Tax Software Vs. An Accountant: Which Is Right For You?

With every important job comes the question of whether or not  individuals should do it themselves or hire a professional. While the ever-improving selection of tax preparation software certainly makes it easier to do your own  taxes, it has hardly put professional tax accountants out of  business.

The Advantages of Using Tax  Software

 Price. There is no way around the fact  that you will pay less for a software package than you will to hire a  qualified tax professional. The  price of tax preparation software ranges from the $10-$120 range to websites  that offer the service for free. On the other hand, the least expensive tax  preparers will charge at least $100 for a simple return,  and a CPA or EA is likely to charge at least twice  that amount and up for complex returns.

Speed. Once you have all the necessary documents in front of you,  it is possible to complete your own taxes in  an hour or two. In contrast, the best accountants will usually take from  several days to a few weeks to process your paperwork and file your forms.

Simplicity. Good tax preparation software walks you through the  process very quickly and easily. For those who have only a few deductions,  sources of income, or investments there is little  need to sit down with an accountant to sort it all out.

The Benefits of Hiring a Professional  Accountant

Better Software.  Tax accountants pay around $1,000 to $6,000 for their software, which is far  more sophisticated than the products sold to consumers.

Human Touch. Like a good family doctor that knows your medical  history, you can develop a relationship with an accountant so that he or  she understands your financial situation and future goals.   A tax professional is often able to make valuable tax savings  suggestions that a software program just can’t anticipate.  The value of  this advice can easily exceed the additional cost of consulting with a  professional.

Accountants Can Answer Your Questions Year Round. As a trusted  professional, a good accountant will be able to answer important questions that  arise not just during your annual consultation, but at other times during the  year.

An Enrolled Agent  /CPA Saves You Time When Handling Complicated Issues. Taxpayers  who find themselves at the center of complicated business and investment matters may even have the skill to sort through their taxes on  their own, but is it worth their time? A professional tax preparer is so  familiar with the system, he or she can quickly and easily accomplish tasks that  might take even skilled taxpayers hours of research. For busy non-tax  professionals, their time can generally be better spent earning money in their  area of expertise.

The Bottom Line Ultimately, there is no universally  correct answer to the question of hiring a tax professional or doing your taxes  yourself with software. Your comfort and familiarity with IRS  rules will be part of your decision, but the complexity of your finances and business situation should  be the key deciding factor. Those with a single employer and few investments may  save hundreds of dollars by preparing their own taxes, while those with business  income or rental properties will find the expense of hiring an accountant to be  worth their peace of mind and potential tax savings.

Reprinted from Investopedia.