DIY Taxes or Leave it to a Professional?
I'm a big fan of saving money when possible, and in general a do-it-yourself-er. And when it comes to preparing our taxes, we've done them ourselves the past 5 years or so. The first few years we were married, we had a friend prepare them for us, but then we started using Turbo Tax, and found the process less scary than we previously thought.
Plus, over the years, Turbo Tax has become more and more user friendly and extremely helpful in walking us through our tax situation, asking us questions and helping us make our way toward a completed tax return.
Our filing hasn't been too complicated over the years and we've always felt our situation to be pretty normal and that we could save some money by preparing our taxes ourselves.
This year we very strongly considered using a tax professional. We even had our tax appointment scheduled. But in the end, we decided to do it ourselves. While our situation was more complicated this year, we have a base of history with TurboTax that gave us enough confidence to file on our own.
I think tax professionals are great, and I know a lot of people who love going to their tax pro every year to have their taxes done. I think if it's all you've ever done, you feel the same way about your tax person as we do about TurboTax. You're comfortable with the process.
Either way, there are various tasks needed before you prepare your tax return for the year. Let's talk about all things tax preparation...
Organizing Tax Documents
Each year at tax time, we create a new file folder named "(year) Taxes." Then, throughout the year, as we gather pieces of paper that we might need come tax preparation time, we have one place for all things tax-related.
This saves us tons of time when we actually sit down to fill in the forms. Whether you are doing your taxes yourself, or having a professional prepare your taxes for you, keeping a folder for your tax-related documents is a great idea.
I also keep an email folder labeled "taxes" and a folder in our DropBox account where I can save electronic tax documents as they are collected.
Tax Preparation Checklist
Tax deductions can come throughout the year, so again, it's best to have a folder set up that you can save information as it comes into your possession.
And if you own a business, you'll want to research the types of things you can deduct, and be sure to keep receipts and a log of mileage for those business trips.
I found the most helpful list of forms to be on the look-out for on the TurboTax website. Check out their printable Tax Preparation Checklist PDF. I'll recap here the list of what you'll need.
- Date of birth
- 1099 (-DIV, -INT, -B, etc)
- 1099 G (Income from state and local refunds or unemployment)
- Profit & loss statements
- SSA 1099 (Social Security Benefits)
- 1099 R or 8606 - IRA/ Pension Distributions
- Home business expenses
- Other miscellaneous income
Taxes That You've Already Paid
- State and local Income tax
- Real Estate Taxes
- Property Taxes
- Vehicle Licence Fees
Other Information Needed to Prepare Your Taxes
- Estimated tax payments made throughout the year
- Foreign bank account information
- Direct Deposit information (bank account numbers, routing numbers)
Deciding Between a Professional Tax Advisor and DIY
If you're on the fence about whether to file your taxes yourself, or let a professional take on the burden for you, Here's a a few thoughts on when and how to make that decision easier.
Simple Tax Situation
If you are a young adult, single, un-married, and don't own a home, you have a pretty simple tax situation and could probably do your taxes yourself.
Semi-Complicated Tax Situation
If you're married and have changed jobs, or had some sort of big transition last year, you might think more critically if you want to tackle your taxes yourself, or let a professional handle them.
Complex Tax Situation
If you are married, had a child, pay for your own healthcare, own a business, sold a home, etc. This is a more complex situation and depending on your comfort level and understanding of tax code, you might be better off having a professional help you file your tax return.
It's worth noting that ultimately, the taxpaying individual is responsible for an accurate return. So be sure that no matter what service you go with, you ask what happens if the IRS comes knocking. Ideally, a professional will assist you through that process and pay for errors if they were responsible.
Turbo Tax (not sure about the other online services), does claim to guarantee accuracy and will pay audit fees if needed, and assign a tax professional to walk through the audit with you.
I hope I didn't put you to sleep! Happy tax season!