Stupid Money: When Should I Do My Own Taxes?

How to tell when it’s really time to call in the professionals.

Stupid Money: When Should I Do My Own Taxes?

Tax day is almost upon us, and if you haven’t filed already, you’re probably wondering the best way to do so. If you have filed already, you may be wondering if either a) you could’ve saved some money doing them yourself; or b) if maybe you messed up real bad by doing them yourself. Let’s see what’s what.

Disclaimer: This article doesn’t constitute legal advice, it’s just some friendly pointers. So see a professional, and don’t blame us if you really mess up.

So… should I do my own taxes, or nah?
You didn’t think there was a definitive answer to this right off the bat, did you? It depends on a lot of things. First things first: Since people’s situations change every year, this is a question you should ask yourself annually (earlier than the month of April, ideally).

What kind of stuff does it depend on?
Lots of things! What type of employment situation you have; how many dependents; investments; deductions you might have; how much money you earn; how much attention you want to give to this; how comfortable you are of not being in total control. Etc.

What are all the ways I can do my taxes, then?
There are several main ways. The most basic (if not straightforward) is to file directly and for free with the IRS using its free filing software (or by sending it in the mail). Then there’s the popular way of doing it yourself, by using programs like TurboTax or H&R Block — generally these are free if you make less than $100,000, with deluxe software running less than $100 if your situation involves itemizations, deductions or property ownership (a small additional fee in certain cases for filing state taxes). Jackson Hewitt even has cubicles inside many Walmarts if that’s your thing. Or you can hire someone to do it for you: A CPA (Certified Public Accountant) or a tax lawyer. That’ll usually cost several hundred dollars.

And what are all the things it depends on?
Okay, here’s the simplest breakdown:

Do your own taxes if:

  • You only have one job.
  • You have no dependents.
  • You have no property or major investments.
  • You’re a numbers kind of person.
  • You’re not filthy rich.
  • You have a comfortable handle on tax law.
  • You have the time and attention to do it.
  • You want total control over your money.

Have someone else do them if:

  • You’re self-employed, with a lot of gigs and contracts.
  • You own a business.
  • You can claim lots of deductions and itemizations.
  • You have dependents.
  • You own property or have investments.
  • You make a lot of money.
  • You give lots of money to charity.
  • You don’t have the time or interest in doing it yourself.

Having someone else do them sounds nice. What are the pros and cons?
The obvious advantage is that someone else does all the work for you — someone who’s read the back of the board-game box and knows the rules much better than you. Because of that, they can also save you money in the form of larger refunds, another obvious advantage. Most tax preparers also offer you representation in case you get audited, which tax software obviously won’t do.

As for cons (literally), the tax-preparation industry has its share of scam artists, so ask around for recommendations. Also, you have to plan ahead: Most tax advisers have been fully booked for months by the time March rolls around, so reach out to advisers early in the year at the very latest, not at the last minute. Then of course there’s the higher fees — although tax-preparation fees are a deductible expense on next year’s tax return, which can mitigate the cost somewhat.

Say I do my own — how can I make it easy on myself?
First of all, if you’re gonna do them yourself, set aside a few hours with no distractions. Turn off your phone — this is serious business! Then get all your personal info and your W-2 from your employer in order, along with any 1099s, health insurance info or other documents, and any medical expenses or deductions you can take. Review your previous year’s tax return. And before you hit send, be sure you feel confident doing so. Take a deep breath, read everything over one more time, make sure you signed on all the dotted lines, spelled your name correctly and entered all your numbers the right way. There’s no room for typos here.

If I file myself, what are the biggest mistakes to avoid?
It’s pretty much the things you’d expect, but here are the most common errors, according to the IRS:

  • Math errors
  • Deduction errors
  • Entering in the wrong social security or PIN numbers
  • Entering in the wrong bank account info for your direct-deposit refund
  • Misspelling names
  • Forgetting to sign or date your return

You mentioned a tax attorney. When do I need one of them?
Generally you’ll be fine hiring a CPA to file your taxes. But a tax attorney can be helpful if you need to do some long-term tax planning; own a business and need help with payroll taxes; need legal defense against tax-related issues; or (may God have mercy on you) if you get audited by the IRS.

Good luck with it… and be sure to make next year the year you finally get a jump on your taxes.