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.