To a CPA, adding machines, complex numbered forms, and ingrained tax code means one thing, tax season is upon us. For you, however, it may look more like forms with too-similar numbers, debating whether you should file with or without your spouse, and a harsh realization of how much money you actually owe in taxes. Despite how you complete them, by hand, software, or hiring a professional, those forms need to be turned in to the IRS by April 15th. So, for all those non-CPAs out there, which is the best way to file taxes for you?
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How to Pick the Best Method for You
Choosing the best method to file your taxes really comes down to you, how complicated your tax situation is, and your level of comfort when navigating the tax forms. Overall, the more comfortable you are with filing, the more likely you can file on your own. Conversely, the more complex your tax situation is, the more likely you are to hire a professional accountant to file your taxes.
The Best Way to File Your Taxes
Best is a relative term. If you have a highly complex tax situation and own a home, itemize, own a business, and have lots of investments you bought and sold, then you might feel the need to hire a professional to help you file your return. If you are comfortable with tax laws and filing, then you may feel that you can tackle it yourself with a high-quality tax software. When evaluating your tax situation, ask yourself a few simple questions to help you get an idea of the best method to suit your needs and personality.
- Does staring at a 1040 form give me anxiety or excite me?
- Do I feel confident in my math skills, or do I need the reassurance computer software?
- Am I familiar with tax deductions, tax forms, understand my tax liabilities, and exemptions?
- Does the thought of filing on my make me afraid that I will do it wrong?
- Am I willing to spend a few hundred dollars to hire a professional or would I rather go with a less expensive option?
Method 1: File By Hand
If you are a do-it-yourself person and enjoy solving complex puzzles, are confident in your work, and do not live in fear of being audited by the IRS, then filing your tax returns by hand might be for you. This method is best for people with simpler tax situations, such as a single W2 from your job, and who are taking the standard deduction. Of course, if you are comfortable understanding the forms and doing the math, you can file by hand even if you have a more complex tax situation and require supplemental forms. Filing by hand is the cheapest method, as it only costs the cost of the stamp and ink and paper to print. You can even get the forms for free at your local library.
Method 2: File With Software
Tax software is a fantastic option for those do-it-yourself-ers who are familiar with taxes, trust themselves to learn the necessary tax code but need help walking through the actual process. Tax software can handle your simple 1040 forms all the way to multiple schedule forms, itemizing deductions, and even handling self-employment taxes for your business. The cost to use a tax software depends on your tax situation, and the software you choose and can range from $0 to $169. Tax software is a safe middle ground that offers the ability to buy consultations with a CPA if you need it. However, they can be as simplistic and straightforward as running the numbers on whether you should itemize or not. No matter your tax situation, there is a tax software program that can help you.
Method 3: File With a Pro
If the thought of digging through your finances and IRS forms makes your heart rate rise, and not in an exciting way, you might be best to seek help from a tax professional. There is nothing to be afraid of when it comes to filing your taxes but sometimes a little hand-holding and reassurance can be worth it. Having a professional that you trust to guide you through the process, explain tax forms, and learn about your specific needs is a valuable resource. That professional can set you up for success to be able to file on your own in future years as well. Most people would benefit from consulting with a tax professional every few years, or whenever you have big changes to your tax situation, just to ensure they’re on the right path and filing for all possible deductions. Though you will pay more for a complicated tax situation, most folks will pay between about $176 (no itemizing) and about $457 (itemized and business income) for a CPA to do their federal and state taxes. Filing with a professional will take longer than filing on your own, as they have other clients competing for their time, so make sure you schedule far in advance and get your paperwork in order prior to the meeting. A CPA can only work as well as their client allows them to, and being organized and forthcoming about your finances can go a long way toward efficiently and correctly filing a tax return.
Tips and Tricks
A word of caution: there was a major overhaul of the tax code for 2018. Whatever method you choose to file, remember that the forms, deductions, and tax brackets are very different now, especially for business owners. Make sure to read carefully, don’t rush, and ask lots of questions of your tax professional if needed. Also, if you choose to file yourself, whether by hand or with software, you can get free guidance from a local Taxpayer Assistance Center. The liability for your taxes does not transfer to the tax preparer or the software company; you always are ultimately responsible for their accuracy and completeness. Make sure that you understand the process, no matter if you do it yourself or have a professional complete your taxes.
There are many methods to file your taxes, not one universal best way. Make sure you carefully consider your needs and pick the best method for you. Consider the complexity of your tax situation, your comfort with the tax code, and your budget to find what works for you. Tax prep software is a great middle ground that can be flexible for any budget and can tackle even the toughest tax scenarios.