No one likes the idea of owing money on their annual tax return. But the idea of paying money just to get your return completed by an accountant doesn’t always appeal to every tax payer. Everyone is looking to save a buck, and you should! But rather than focusing solely on saving money, try to shift that focus to making good financial decisions. Although free tax software might sound appealing and save you money up front, it may not always be the best financial decision.
Benefits of Free Tax Software
Free tax software may not be the best money saver in the long run but it does have its positives for some. Free software is aimed for those that have a basic return and the confidence to complete it on their own. A basic return typically entails filing as an individual, being a W-2 employee, and taking the standard deduction. Having other sources of income, dependents, or life events are examples of things a free tax software is not equipped to handle. If your return qualifies as being simple, then you can benefit from these perks:
- Cost Effective: One of the biggest appeals of using free tax software is the price! Everyone likes the sound of free. However, it’s important to know your financial situation prior to choosing this route. As mentioned above, many nuances can make your once simple return more complex and thus not be eligible to use free software
- Understand, some softwares will require you to pay and upgrade to a “premier” service in the middle of completing your return if it appears to not be considered simple.
- Convenience: Rather than trying to coordinate schedules with yourself and your accountant, you have the flexibility to do your taxes on your time. While working on your taxes, most softwares allow you to pause your return and come back to finish at a later date giving you complete control.
- Simplicity: Many current tax softwares are very user friendly and simple to navigate. Without having much tax expertise and with a simple return, you typically just follow the prompts and plug in your information accordingly. Letting the software guide you through the process.
Benefits of Hiring an Accountant
Because majority of tax returns aren’t considered basic, hiring an accountant is the best route to take. Not only is an accountant an expert at any given tax scenario, but they can ensure your return is completed accurately and with your best interest in mind. Unlike tax software, accountants understand each tax situation is unique and treat each client accordingly.
- You Don’t Have to Be a Tax Expert: Because accountants are experts in their field, you don’t have to be a pro! You can provide them all of the necessary documents to complete your return along with some background information and the accountant takes it from there!
- Receive In-Person Help and Communication: In a day where so much is done online or digitally, many people still like the personal touch of meeting and having face to face interaction. Rather than plugging your financial situation into a computer system you can actually explain and discuss your current finances as well as set financial goals. Accountants can also explain the process and address any concerns or questions you may have.
- Accountants Handle Complex Returns: Many scenarios can make a simple return more complex, thus needing additional steps and required information. The wonderful thing is, an accountant is an expert in all of these situations. They know how to handle and address each unique circumstance. Scenarios that make a return more complicated include but are not limited to:
- Claiming Dependents
- Major Life Events
- Marriage/Divorce
- Moving States/Relocation
- Because the housing market is on fire, many people are taking advantage and moving states. Arizona is currently one of the fastest growing states. If you made a major move to a new state then your taxes may be a little more complex. Scheduling a meeting early with the My Accountant Bookkeeping & Tax Service Inc. team can help you get prepared and answer any questions you may have.
- Being Self-Employed or a 1099 Worker
- Buying or Selling a House
- Having Investment Income
- Knowledge of Tax Credits and Deductions: To ensure you owe as little or make as much as possible from a return, knowing all of the tax credits and deductions you are eligible for will be crucial! Because there are so many of each that may or may not apply to you, working with your accountant will ensure you receive all eligible credits and deductions.
- Tax Credits: This is a dollar amount directly subtracted from the amount you owe. For example if you have a tax credit of $400 but owe $2,000, then you would now only owe $1,600.
- Tax Deductions: A deduction lowers your taxable income based on your tax bracket. For example, if you had a $5,000 deduction and you are in the 24% tax bracket, you would subtract $1,200 from your taxable income.
- IRS Representation: CPAs and accountants who are enrolled agents with the IRS can represent you in the case of an audit. Rather than being caught off guard if you filed your taxes through software, an accountant can assist you with the audit process and be a liaison with the IRS.
Although free tax software can be beneficial to some, unless you have a basic tax return, the cons far outweigh the pros. Although hiring an accountant may cost you more up front, you are getting the security and confidence that your taxes are completed with the best possible outcome. To ensure you owe as little as possible or get the best return possible, reach out to the My Accountant Bookkeeping & Tax Service Inc. team to schedule a consultation. There is no time like the present to get financially prepared.
