Anyone with a relatively complicated tax situation can benefit from hiring a professional. If you own a business, for example, and have lots of different expenses to deduct, it may be worth paying someone who can help you navigate your return, maximize the tax breaks you're entitled to, and avoid errors.
According to the National Society of Accountants' 2018–2019 Income and Fees Survey, the average tax preparation fee for a tax professional to prepare a Form 1040 and state return with no itemized deductions is $188. Itemizing deductions bumps the average fee by more than $100 to $294.
Deciding whether to pay someone to prepare your tax return depends a great deal on your confidence in crunching numbers and your understanding of tax rules. You could be fine forging ahead on your own if calculations are your thing, but you might want to pay someone to prepare your return otherwise.
The IRS program would have required anyone who is paid for preparing or assisting in the preparation of a return to obtain a preparer tax identification number, pass a qualifying exam and complete ongoing education requirements. Most certified public accountants and financial planners already have the ID and training.
Preparers may manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit. In some situations, the client, or taxpayer, may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on his or her tax return.
If you think you've been scammed by a tax preparer, report it to the IRS by filling out two forms: Form 14157, which registers your complaint; and Form 14157-A, if you suspect the preparer filed or changed your return without your consent.
36.8% Also Hire a Professional to File Their Taxes
Hiring an accountant to file taxes is almost as common, with 28.5 percent of people saying they prefer this method for filing taxes.
More than 43.6 million Americans prepared and e-filed their own income tax returns in 2013, up 4 percent from the year before, according to the IRS. In addition to being more affordable than a storefront or accountant, online and mobile solutions have made doing your own taxes exceptionally easy and fast.
H&R Block Free Online tax filing service offers more for free than TurboTax Free Edition. Students will love the fast, easy features, while parents can get info about the Earned Income Credit and Child Tax Credit, including the IRS letters needed before filing.
TurboTax is the most expensive option for filing taxes online, but offers a high-quality user interface and access to experts. It's especially valuable for self-employed filers who use QuickBooks integration.
Business Taxpayers
The IRS says they spend 13 hours preparing their returns, with six hours of the total used for recordkeeping and two hours for tax planning. Taxpayers with their own businesses spend far more time on tax preparation than nonbusiness taxpayers.
If you fail to file your taxes on time, you'll likely encounter what's called a Failure to File Penalty. The penalty for failing to file represents 5% of your unpaid tax liability for each month your return is late, up to 25% of your total unpaid taxes. If you're due a refund, there's no penalty for failure to file.
The Internal Revenue Service offers free tax help by computer and telephone and in person. The IRS helps taxpayers get forms and publications and answers a wide range of tax questions. The IRS can also help individuals find free tax preparation services.
As of the 2021 tax year, the minimum gross income requirements are: Single and under age 65: $12,550. Single and age 65 or older: $14,250. Married filing jointly and both spouses are under age 65: $25,100.
There's a reason so many tax preparers pop up around filing season: There's money to be made. Some of them are using some unscrupulous methods to get it, including overcharging people who could have had their taxes prepared for free.
The IRS Penalizes Tax Preparers Who Make Mistakes.
If the IRS determines that your tax preparer made a mistake, this may help you in seeking to avoid fees, penalties, and interest (or having these costs paid by your tax preparer).
Advantages of TurboTax
Lower costs, since you're using software instead of professional advice. Faster turnaround time, since you can sit down and do it yourself – although you may spend hours completing it. Ease of use, because you answer the questions and the algorithm handles it.
Time flies when you're having fun, but while tax preparation may not be anyone's idea of a good time, it doesn't have to be a slow, painful process either. You might think completing and filing your own income tax return would be more difficult than handing everything over to a paid tax preparer.