The question, “should I pay someone to do my taxes?,” is kind of like asking “should I pay someone to do my plumbing?” there are people who enjoy hands-on home improvement projects and others who are swift in hiring a professional to fix the leaky pipe.
When it comes to preparing your own taxes, many dare not try and others wonder if they can do it themselves. There is no right or wrong answer.
The best part of preparing your own tax return is the cost: FREE.
Well, not exactly “free,” as the IRS has estimated that on average, a person spends 13 hours preparing a tax return. The amount of time it actually takes from beginning to end does vary from person to person, and their knowledge and experience as well as the complexity of the return, is a factor.
Every year BILLIONS of DOLLARS go unclaimed on tax returns.
For 2015, it is estimated that only 36% of tax returns were done by a professional. This number is just slightly higher than the number who used a digital tax preparation tool (such as TurboTax).
In some cases, digital tax software will get you close to, if not all, of your maximum refund. However, with billions of dollars unclaimed each year and an understanding of how software and algorithms work (lets not even go there), it is a safe assumption that the majority of unclaimed refund money is a result of digital “DIY” tax software.
So….. Should I Pay Someone To Do My Taxes?
If you feel comfortable filing your taxes on your own and have the time, then by all means, go ahead. However, there are two things you should consider first.
- Who is liable for mistakes? By various sources, It is estimated that between 42-61% of tax returns contain errors. Errors can be costly and time consuming.
- Are all of my deductions and expenses accounted for? There are billions of dollars unclaimed each tax year. Some of it may be yours.
Software is not (yet) programmed to be capable of “thinking outside the box.” Human tax preparers are capable of discovering, identifying and analyzing potential opportunities to save you additional money that software cannot.
Computers and software do not sit down taking time to look over your documents and information. They are only capable of calculating the information that YOU put into THEM.
Yesterday, I was encouraged by someone who had used online tax software to obtain a refund estimate to take a look at their documents “just to see”.
“I used the best company’s software to do it so I know it’s right”.
The doubt was there. And that is why I was encouraged to look, anyways. After spending just a few minutes reviewing the form, I responded, “Yes. The refund is correct… but your second W-2 shows me that you lived in another state. Did you know that you can deduct some moving expenses?”.
My client was unsure.
In the majority of cases, an individual cannot claim moving expenses. However, if a person moves to a new location because of work and meets the following two requirements, then deductions may be claimed.
- Meets the time test
- Meets the distance test
Needless to say, I was asked to file the taxes for him. Including a few other minor adjustments, the client received a nearly additional $350 on his return. His additional expense (preparation fees) was only $59.
“This is better than free”, he said