5 Reasons Filing your Own Taxes Can Cost You
Introduction: Why would someone choose to prepare their own taxes instead of hiring a tax professional?
There are a few reasons why someone might choose to prepare their own taxes instead of hiring a tax professional. However, preparing and filing your own tax return can cost you. We will explore why filing taxes on your own could be dangerous later in this article.
But first, why would you want to file your taxes without the help of a trained tax professional?
Cost
Hiring a tax professional can be expensive, and some people prefer to save money by preparing their own taxes. However, preparing your taxes can be time-consuming. And it may not always result in the most cost-effective solution, especially if you make mistakes that result in penalties and interest.
Simplicity
Suppose you have a straightforward tax situation, such as only having a single source of income and no deductions or credits to claim. In that case, you may feel comfortable preparing your own taxes.
Control
Some people may prefer to prepare their own taxes because they want complete control over the process and to ensure that their tax return is accurate and complete.
However, if you are not a trained tax pro, the resultant tax return may not be as accurate as anticipated. If this is the case, you may be penalized by the IRS.
Confidence
Some people may feel confident in their ability to prepare their own taxes and enjoy the process of doing so.
However, even if you feel confident about your ability to prepare tax returns, it is essential to consider all the factors involved when deciding whether to prepare your own taxes or hire a tax professional.
In general, it may be a good idea to hire a tax professional if you have a complex tax situation, if you are not confident in your ability to prepare your own taxes, or if you want to be sure that your tax return is accurate and complete to avoid any potential penalties or interest.
When should you NOT file your own taxes?
There are several situations where it may be a good idea to hire a tax professional rather than preparing your own taxes. In such cases, you must strongly consider hiring a tax professional.
Here are a few examples of when you should not file taxes on your own:
You have a complex tax situation.
Suppose you own a business, have rental property, or have significant investment income. In that case, your tax situation may be more complex than someone with only a few income sources.
In these cases, it may be more beneficial to hire a tax professional with the knowledge and expertise to help you navigate the complexities of your tax return and ensure that you are taking advantage of all the credits and deductions you are entitled to.
You are self-employed.
If you are self-employed, you are responsible for paying both the employer and employee portion of your self-employment tax. Calculating this tax can be complicated, and it may be worth hiring a tax professional to help you accurately calculate and pay this tax.
You have experienced a significant life event.
Suppose you have experienced a significant life event such as getting married, having a child, or buying a home. In that case, it may be beneficial to hire a tax professional. They will help you navigate the changes to your tax situation and ensure that you take advantage of any credits or deductions you may be eligible for.
You have received a notice from the IRS.
Suppose you have received a notice from the IRS regarding a tax issue. In that case, hiring a tax professional to help you resolve the issue and avoid any potential penalties or interest may be a good idea.
Ultimately, whether to file your own taxes is a personal decision that depends on your individual circumstances and needs. If you are unsure whether it is a good idea to prepare your own taxes or hire a tax professional, consult with a tax professional to determine the best course of action.
Do you feel you need to hire a tax professional to file your 2022 taxes? You can hire me by visiting this link.
Now let’s look into the reasons you should not file your own taxes.
5 reasons filing your own taxes can cost you
- Mistakes on your tax return can lead to penalties and interest.
If you make a mistake on your tax return, such as failing to report all your income or claiming a deduction or credit you are not entitled to, the IRS may impose penalties and interest on the amount you owe. These penalties and interest can add up quickly and significantly increase the cost of filing your own taxes.
- You may miss out on credits and deductions.
You may not be familiar with the tax laws. You may also not have the time or resources to research all the credits and deductions you are eligible for. This can lead to you missing out on opportunities to reduce your tax liability.
This can end up costing you more in taxes than if you had used a tax professional. Remember that a tax pro has the knowledge and expertise to help you maximize your deductions and credits.
- You may not be able to value your assets accurately.
If you own assets like stocks, mutual funds, or real estate, accurately valuing them for tax purposes can be complex. If you make a mistake in valuing these assets, it could result in overpaying your taxes.
- You may not be able to calculate your self-employment tax accurately.
If you are self-employed, you are responsible for paying both the employer and employee portion of your self-employment tax. Calculating this tax can be complicated, and if you make a mistake, it could result in underpaying or overpaying your taxes.
- You may not have the time or resources to devote to preparing your own taxes.
Preparing your own taxes can be time-consuming and require a significant amount of effort. If you cannot devote the time and resources to prepare your taxes properly, it could end up costing you more in the long run.
Conclusion: Who is the best tax preparer to hire for individual filers?
There are several types of tax professionals who can assist with preparing individual tax returns, including certified public accountants (CPAs), enrolled agents (EAs) like me, and tax attorneys.
Here are some factors to consider when choosing a tax preparer:
Credentials
Look for a tax preparer who has the appropriate credentials for your needs. CPAs are licensed by the state where they practice and have passed a rigorous exam. EAs are licensed by the IRS and have passed a comprehensive exam. Tax attorneys are licensed attorneys who have passed the bar exam and specialize in tax law.
Experience
Consider the tax preparer’s experience and how long they have been in business. A tax preparer who has been in business for a long time and has a lot of experience may be more knowledgeable and reliable than a newer tax preparer.
Fees
Make sure you understand the tax preparer’s fees before engaging their services. Some tax preparers charge a flat fee, while others charge by the hour. Make sure you are comfortable with the fees and that they are reasonable for the services being provided.
References
Ask the tax preparer for references or testimonials from previous clients. This can give you an idea of the quality of their work and their level of professionalism.
Ultimately, the best tax preparer for you will depend on your individual needs and circumstances. It may be helpful to meet with a few different tax preparers to get a sense of their credentials, experience, and fees before deciding.
Suncrest Financial Services: Our Tax Preparation Services
We help hundreds of taxpayers file accurate and timely returns each year. And you can also hire us to prepare your 2022 tax return (to be filed by April 2023). We are already taking clients,
Visit this link to choose our tax preparation services.
Frequently Asked Questions
- Can I file my taxes for free by myself?
Yes, you can file your own taxes. Filing your own taxes for free is a good option for individuals with a simple tax situation who are comfortable preparing their own taxes. But, if you have a more complex tax situation or are not confident in your ability to prepare your own taxes, consider hiring a tax professional to help you file your taxes.
- Should I do my own tax return?
You can do your own taxes if you feel that it is the right option. However, you may stand to lose various deductions and tax credits because of a lack of tax knowledge (such as that which a tax professional can help you with). When you lose deductions and credits, you pay more taxes in general.
- What are the pros and cons of filing your own taxes?
Filing your own taxes is generally free – you pay no one because you are the one who is filing. However, the cost could be bigger for someone who could have benefited from tax credits and deductions because you end up paying more taxes when you could have hired a professional to help you pay less on nothing at all to the IRS.
