This article is presented for educational purposes only. For specific advice, please consult with a qualified tax professional.
If you make any kind of income, no matter how much or how little, you are required to pay taxes. If you work for someone else, the majority of taxes you need to pay are taken out of your paycheck. But if you work for yourself or have investment accounts and assets, you’ll need to figure out how much you owe on your own.
The question then becomes not Do you need to pay taxes?, but Do you need help figuring out how much you owe? And, if you’re fortunate, figuring out how much you’ll get back.
There are two options when it comes to filing your tax returns:
1. Prepare yourself using tax software or with the help of the IRS website. Tax software usually runs about $20 for a basic version up to about $100 for a more complex version which you’ll need if you have a lot of assets or are self-employed. If your filing is very simple and straightforward, most tax software has a free version you can use online.
The IRS doesn’t charge you to file your taxes and provides the forms you need. They encourage you to e-file and print a copy for your own records. If you make under $66,000/year (gross adjusted income), they’ll refer you to a site where you can file for free like TurboTax or H&R Block. If you make over $66,000/year, you can use the forms available on their site. If you’re using the free versions, take the extra time to check your debt/refund status on more than one. You may find that one offers deductions that are available to you that another doesn’t.
2. Hire a professional. Keep in mind that if you choose this option you should only choose to work with a tax lawyer, a CPA, or an IRS agent as they are the only ones qualified to help you and file on your behalf. Depending on how complicated your return is to file, you can expect to pay anywhere from $100 to $300 for a professional to handle it for you.
Here’s how to determine the best option for you:
Prepare your own taxes if:
- Your filing is simple and straight-forward with no dependents, investment accounts, or significant assets and you don’t own a business. The free versions are perfect for you.
- You’re starting early and have plenty of time along with patience to deal with figuring it out. Expect a basic form to take a minimum of an hour or two and up to 10-15 hours depending on your needs.
- You feel comfortable with it. If you feel like it’s something you can manage with the help of software and the IRS site to answer questions then do it.
Hire a tax professional if:
- You made over $200,000 for the tax year. Your deductions may be complicated and may require the help of a professional.
- You experienced a major life change. If you got married, had a baby, bought a house, or even got a new job these can all have an impact on your filing status and deductions.
- You have a complicated situation or plan to itemize. If you have dependents, investments, and assets or own your own business, it’s best to work with someone who can find all the deductions you’ll qualify for.
- You don’t have time or don’t trust yourself. It’s better to get it right the first time so you don’t have to deal with corrections. If you’re not sure what you’re doing, hire someone.
Take the time to review your situation and make the decision about doing your taxes yourself or hiring a professional each year as your situation may change.