When it comes to filing taxes, online filing has made a huge difference. For both tax professionals and people filing their own taxes, online filing has made submitting tax returns much easier, along with cutting down the lines in post offices for people mailing their tax returns before midnight on April 15.
But just because you can file online, it’s still important to understand whether you’d be better off using a tax professional or filing taxes yourself. For those asking themselves, “How should I file my taxes?” here are some of the biggest reasons why one method of filing may be a better fit for your unique tax situation.
Why Would I File Taxes With a Tax Professional?
The IRS reports that 61 percent of the people who filed taxes online in 2016 hired a tax professional. So obviously there are a number of situations when hiring a tax professional can save you money and ensure you’re filing your taxes correctly, including:
- Starting or Running a Small Business
Many small businesses do their own taxes as a way to save money. However, business owners may not know enough about the deductions and credits that business ownership allows. In these cases, you may end up paying more in taxes than you’re required to. A tax professional can help prevent that. For new business owners, starting out on the right foot with your business can help ensure its continued success. Consulting with a tax professional can help make sure you’re collecting the right taxes and reporting your income correctly.
- A Corrected Return
If the IRS rejects your return due to errors, a tax professional can help you correct your return and re-file properly. Plus, a tax preparer is trained to watch out for common errors up-front so they’re prevented and your return and refund aren’t held up to begin with.
- Marital Status
When filing your tax return, the marital status you report should be based on whether you are legally married on December 31 of that tax year. A tax professional can help you determine whether you’re better off filing joint or separate returns with your spouse. If you’re in the process of getting a divorce but it’s not yet official, it’s especially important to consult with a tax professional to ensure you won’t be responsible for your spouse’s tax liability.
- Investments and Foreign Assets
If you own investments such as real estate, vacation homes, rental property, or stocks and bonds or you’ve bought a new home this past year, a tax preparer can help you correctly report income and assets, both within the U.S. and abroad, and determine if you owe any taxes on those investments. The laws and tax rules for investments are constantly changing, and tax professionals train year-round to stay up-to-date.
If you’ve adopted a child during the tax year, the IRS allows you to claim a tax credit of up to $13,570. However, the tax credit is non-refundable, which means you can only claim as much as you owe in taxes that year. For example, if you owe $10,000 in taxes, you can only claim $10,000 of the adoption tax credit. However, any leftover credit can be rolled over for up to five years. Using a tax professional will ensure you’re claiming this credit correctly so you receive the full amount.
- Death of a Loved One
The rules are different for inheritance from a family member or friend and assets that come from the death of a spouse. Without a tax professional, you may end up paying more in estate taxes than you should or incorrectly calculating the cost basis for those assets.
- Safety & Security
With the presence of online hacking and cyber security issues, online tax filers have experienced data breaches and tax return fraud. Most times it’s safer to file with a tax preparer who works with a protected, closed system that is more secure against outside criminal agencies.
- Peace of Mind
Sometimes the Internet can be a scary, unfamiliar place, especially for those with limited computer knowledge or skills. As opposed to a faceless website, a professional tax preparer is a real-life person we can see and speak with — someone who’ll answer our questions and reassure us that everything is being done correctly.
The IRS isn’t very tolerant of returns that are filed inaccurately or incorrectly. Even simple mistakes like online typos or mistyped numbers can cause delays in filing and getting a refund. Professional tax preparers are experts at detecting potential errors and correcting them before the return is filed. Professionals also know the current amounts for deductions and credits, so you can be sure you’re getting the biggest refund you’re entitled to.
Why Should I File My Own Taxes Online?
Do-it-yourselfers have the potential to save themselves the cost of having someone prepare their taxes for them. For savvy tax filers who are experienced and confident enough to file online, there may be no need to consult a tax professional. Here are a few key reasons why filing taxes yourself online could be the right option for you:
- Costs Less
Filing taxes yourself online will usually cost at least $100 less for a simple, basic return than paying for a tax preparer to do them for you. And if you have a more complex return with multiple forms and deductions, the price difference increases even more. However, the more complex your tax return becomes, the more likely you’ll need the advice and experience of a professional tax preparer so you don’t miss out on hundreds or even thousands of dollars’ worth of deductions and credits by filing yourself.
- Saves Time
When you file online, you don’t have to travel to an office or leave your home. Plus, you don’t have to wait for your tax preparer to complete your taxes and get back with you with the results, and then wait again to file the return. But, if you file online yourself incorrectly or need to amend your tax return, it could cost you more time and headaches than it’s worth. The confidence, convenience, and experience of a tax preparer will expedite the process of getting an accurate tax refund as fast as possible. Some tax preparers even have refund advance opportunities that allow you to get your refund faster than filing online.
- Quickly Access Last Year’s Info
When filing taxes yourself online year after year, your previous information will be stored in the program. If your tax information doesn’t change each year, then you won’t have to re-enter everything again. But if you switch online tax services or don’t purchase their premium products, your historical tax returns could be deleted from their archives. On the other hand, professional tax preparers are required by law to keep your tax returns on file for at least three years so that your previous information is readily available.
- File Instantly and Get Your Refund ASAP
Once you’ve completed the online tax forms, you can file your taxes right away. You may even be able to have your refund deposited directly into your checking account. You don’t have to wait to hear back from your accountant or call and ask if your taxes have been filed yet, and you don’t have to wait for a refund check (if you’re getting one) in the mail. However, many tax preparers offer tax refund advances that give you access to your money even faster than filing online and waiting for the IRS to release your funds.
If your taxes are straightforward, filing taxes yourself can be a simple, cost-effective option. However, there are many circumstances when using a tax professional can help. Professionals are trained to stay up-to-date on the most current tax laws and changes. And if you’re eligible for many deductions and credits, paying a tax preparer could save you money in the long run, especially if it prevents you from missing an important money-saving deduction.
For more information on all things taxes, contact Liberty Tax® directly at 1-877-at-Liberty, or visit a conveniently located Liberty Tax® office near you. For real-time updates, follow Liberty Tax® on Facebook and Twitter.