One of the biggest questions we see every tax season: do you have to pay someone to do your taxes?
Getting a tax refund is a big part of this question. Most people are hoping for a refund and can’t wait to get their direct deposits (who gets a paper check anymore?).
But taxation can be tricky, or so the mainstream media tells you, along with advertisements and more. So, should you pay someone to do your taxes?
As with most things, the answer is: it depends.
It depends on a number of factors and we analyze whether you should pay someone to do your taxes or whether it makes more sense to do it yourself. And if you’re going to pay someone, who should you pay – it makes sense to use one of these big companies like H&R Block.
Here’s what you need to know.
When it makes sense to do your own taxes
For many Americans, doing your taxes makes sense. Honestly, the actual act of doing your taxes is pretty easy (especially if you’re financially organized). If you can read a form and enter information on a computer screen, you can do your taxes.
There are plenty of free tax software options if your income is under $79,000, and even if it’s more, tax software prices are very reasonable (much less than a paid tax professional). When we compared the top tax software options, the average price for paid versions was about $60 for itemized deductions. And in our survey of how much Americans paid to file their taxes — the average was about $50.
If you have a simple tax situation, it makes sense to do it yourself because it will be much cheaper. So, what does a simple tax statement look like? Here are some common examples of when it makes sense to do it yourself:
- You are single, you have a job and not much else
- You don’t have a business
- You don’t have complicated investments
- Have the patience to sit down and do it
You should also have a basic understanding of how taxes work. If you haven’t yet, because it might be your first time filing your taxes, take it easy and learn what you’re doing – it’ll make the next few years really easy.
When should you pay someone to do your taxes?
If you are going to pay someone to do your taxes, you should be looking for help that is MORE than just data entry. Yes, while a tax preparer is there to actually file your taxes – the preparation process can involve a lot of moving parts. And that expert you’re going to hire should be able to help you navigate it.
Some common examples of when it makes sense to pay someone to do your taxes:
- You make over $200,000 a year
- You had a life event, such as marriage, divorce or children
- You started a business
- You have complex investments such as partnerships or trusts
- You have questions you can’t answer
The goal of paying someone to do your taxes should be twofold. Of course, do your actual taxes. And get help and advice. Some common areas where a paid professional can help include:
- Optimizing your accounts to reduce your tax burden
- Making sure you qualify for credits and deductions or get all the credits and deductions you qualify for
- Keep accurate records for complex investments such as partnerships
- It helps you optimize your business structure to reduce your taxes
So when deciding whether to pay someone, keep these ideas in mind when discussing your situation.
Where should you do your taxes?
Now that you know when it makes sense to pay someone to do your taxes, where should you do it?
It’s important to note the cost to fulfill your taxes. For a basic return (which you will probably have to do yourself), it will start at $100 or more. According to a recent study by the National Society of Accountants, the average cost to process your taxes is $261. If you’re looking for help with a myriad of financial matters, you can expect to pay around $350-$500 to get your taxes done, but that includes advice.
For most people who “need” to have their taxes done by a professional (versus those who just do but don’t need to), a CPA usually makes the most sense. But even if you’re going with a company like H&R Block, you want to make sure you know who you’re working with and if they’re a good fit. Some unscrupulous tax professionals have a tendency to mislead.
The IRS requires all tax preparers to register, and you can find their information online: The National Directory of Registered Tax Preparers and Professionals.
Make sure you check who you work with, no matter the company – big or small, public or private.
Also, make sure you develop a good relationship with this person. They should be able to help you with your tax questions. If they can’t answer you or help you, it’s a sign you need to find someone else. If they just want to do data entry, they’re not someone you should pay several hundred dollars to.
If you find that you owe a lot of taxes (or owe back taxes), you may want to consult with a tax debt professional. Check out Sovable and get help >>
Last reminder
Finally, remember, even if you pay someone to prepare your taxes, you are personally responsible for the accuracy of the information provided. The taxman can help you, but you need to make sure it’s correct.
One of the biggest mistakes I see every year are typos – especially from people who use the big mass-market tax preparation companies you see on TV. These data entry professionals (because they rarely offer advice or help), can be confusing. They can misspell your name, mistype your social security number, and more. All of these will lead to delays in your tax refund.
Make sure you check your tax return thoroughly before you file – it doesn’t matter if you do it yourself or pay someone to help you.
