Andy Dufresne in Shawshank Redemption helping a prison guard with his taxes | Castle Rock Entertainment
When you get your W-2 in the mail each year, it might fill you with a
bit of dread. It’s time to call your accountant, wait in line some
Tuesday night in March, and pay out a hefty chunk of your refund just to
get someone to type your income and taxes paid into some
computer software program. It all seems like a waste of time and money, with a thankless reward of
handing over a check to the government at the end of it all.
Here’s the thing: It doesn’t have to be that way year after year. Yes, you still need to pay the
taxes you owe. As
John Oliver
sagely points out, it’s one of the few reasons our country can operate
at all. However, you might find that it’s just as easy and cheaper to
file your own taxes.
At that suggestion, the dread might creep up even more. But if your
tax situation hasn’t changed dramatically from year to year, and your
financial habits are pretty straightforward, it might be worth it to
give it a
shot.
The worst that could happen is you try to save yourself some money,
only to get confused and give your accountant a call in a few weeks from
now. No harm, no foul. Plus, you might be surprised by some added
benefits of filing the taxes yourself. Here’s why.
1. You get to keep your entire tax refund
A mock tax refund check | Mark Wilson/Getty Images
If you’re paying someone else to prepare your taxes for you, you’re
basically sharing your refund with them. Or worse yet — you didn’t get a
refund and now you’re truly paying out of pocket for the tax
assistance. As
TIME reports,
it costs an average of $261 for someone else to file your taxes for
you. If you think you’re eligible for a bunch of deductions and need
help itemizing everything, maybe a professional’s assistance will be
more than worth that cost. But in many cases it won’t be, and you’ll
have paid someone hundreds of dollars just to tell you that you’re not
getting a check back from Uncle Sam.
2. Many filing tools are cheap or free
Turbo Tax software for sale | Tim Boyle/Getty Images
If you haven’t moved your filing process online, now is the time to do so.
TIME reports
that paper filings can contain errors up to 21% of the time, while
e-filing brings that risk down to 1%. If you earn $64,000 or less per
year,
the IRS
has a free filing form you can use online, meaning you don’t have to
pay any extra money to file your taxes. Sites like TurboTax offer a
number of free resources to help you determine if you’re eligible for
any deductions, along with a general estimation of how much in taxes
you’ll owe.
On top of that, the software you can buy to use on your own gets
updated every year with new tax laws, and they’re generally pretty
affordable. Most tax experts suggest using software from TurboTax or
H&R Block if you’re going to file on your own. TurboTax’s site will
help you determine which of their packages is most likely to help you —
the Deluxe edition is the most popular, and
retails for $34.99. Other options to cover numerous revenue streams or your own business are more complex, but still only cost $90 or less.
H&R Block offers similar software setups for similar prices, ranging from $30 to $90.
Finally, solid tips abound for people who are determined to file
their own taxes. The self-filing software often comes with live help
from CPAs (TurboTax and H&R Block both offer that resource), and
it’s easy to find a list of best practices, like
this one from TIME.
3. You can file whenever you want
A tax advertisement | Justin Sullivan/Getty Images
If you plan to file your taxes on your own, you can have the
paperwork ready to submit your taxes the day your W-2 arrives, if you’d
really like. The early bird gets the worm — or in terms of paying taxes,
the early filer
gets their refund
check faster. Mark a night on your calendar to sit down and complete
everything some night in February, and that evening will be a distant
memory in April when everyone else is stressing about getting their
returns done on time.
You might use a little more brain power submitting your own return,
but the reality is that you’ll be using the same forms and information
that you would otherwise collect in a folder for the staff at the
H&R Block pop-up across town. Why not sit down and file yourself,
when your medical expenses and charitable donations are fresh in your
mind?
4. You’ll grow in financial awareness
Couple figuring out their financies | iStock.com
Yes, this benefit is more abstract than the others, but no less
important. If your goal is to get a better handle on your finances this
year, there’s no better way to do that than to file your own taxes.
You’ll get a snapshot of exactly how much money you brought in, how much
you spent going to the doctor, paying for child care, and other major
purchases, and you’ll see exactly where you fall in terms of paying your
share to the government.
“You see your assets, expenditures, and income at a detailed level for the entire year,” writes Mike Jelinek for
The Simple Dollar.
“Doing your taxes on your own also helps you understand what you can
write off. You learn what receipts to keep and what to discard. Products
like H&R Block ask you detailed questions as you work through your
taxes. It makes you stop and think about what has happened to you in the
past year financially, and even more so in your overall life.”
When to hire a professional
A woman meets with a tax preparer | Andrew Burton/Getty Images
In the past two years my husband and I have gotten married, received
W-2s from five separate companies, and needed to file taxes in four
separate states. Needless to say, it was a bit more than we were
prepared for on our own — especially since neither of us had filed our
taxes on our own up to that point.
That’s not to say that you always need to throw in the towel in light of more complicated taxes — Jelinek at
The Simple Dollar
makes the case that you can file your own even if you move states and
have your own business. However, it was enough for us to have someone
else be in charge for a few years.
Being self-employed, owning rental properties, having complicated
stock holdings, or even adding children to the mix can be reasons you
might want a trained professional taking a look at your return for you.
If you earn more than $200,000 a year, it might also be a good idea.
Business Insider
reports that your likelihood of being audited goes up after this
threshold. Not only will a tax professional set your mind at ease about
everything being done correctly, but most also offer audit assistance
should the IRS come knocking.
Perhaps even more important is when doing your own taxes is too much
of a hassle to even think about. If you’re stressed just downloading
TurboTax, let alone pulling out your W-2 by yourself, it might be worth
it to get some reinforcements.
The key is to remember two things. One: Not everyone sitting at a pop-up desk
is trained with taxes. If you have a truly complicated situation, go the extra mile to hire a tax lawyer, CPA, or enrolled IRS agent. An online
Tax Preparer Registry
can tell you if the person you choose is actually licensed to look at
your financials. And two: You can still be an informed taxpayer. Look
into the deductions you’re eligible for ahead of time, have an
estimation in your mind, and look over your return in full to learn as
much as you can about your own financial picture. That way your can ask
the tax preparer informed questions, and maybe even catch a thing or two
yourself. You care the most about your own taxes, so know as much as
you possibly can.
Culled from Money & Career Cheat Sheet:
