It’s Tax Time! To do, or Not to do Your Own Taxes
It's everybody's favorite time of the year, TAX time. Well, not exactly, but this is the time we all begin pulling things together to do our returns, and, hopefully, get money back.
The real question is, however, should I do them myself or have a professional do them for me.
For me, it's not a question. I use the professional. For what little it cost me, relatively speaking, it save me hours of sweat and pain, and, I know they're done correctly.
What about you? Do you do you own? Maybe you're thinking about either choice, but don't quite know. It's not what you know that's important here. It's what you don't know . . . or, more to the point, what you think you know and really don't.
If you have a simple return, you might consider e-filing or using a simple tax program. But remember, you're not hiring a tax pro just to put numbers in boxes. Any monkey can do that.
To help you decide whether to do your own taxes, professional Jeff Schnepper, licensed by the New Jersey Board of Certified Public Accountants, recommends you ask three questions.
1. Are you prepared to give your taxes your time?
In 2011, the Internal Revenue Service estimated that the average taxpayer needed 23 hours to do his or her 2010 tax return -- 32 hours if a Schedule C for business or a Schedule E for rental properties was filed.
2. Are you prepared to put up cash to hire a preparer?
Getting someone to do your taxes can cost $50 to $100 at the low end -- assuming a simple return -- or up to several thousand dollars for a complicated return. The average for an itemized return is more than $200.
One consideration: Any fee you pay may be deductible on your next year's return if you itemize. Tax preparation fees qualify as miscellaneous deductions, the sum of which must be more than 2% of your adjusted gross income before you can claim a deduction.
Taxpayers spend more than 7.6 billion hours and more than $193 billion each year complying with the Tax Code - and that's just to figure out what we owe.
3. Are you prepared to deal with the complexity of the federal code?
Because the tax code is so complicated, more than 60% of Americans have professionals do their tax returns. Tax law has had major changes in 45 of the past 48 years. Last April, IRS Commissioner Douglas Shulman reported that there had been about 3,500 tax law changes since 2000.
A growing number of individuals are filing electronically. Tax preparers who filed 100 or more returns in 2011 were required to file electronically. And the e-file threshold has dropped to only 11 returns in 2012.
What do you think? Me, I'm calling my accountant tomorrow!