Tax season is a busy period for many people. This three and a half month interval at the start of each year is the time to file the necessary paperwork for your tax returns. While some people do their taxes with the help of tax software, other individuals rely on a tax accountant to calculate their tax returns. But is one way better than the other?
Pros of Using Tax Software
There is a lot of tax software out there. The good ones will walk you through the process quickly. People with simple tax situations – those who have few deductions, investments, or sources of income – can easily process their taxes using tax software.
With good tax software, you can complete your taxes in less than an hour – provided that you already have all the necessary documents in front of you. Meanwhile, the best tax accountants will take anywhere from a few days to a few weeks to organize your paperwork and file your forms.
The fact of the matter is that getting a tax software package is cheaper than getting a tax accountant. Tax software can range from $10 to $120. Some websites even offer the service for free. If your adjusted gross income is less than $60,000, you can use FreeFile, the IRS’s free service that lets you do your taxes and submit them online.
According to the National Society of Accountants, tax accountants usually charge $176 for a tax return that doesn’t include itemized deductions. The cost for an itemized Form 1040 with Schedule A and a state tax return is $273, at the least.
You get more upfront savings from using tax software over hiring a tax accountant.
Pros of Hiring a Tax Accountant
Unlike tax software, you can build a relationship with your tax accountant. When your tax accountant understands your financial situation and future financial goals, they can help you by making useful suggestions. The value of this advice alone could make up for the cost of hiring a tax professional.
Do you have a question about your taxes? A trusted tax accountant should be able to answer important tax questions, not only during your annual consultation but during other times in the year.
Saves You Time
Sorting through your taxes takes skill. The more complicated your tax situation, the more complex filing your taxes will be. If you find yourself at the center of many business and investment matters, then you should get a tax accountant. They are familiar with the system; they can easily accomplish tasks that will take you hours of research just become familiar with.
Tax accountants know what software to use and how to use them to their fullest. These advanced programs can quickly scan information and accurately organize line items and forms. With this software, much of the data entry is automated, meaning there are fewer chances of human error.
The Bottom Line
At the end of the day, choosing between a tax accountant and tax software depends on the complexity of your tax situation and your familiarity with IRS rules. Those who have a single employer and few investments can save hundreds of dollars if they prepare their own taxes. Meanwhile, those with rental properties or business income should welcome the peace of mind and potential tax savings that hiring a tax accountant will bring them.