Taxes are a fact of life whether you work for someone else and receive a W2 every year or own your own business. Fortunately, you have the choice to either file your taxes on your own with the assistance of tax software or to hire a professional accountant to take care of it for you. The decision to hire an accountant should not be made without first considering the complexity of your financial information and an analysis of your individual circumstances.
Advantages of Hiring an Accountant
An accountant saves you the time and hassle that you would spend filing taxes on your own. When you file your own taxes you need to look over every form, some you may not be familiar with, and read the instructions to determine how it needs to be filled out. An accountant is familiar with these forms and can go through filling everything out much faster than you would on your own. Estimates from the IRS in 2007 stated that the average individual would spend approximately 24.2 hours to complete their taxes.
Accountants are also familiar with deductions and credits and can identify both those that you may not even be aware of. Tax software can make guesses about what you qualify for, but it’s very possible to miss one since they change every year. Something you didn’t qualify for last year may be applicable this year, even if your circumstances didn’t change.
If you are one of the 1% of taxpayers that the IRS audits each year, you’ll have assistance with a professional who can deal directly with the IRS for you. It is rather scary to deal with the IRS on your own, especially if you have no idea how tax laws work.
It is also wise to hire an accountant if you have income coming in from multiple sources or if you’re self-employed. The IRS requires additional forms to be filled out if you are self-employed and knowing what you can and cannot use for write-offs is beyond the scope of most individuals.
Disadvantages of Using an Accountant
The primary disadvantage of using an accountant is the cost. It is much cheaper to purchase tax software and input the information yourself than it is to hire someone with a degree to take care of it for you. Some accountants charge a flat fee that increases based on complexity, while others charge by the hour. The fees can accumulate to hundreds of dollars if you have a complex financial situation. If your taxes are rather simple and you don’t need to itemize deductions or have multiple income streams, it may be smarter financially to file your taxes on your own.
It is also difficult to find the right person to do your taxes, especially if you need someone specialized in a certain area of tax preparation. You also need to be comfortable with sharing sensitive personal and financial information with a stranger to have your taxes completed. If you do decide to go with a professional, ensure that they have adequate experience and are registered with the IRS.
April Santos writes on behalf of rgbrenner.com and knows that with tax time come headaches and frustration.
© 2012, Jen Carrigan. All rights reserved.