.

Another drawback of DIY tax preparation is the possibility of error. Placing a decimal point or comma in the wrong place could mess up the whole return. Simple mistakes attract huge tax bills. If you are determined to prepare the taxes on your own, you should exercise caution and be as thorough as possible before filing.

Summing It Up

The question of whether to file your own taxes or to hire a professional to do it for you is not an easy one to answer. If you are confident in your ability to grasp the tax code, then you can do it on your own and save money. If you are unsure about yourself, hire a professional before you make a mess of things.