Choosing To File My Own Taxes Rather Than Hiring An Accountant To Do It For Me
Published 1/23/08 (Modified 3/22/11)
I have this policy for myself where I refuse to pay someone for a service I can easily perform myself with reasonable effort. For example, if I lived in a house with a front and backyard lawn, rather than pay someone to handle the landscaping, I'd rather mow the grass and trim the hedges on my own, so long as the time and effort spent aren't too prohibitive.
Online and Software Tax Preparation Programs Make It Easy To Do Your Own Taxes
When it comes to taxes, I've traditionally done my own tax preparation work. Ever since I started working and generating income, I've always filed my own tax return. Initially before I gained a better understanding of tax matters, performing my own tax accounting work was difficult. But then along came extremely useful online and software tax preparation programs like Intuit's TurboTax and H&R Block's TaxCut. With the assistance of software based tax preparation programs, I was able to easily complete my own taxes with comparative ease. The advantages of using tax preparation programs are obvious - you simply compile all of your tax papers and respond to the series of tax related questions proposed to you by the program of your choice. The software asks you a whole slew of questions to determine what category you fall under and what type of tax deductions you qualify for. For those that have easy tax returns, I recommend using TurboTax or TaxCut to not only help you save money but to help you get educated and empowered.
Learn More About Your Own Finances And Become Better Educated On Important Money Matters
I think the vast majority of people are intimidated by the IRS and the voluminous tax laws that surround its presence. Most people have a general and basic understanding of the tax code and understand that income is taxed and that there are such things as deductions that help to reduce your tax liability. But beyond that, most layman don't know the specifics - and tend to avoid anything to do with taxes like the plague - even lawyers. When I attended law school, the massive majority of students avoided tax law courses. Bucking the trend, a small group of students including myself embraced tax and went on to take most of the complicated tax law courses available - everything from individual, to corporate, to partnership tax. Of course, after taking all of those courses, I later realized why even studious individuals avoided the subject - there are a lot of numbers involved and sometimes for more complex transactions, calculations can get somewhat daunting.
However, with the wealth of information available on the internet and the ability to utilize tax preparation software today, regular individuals don't need to remain in the dark on such an important matter. Rather than diligently gathering all of your assorted tax receipts together and driving them down to your certified public accountant with a big check, why not consider filing your own taxes? Of course, this is only advisable to tax novices who have relatively simple tax issues. If your income sources are straight forward and you don't run your own home business or otherwise own complex financial investments, you're likely a good candidate to file your own tax return.
There Is No Magic Involved - Just Self Financial-Empowerment
The biggest problem with outsourcing your tax preparation work out to someone else is that you are kept in the dark and remain clueless about a very important document in your financial life. If you spent just a few moments doing it yourself with the assistance of tax preparation software, you'll gain a needed appreciation of your financial status as well as learn how to better improve your tax situation in the future. Most people seem to think professional tax preparers are some sort of magicians who possess the ability to make financial sense out of chaos. If you put a bit of extra effort into trying to understand your own tax numbers better, you'll see that there is no magic involved. You might also come to realize that you've been wasting your money on expensive professional accountants all this time. Remember, it's in your tax preparer's own financial interest to leave you in the dark about specific tax issues to keep you dependent on them continuously for the service they provide.
Along the same lines, I always find it remarkable when people say that they don't mind paying their accountants the hefty tax preparations fees to do their personal tax returns because the fees are tax deductible, and using this self proclaimed fact to support their decision to outsource the work. Now where did they get this information - their self serving accountant? Yes there is a place for tax preparation fees under Miscellaneous Expenses on Schedule A, however only the amount that exceeds 2% of the tax filer's adjusted gross income is deductible. Unless their tax preparation was exceedingly complex and very expensive, most ordinary people would not be able to qualify for this itemized deduction to reduce their taxes.
When you don't try to understand your own personal tax return and instead depend on someone else's knowledge, you grow dependent on them and give them more credit than they deserve. For example, when someone hands their accountant a stack of medical bills thinking that the accountant will process the bills and deduct everything to reduce the overall tax liability, would it surprise you if the accountant chose not to do anything with these bills? That's because you would have needed to have suffered a major illness or medical condition to have accumulated sufficient medical expenses to make it tax deductible. Only medical expenses in excess of over 7.5% of the adjusted gross is deductible. Of course your accountant likely may not tell you all that - preferring to keep you mesmerized and dependent on his or her magical tax preparations skills.
If some strange auto mechanic told you to come back with your car and get an oil change every 3,000 miles, should you trust him right off the bat? Of course not. You would either get a second opinion or go perform some online research to verify that you're not being taken for a ride. Doing your own personal tax return works in the same way. Remember, knowledge is power, so please empower yourself.