Whether You Hire a Pro Comes Down to Price and Your Comfort Level

Asking someone to do your taxes can be a little like asking for help with home improvement tasks. Some people enjoy do-it-yourself (DIY) projects—they have the knack, and would rather save money and keep their business to themselves. Meanwhile, others are happy to outsource these time-intensive chores to a professional, who may also do a better job.

It's the same when it comes to preparing your own tax return. Whether you decide to pay someone depends on your confidence in crunching numbers and a basic understanding of tax rules, plus your willingness to put in the time.

You're probably fine forging ahead on your own, if calculations are your thing, though you might want to keep a tax professional on speed-dial because you'll probably have at least a few questions as you go along. Otherwise, you might want to pay someone to deal with your return, especially for the 2019 tax year.

You might want to enlist the help of a professional to prepare your 2019 return, even if you consider yourself to be pretty tax-savvy, because the Tax Cuts and Jobs Act (TCJA) made some sweeping changes to the tax code when it went into effect on Jan. 1, 2018.  

Standard deductions more or less doubled after the law went into effect, and this might make itemizing less attractive to some taxpayers who have chosen that route in the past, particularly because changes were made to quite a few itemized deductions as well.

For example, the state and local property tax deduction (SALT) has been limited to $10,000 combined.  The casualty and theft loss deduction have been repealed, except for taxpayers who suffer a loss due to a disaster area declared by the U.S. president.  Personal exemptions have been eliminated from the tax code as well.

Thus, you might be better off hiring a professional to make sure your return is right—particularly if itemized deductions are a high priority for you.

One nice thing about preparing your tax return yourself is that it can be free. If you are an expert and choose to do it the old-fashioned way with a paper return and a pen, you will pay nothing. Many people also choose DIY tax preparation software through companies like TurboTax or H&R Block, which have very low fees and sometimes free deals. These services usually offer tax support and advice.

Preparing your own returns can take a lot of time, however, along with a good deal of planning and patience. The IRS estimates that the average person will require about 11 hours to prepare a 2020 tax return.  Of course, the amount of time you'll spend will depend on the complexity of your financial situation.

If you decide to prepare your tax return in paper form, start by downloading the relevant forms and instructions from the Internal Revenue Service. And don't forget to get a state return from your state's tax department website while you're online.

You may be limited to using Form 1040 in 2020 to prepare your 2019 return. You'll no longer have the option of filing Form 1040-EZ or 1040-A—another major change brought about as an offshoot of the TCJA. The IRS decided to "streamline" tax returns to conform to the new law and it created a new Form 1040 to replace the older 1040, 1040-A, and 1040-EZ. It's shorter, but it comes with multiple attachments that all but the simplest of tax situations will probably require—another good reason why you might want to touch base with a tax professional this year.  

If you get stuck and aren't sure where to enter information, check out the handy Where to Report Certain Items chart near the front of the 1040 instruction booklet you'll find online.

You can look up various documents, such as Form W-2 or Form 1099-B. The IRS has promised that the information will be updated to accommodate the 2019 tax return. A chart will tell you which forms and line numbers are relevant to your tax situation.

Your best option might be to use tax preparation software. Using the software is almost like having a virtual accountant sitting by your elbow as you work. Most reputable programs will tell you what would happen if you contributed to an IRA, if you gave more money to charity, if you earned more money, or if you lost money in the stock market. You can see how entering numbers into different parts of the software can make an impact on tax calculations and tax planning.

You have several options to choose from, including free and paid software. Some of the more well-known software providers include TurboTax, H&R Block, and TaxAct. Prices range from free to $100 or more for premium versions or more complex filings. Free software is often reserved for lower-income individuals through the IRS Free File Alliance.  

If you do choose to use tax preparation software, you can expect that it'll be up to speed with the most up-to-date tax code changes and updated 1040 form by the time you prepare your 2019 return in early 2020.

The majority of Americans opt to hire an accountant or other tax professional to prepare their tax returns because they want to be sure that it's done right. They don't want to hear from the IRS after they file.

Be sure to find a tax professional with a level of experience and specialization that's suitable for your needs. Some accountants are general practitioners. Others specialize in things such as helping Americans who live overseas or self-employed individuals in a variety of businesses. 

The two most popular professional credentials for tax preparers are certified public accountant (CPA) and enrolled agents (EA). CPAs are trained in a wide range of accounting procedures and some of them specialize in tax preparation. EAs are trained specifically in tax procedures.  

In 2017, the National Society of Accountants reported that tax professionals charged an average of $176 for a regular Form 1040 with no itemized deduction and a state return during the 2018 tax season. The price jumped to about $273 for those who itemized your deductions, and it was as high as $457 for self-employed individuals who had to file a Schedule C.  You can expect prices to be higher in regions with higher costs of living or if your tax return is particularly complex, and possibly because of the complexity of the tax law changes.

You can also find free tax preparation services through local non-profits if you qualify. The Volunteer Income Tax Assistance (VITA) provides free tax preparation services to people who earn $56,000 or less per year as of 2019.  

Those who are age 60 or older can find free tax preparation services through Tax Counseling for the Elderly (TCE) and the AARP Foundation's Tax-Aide programs.     These programs set up space during the tax season at local community centers, colleges, or libraries.

Your final decision can be influenced by many different factors. Overall, keep in mind you'll still have to do a lot of the work yourself even if you hire a professional.

Start gathering and organizing your 2019 tax documentation as soon as you can so you're prepared when it's time to file.

It's up to you to gather all your tax-related documents. The sooner you start, the more information you will have to make the best decision. For most people, it will come down to cost, so creating a list of pros and cons detailing your expenses can be prudent.

Regardless of which route you take, you will also want to save time for reviewing your tax return when it's completed for accuracy. A professional will certify accuracy and help you down the road in a tax audit, but the return filing is still only as good as the information you provide. Once you file, you will also want to keep a copy of your tax return and the related documents for at least three years in case the tax agencies have any questions. 

Source: https://www.thebalance.com/should-i-pay-someone-to-do-my-taxes-3192866