Here's how to figure out whether you should do your own taxes

Before you go, we thought you'd like these...
Before you go close icon
How a Tax Advisor Can Perfect Your Financial Plan

Everyone has to pay taxes.

As to whether you should prepare your own or work with a tax preparer or accountant, however, there's no one-size-fits-all answer.

Since most people's financial situations change every year, it's a question worth asking annually.

Americans have two basic options when it comes to filing their taxes:

1. Preparing them yourself.

You can use tax software, or go through the IRS website.

Popular tax software includes programs like TurboTax (the most basic version is free), TaxACT (again, the basic version is free), and H&R Block (the most basic version offers federal filing for free, and $9.99 for state).

The IRS does not charge to file taxes, and while you can print out and mail in your paperwork or request the paper forms in the mail, the IRS encourages online filing and directs taxpayers with incomes under $62,000 to available free filing software like that mentioned above. For people with incomes north of $62,000, the site provides free fillable forms.

View the most important tax dates to know:

Important tax dates to know
See Gallery
Here's how to figure out whether you should do your own taxes

January 15, 2016: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Tetra Images/Getty Images)

April 18, 2016: Individual tax returns are due for the 2015 tax year

(Photo via Alamy)

April 18, 2016: Requests for an extension on filling out your taxes must be filed by this date

(Photo by Chris Fertnig via Getty Images)

April 18, 2016: Those who are self-employed or have first-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Alamy)

April 18, 2016: This date is also the deadline to make a contribution to an IRA account for 2015

(Photo by Garry L., Shutterstock)

June 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Shutterstock)

September 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Shutterstock)

October 17, 2016: 2015 tax returns that received an extension are due by this date

(Photo by Juan Camilo Bernal via Getty Images)

October 17, 2016: Today is the last chance to recharacterize a traditional IRA that was converted to a Roth IRA during 2015

(Photo via Getty Images)

January 15, 2017: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo by Pascal Broze via Getty Images)


2. Hiring a tax preparer to file for you.

The only professionals qualified to help you are tax lawyers, CPAs, and enrolled IRS agents. You can search for appropriately credentialed preparers at

Preparers generally start at around $100 and vary depending on where you live and how complex your taxes are, and accountants might very well charge at least twice that, with similar variations in price according to location and complexity. According to a survey conducted by the National Society Of Accountants, federal and state tax preparation with itemized deductions costs an average of $261.

Note that if you itemize your deductions, you may be able to deduct the cost of your tax preparation from next year's taxes.

So, should you prepare taxes yourself or hire someone to help? For most people, it's not just about the price. Ultimately, it comes down to what you're most comfortable with, but these guidelines could help you decide.

Do your own taxes if:

You have a straightforward tax situation.

That probably means you don't have dependents, investments, or significant assets or charitable contributions, and you don't own a business.

Those basic, free versions of tax preparation software mentioned above were created for people like you, who have few deductions and factors to take into consideration.

You have the time and patience to deal with it.

Taxes probably aren't the kind of thing you should do with Netflix on in the background. Expect to set aside some time to give it your undivided attention — in 2012, the IRS estimated you'd need 16 hours to do all of the preparation work for the basic form 1040.

You feel comfortable hitting submit, and want that control over your money.

Taxes are a big deal. If you feel comfortable navigating the software, looking up questions on the (surprisingly accessible) IRS site, and the idea of having to fix any errors doesn't terrify you, then you'll probably feel more comfortable doing your own taxes.

Hire a professional if:

You earn over $200,000 a year.

Kiplinger reports that IRS statistics show an increased likelihood of IRS audits once your household income passes $200,000, and even more so if you earn over $1 million annually. If the IRS is going to come knocking, you'll want to make sure everything is buttoned up as tightly as possible — and for most people, working with a professional is probably the best way to do this.

You've had a major life change in the last year.

Did you get married? Buy a house? Have a baby? These all impact your tax filing, and, at least the first time you document them on your taxes, you might want someone to show you how best to do it.

You have a complicated tax situation.

That probably means you have dependents, investments, or significant assets or charitable contributions, or you own a business.

Nearly every financial transaction comes with some kind of tax consequence, and the more transactions you have, the more things you need to take into consideration. People who own businesses, freelance, or are self-employed in particular might want the help of a professional to iron out their atypical tax situations — deductions for home offices, business meals and travel, and vehicles are also audit red flags.

You're planning to itemize your deductions.

This point goes hand in hand with having a complicated tax situation. If you have major medical costs, a mortgage, or make large charitable donations (among other factors) you might save more money itemizing your deductions than taking the standard deduction. Itemizing makes your taxes a little more complicated, which you might not want to take on.

You don't have the time and patience to deal with it.

If you feel that the significant time you'd need to devote to doing your taxes would be better spent elsewhere, you might want to outsource. It's probably more prudent than rushing through your filing and making a mistake.

You don't trust yourself to cover all of your bases.

If the idea of entering numbers and talking about dependents and deductions makes you break out in a cold sweat, you might want to leave the preparation to a professional.

RELATED: The 10 strangest ways states tax you... or don't

10 Strangest Ways That States Tax You (or Don't)
See Gallery
Here's how to figure out whether you should do your own taxes
To preserve the uniqueness of their island paradise, Hawaii since 2004 has had an "Exceptional Tree" tax allowance. Landowners can deduct up to $3,000 from their income for expenses such as pruning and fertilization for any tree designated as rare, big, old or a combination thereof. That's per tree. Top-bracket earners taxed at the state's highest rate (11 percent) would save $330 via the deduction. The work must be done by a certified arborist, and the deduction can be claimed only every third year. Hawaii has had a list of "Exceptional Trees" since 1975, and there are now estimated to be more than a thousand thus designated.
Maine legislators tax anyone who deals in their official state fruit-blueberries, at the rate of 1.5 cents per pound. The resulting revenues-more than $1.6 million to state coffers in the fiscal year that ended in June 2013-are used to promote the crop and agricultural research. 
The state also taxes harvesters and processors of hard-shell clams (known in the state as mahogany quahogs) at $1.25 a bushel, but state revenues for that are much lower. 
Alabama is the last in the union to tax a deck of cards as if it were a "vice," like alcohol and tobacco. Taxing decks of cards, associated with gambling, was once fairly common, but most states have since set up separate control boards to regulate liquor and tobacco, and have let the cards slide.
But in Alabama, you'll still pay a 10 cent sales tax on any pack of cards you purchase. Retailers also have to pay $2 to the state each year for the privilege of selling playing cards.
Virginia levies a 50-cent excise tax on every lamb or sheep sold in the state. Both the Maine and Virginia taxes are examples of checkoff programs that collect taxes from an industry to fund promotional campaigns for the products. National commodity checkoff programs, authorized by the U.S. Department of Agriculture, have brought you campaigns such as "Beef: It's What's for Dinner" and "Got Milk?" But the Virginia program is extremely modest by comparison, having collected only $9,000 in fiscal year 2013. The funds go to the Virginia Sheep Industry Board, which spends them largely on predator control.
In 2013, in part to meet federal pollution-control mandates, Maryland legislators enacted fees on property owners in Baltimore and nine other Maryland counties, aimed at curbing storm water runoff. The fees were meant to fund programs to improve the water quality of the Chesapeake Bay, the largest marine estuary in the U.S. Sounds simple enough, but the way Maryland legislators wrote the law has led to an angry backlash in some corners against this so-called “rain tax.” One way localities calculate the tax is by measuring how much of a landowner’s tract is "impervious" to precipitation seeping into the ground. So the more you've developed it with buildings, driveways, tennis courts and the like, the less it will absorb and the more you pay. That's how the tax is being implemented (through aerial and satellite photos) in Montgomery County, a heavily developed suburb of Washington, and many landowners are up in arms. New Maryland Gov. Larry Hogan, a Republican, campaigned against this tax in his winning 2014 campaign and has introduced legislation to repeal it, though it’s not clear that will fly with Democratic state legislators. Money still needs to be raised to satisfy the federal pollution mandates, but the methods may change.
Kansas is among a bevy of jurisdictions that allows sale of lower-alcohol beer (the term of art is “cereal malt beverage”) in convenience and grocery stores. But Kansas also taxes “3.2” beer differently -- and there lies the rub. At a liquor store, all products, including, say, a conventional six-pack of Budweiser (with 5 percent alcohol by volume), are taxed at a special rate of 8 percent. At the convenience store down the street, however, ordinary sales tax is levied on the lower-alcohol, cereal malt beverage bottle of Bud. That often ends up being more than the 8 percent alcohol tax. In Pomona, Kansas, for example, the effective rate on the weaker beer would be 9.7 percent. Go figure.
When it comes to taxation, the rule is generally the stronger the booze, the higher the tax (that's why Kansas's beer tax scheme is an anomaly). California follows that curve, but at 100 proof, you better be ready to pay through the nose. Distilled spirits are taxed at $3.30 a gallon if below 100 proof, or 50 percent alcohol. Go over that, like with Bacardi 151, and the tax doubles to $6.60. Maryland also notes the 100 proof point, but it only adds 1.5 cents per proof, per gallon to the relatively modest liquor tax of $1.50 per gallon, taking the Bacardi 151 to $2.27 per gallon.
Entertainment venues pay a business tax to Nevada ranging from 5 percent to 10 percent on admissions fees (and food, drink and merchandise sales) whenever there’s live entertainment going on. There are exemptions, however, including this one, for businesses that provide "instrumental or vocal music, which may or may not be supplemented with commentary by the musicians, in a restaurant, lounge or similar area if such music does not routinely rise to the volume that interferes with casual conversation and if such music would not generally cause patrons to watch as well as listen." So your piano player can play “Feelings” softly and even crack a few jokes, tax-free, for your business. Just make sure they're not funny enough to attract attention.
Want to own a plush or fuel-thirsty ride? That’ll cost you extra in New Jersey. Cars that cost $45,000 or more or have a combined EPA fuel-mileage average of 19 or below pay an additional 0.4 percent on top of New Jersey’s 7 percent sales tax. 
In New Mexico, making it to 100 years has a payoff beyond the chance that Willard Scott will wish you a happy birthday: You don’t have to pay state income tax anymore. If you’ve been physically present in the state for at least six months and a resident of the state on the last day of the year, and you’re not someone’s dependent, you’re eligible. You’ll still need to file, and there are some complications if you’re married and your spouse doesn’t qualify.

See Also:
A CPA says there's only one way to cut down your taxes
One of the most common strategies rich people use to pay less in taxes is something almost anyone can do
7 strategies rich people use to pay less in taxes

SEE ALSO: 8 common tax mistakes that can cost you hundreds

Read Full Story

People are Reading