Should I hire a tax professional or do it myself?!

IdeaEconomics YouTube video: Should I hire a tax professional or do it myself?!

Oh, the dreaded thought has reoccurred in your brain again. Do I spend money and hire a tax professional to help me with my taxes, OR do I just say screw it and do it myself? Trust me, I get it. We have all been there trying to figure out if we get help and why we even have to pay taxes? I did my best to break down that question and better explain why we pay taxes and solutions to help reduce your taxes to save more money. 

Now, if you are ready to understand if you should pay a professional or do it yourself when it comes to your taxes, you have come to the right place! If you are someone who never wants to be on the IRS wanted list, I’m sure you have already resigned yourself to following the rules of paying taxes.

Today’s goal is to help you better understand if you should work with a Certified Public Accountant (CPA) or if you should find a site that allows you to file taxes on your own. I have experience with both, so I will walk you through what each of these two options means and include both the pros & cons of each option.

I will not leave you hanging and will present different solutions for both options to help you get going in the right direction. Everyone’s situation is unique, so I will do my best to present scenarios that may describe your current or future situation when filing taxes. Learn about where your tax money goes and the top ten reasons why.

Alright, let’s dive in! Do you go see a CPA or just do it yourself? Side note, I want to mention that non-certified accountants are not on the list to file your taxes. Your four choices would be a Registered Tax Return Preparer (RTRPs), a CPA, an attorney (can be CPAs as well), or an Enrolled Agent (EA). A Tax Return Preparer is considered a generalized tax specialist or may have no education/credentials.

Generally, if you select this choice, you will go with a big outsourced company like H&R Block. They may or may not have a CPA or an Enrolled Agent on their tax payroll. However, this option is less expensive; you have to accept that you won’t necessarily know who handles your taxes. This method is usually better for simple tax forms that need to be filed. Another option is the Enrolled Agent. They are considered to be certified tax professionals. This person has obtained a nationally recognized certification that represents the IRS directly.

The main difference between an EA and the CPA is that an EA only focuses on tax issues and is more client-based. Whereas the CPA has a complete financial scope of someone’s situation and can help the client with their overall viewpoint. Lastly, you can move forward with an attorney who is also a certified CPA. Just be prepared to pay more as this is considered the more expensive option. They are probably better if you have a very complicated financial situation that requires legal advice.  

For this article, I will focus on the pros and cons of a CPA. If you would like me to go into further detail about the other three options, please reach out to me! So what exactly is a CPA, and what functions can they do for us? A CPA is a certified accountant that must pass a rigorous exam. Afterward, they can do business audits, maintain & review financial statements, file taxes for both individuals & businesses, predict future economic activities, analyze and supervise collections and account payables.

A CPAs education and training generally consists of at least 150 hours of college and a bachelor’s degree from a 4-year accredited school. Afterward, a CPA can become certified once they complete all education requirements and gain at least 2 years of accounting experience. Or they can earn 5 years of experience in an environment related to accounting. After that is completed, a CPA is given access to glide down the red carpet and take the exam.

Important pros to consider when deciding if you want to hire a CPA:

• CPAs are experienced in the general overview of finances. Working with someone who files your taxes can be beneficial and offers valuable tips on lowering real estate tax, income tax, business expenses, etc.

• They are the experts in this field. Many people would encourage you to pay for quality, especially when your money is on the line and prison is, unfortunately, an actual reality for some people.

• They are efficient with their time, organized, and are detail-oriented. CPAs can save you thousands of potential dollars and teach you how to increase your income.

• You save time and avoid the frustration of figuring out everything by yourself.

• CPAs have advanced financial software and have help from others on the team who may catch a mistake. As well as, CPAs have resources such as senior leaders they can lean on when working with complicated issues.

Significant cons to consider when deciding if you want to hire a CPA:

• One of the most detrimental factors of not moving forward with a CPA is the high service fee cost. The average fee range is usually around $150 to $300+ per hour. 

• You will have to disclose and show all your personal information, so it is preferred to work with someone you trust (do your due diligence when researching the person or company you wish to move forward with). They will have access to your social security, bank accounts, assets & liabilities, and personal contact info. 

• Since they are the expert, you place your trust in their hands and hope they do everything right and don’t make any mistakes. 

• Your taxes may go to a newbie in the organization or small business you are working with. You might not have the luxury of meeting or even speaking directly with the CPA in charge of your files. 

I would recommend that working with a CPA can be beneficial for people in these categories: business owners, someone who works 2+ jobs and has many moving pieces that need to be filed. A person who might be awful with numbers and does not want to handle the stress of teaching themselves. Even a hectic life that does not allow you hours to pour over the family tax forms. Or if you are not very detail-oriented about inputting numbers correctly, unable to utilize all the deductions, or just have the money and can afford it. 

A CPA can save you time & unnecessary headaches. Also, any significant assets like multiple residential properties you won or wanting to leave money behind to family & loved ones. These are all reasons you may decide to move forward with a CPA. Again, I cannot stress the importance of researching the CPA you want to work with! Next, let’s dive into the pros and cons of you personally filing your tax forms.

Important pros to consider when deciding if you want to do it yourself:

• One of the most obvious ones, of course, is the COST! Most people are not interested in paying hundreds and hundreds, if not thousands, to work with a tax professional. Many sites allow you to pay $14.99 or $19.99 to access their tax filing software. Many of them are very straightforward and have the description explanation button to help you. Or you can reach their customer service line to have someone walk you through any questions you have step by step. We also have the internet, so there are hundreds of videos on YouTube you can find of people walking through the tax software with step-by-step photos to show you what to do. I recommend checking out a few sites: Free Tax USA (I have used this one multiple times and find it very user-friendly and easy to navigate for federal and state taxes). There is also IRS Free File for Federal taxes, TurboTax Free, and H&R Block (good for student loans & school payments). Always do research before moving forward with any of these companies. These are just a few lower-cost tax filing software recommendations that are relatively easy to navigate and well-rated.

• Doing it yourself can also be pleasant as you are in total control of looking at your different tax forms and filling out your personal information. You are only sharing your information with the software (that is encrypted) versus someone outside of the company’s organization.

Significant cons to consider when deciding if you want to do it yourself:

• Suppose you are not experienced or already familiar with the tax filing system & software. In that case, the process can become very frustrating. You may lose hours, if not days trying to understand how it works and where to put things. Researching what deductions or stuff you can itemize or can’t, for that matter. Suppose you potentially miss something while filing your taxes. In that case, it can negatively impact you with potential fees and penalties racking up on your tab from the IRS. 

• Next thing you know, you have missed the deadline, and now you have the Failure To File penalty attached to your profile in the IRS database. This leads to a considerable risk of error. Maybe adding in that extra 0 or not putting in that additional 0 can cause you to get denied. The IRS cannot process your information because things don’t line up. 

• Another frustrating experience you may have when trying to DIY (do it yourself) is that online help or customer service on the phone can be stressful. The waiting times may be over an hour. You may have been waiting 30 minutes, and the phone just hangs up; you speak to someone in a different country, or no one is helping you resolve the problem. The list can go on and on about how bad the company’s customer service can be on resolving issues. 

So to conclude, if you feel confident or at least have some experience filing your own taxes, you can move forward with doing it yourself. Even if you are not that experienced and have a simple tax form you received from work, you can enter the boxed numbers on the form that match the tax filing software. Also, suppose you want to save money and don’t have an overly complicated financial situation. In that case, this could be easier for you.

It could also be that you are a very hands-on person and want to learn the tax process better and not be inclined to show your information to others. I cannot tell you which is correct vs. incorrect because we all have different situations. You are smart and probably have an idea of which would be the best decision. I am simply here to guide you in the best direction for your specific situation.

This concludes today’s article, and I hope that it was helpful to you and got you thinking more about your taxes. I always want to hear your thoughts and questions, especially financial literacy. Please email me your questions and leave comments below because I want to know what you think. Check out the website to keep reading more!

And remember, like Earl Nightingale said, “Everything begins with an idea.” See you again next time!