The IRS says more than half of taxpayers hire someone to prepare their taxes -- but who actually needs to hire a pro?
If you have a complicated financial life, you may want to pay up for a professional. A few examples:
- Those who are self-employed may want someone who is familiar with Schedule C, who can advise on the best type of retirement accounts, and who will let you know when you should file a Form 1099 to report any payments made to others.
- If you had a lot of investment activity, sold property or have to file an estate tax return for someone else, you may want guidance.
- And if you are one of the over 5 million taxpayers who are subject to the Alternative Minimum Tax, a tax professional may be able to minimize the hit.
Tips for Solo Filers
If you are ready to go it alone, be sure to e-file. The IRS says that the the error rate for a paper return is about 20%, compared with an e-file return error rate of about 1%.
You will also get instant notification of receipt, ensure that your return goes to the correct processing center, and be able to check the status of your tax return or tax refund at any time. If you are due a refund, meanwhile, there’s an extra bonus: You'll get your money faster if you e-file!
In terms of tax prep software, the IRS provides taxpayers whose incomes are $62,000 or less with free tax prep software called “Free File”; it's available through IRS.gov.
If you don't qualify, you are left with three main choices: Turbo Tax, H&R Block and Tax Act. Most tax preparers that I spoke to say that Turbo Tax may be the best bet, even though it costs more than its competitors. They cite Turbo Tax’s easier-to-use platform and the interface’s ability to save time and reduce errors.