One of the ways that you can save money is by doing your own taxes. You can do your own taxes by hand, or use tax prep software. No matter which method you choose, chances are that you are going to save money over using an accountant. I did my own taxes for years. Until they finally became too unwieldy and time consuming. Could I still do my own taxes if I really put my mind to it? Sure. I keep my tax documents organized all year, and it’s not all that hard to follow instructions. But it is time consuming, and I have a lot more going on with my taxes than I did five or six years ago.
When to Consider Hiring an Accountant
Five years ago, I formed my LLC, changing my business structure from a sole proprietorship. At the same time, we started becoming more involved with investments, moving beyond just the Roth IRA. Our taxes became much more complicated and time consuming. We had more deductions, and my LLC needed to issue Schedule K-1 forms to the partners (my husband and me). We also had to record capital gains and losses, and other tax things going on with our finances.
Once you start seeing more complicated tax returns, it’s time to consider hiring an accountant. Some of the advantages of hiring an accountant include:
- More likely to be up to date on the latest tax laws.
- Will represent you to the IRS in the event of an audit.
- Can often more quickly prepare your tax return.
My accountant was able to suggest some strategies that we can use to legally reduce our tax liability — things that we wouldn’t have thought about on our own, and that would have taken a great deal of time to find on our own. He automatically assesses our situation, and helps us make sure that we are getting all of the tax breaks we are entitled to. He’s also a small business specialist, so he’s especially well-versed in the LLC (he’s the one who helped set it up).
On top of that, he saves us time. I spend about an hour with him, and he does the rest, preparing and filing everything electronically. Instead of me spending three to five hours, I gather up my already-organized documents and then spend an hour with the accountant. It saves me time, allowing me to do more work, or get some essential household things done. Time is money, and even if you aren’t using the time to specifically make money, time is still very valuable. You could be doing any number of other things that you would rather do than prepare your taxes.
Yes, I could do my own taxes, but they are increasingly complex and time consuming. The process of doing it myself just doesn’t seem worth the trouble, when I can hire a professional who can do it better and faster. Even with tax prep software (which is more expensive once you add your state taxes and business tax forms to the picture), it’s still time consuming. An accountant makes things easier, and is, in my opinion, worth the cost.
Do You Want to Keep Doing Your Own Taxes?
I did my own taxes for years, and didn’t have a problem. If you have relatively few financial/tax issues, and if your taxes are relatively simple, doing your own taxes can save you money. You can also get help from a variety of sources, including accounting students at the local university. Many of these students put on clinics so that you can ask questions with your tax return.
Sometimes, it’s nice to do your own taxes. You know exactly what to expect, and you are aware of what has been done with the forms. Even if you decide to have an accountant prepare your taxes, you should still look over the paperwork. Before my accountant actually files the forms, he has me review the forms and make sure that everything is as it should be. Even if you don’t do your own taxes, you should still have an idea of what the final product should look like.
Photo by Muffet.