Earlier this month, we talked about the essential documents needed when filing your taxes. If you missed it, check out Part 1 of PFCU’s Filing Your Taxes series here.
If you feel overwhelmed or confused filing your taxes, you may need to bring in a tax preparer. There are a variety of resources available to aid in filing your taxes – it’s just a matter of picking the best option based on your income, filing status, and time. Before you bring in a professional, ask yourself a few questions to help decide if you’re making the right move.
Questions to Ask Before Hiring a Preparer
Do I have the time to file my taxes by myself?
Depending on how much time you're willing to commit to filing taxes, you may need help from a tax preparer. According to the IRS, the average taxpayer spends about 13 hours preparing and filing his or her tax return. Time is spent on record-keeping, tax-planning, and filling out the forms we talked about in part one of our series. Tax preparation can also include activities such as searching for a program and installing the software. Thirteen hours is nearly two full workdays! Not everyone has that kind of free time, especially when juggling other responsibilities. If the sheer number of hours spent on filing a return is impossible with your schedule, bringing your return to a professional might be the best option. As the saying goes, time is money! Weigh the cost of filing with a CPA or tax preparer against the benefit of gaining personal time to decide if it’s the right move for you.
Is it more affordable to hire a tax preparer?
In a 2015 survey on the fee averages from tax return preparation, filing a 1040 state return with no itemized deductions cost approximately $159. The prices for filing with deductions, multiple states, and including business income skyrocketed the prices up to nearly $450. If you are business owner or new homeowner, filing your taxes may be more complex than you can handle on your own. While in many cases it may be affordable to do it yourself, however if your filing situation is more complicated than most, hiring a tax preparer will save you in the long run. An added benefit of utilizing a tax professional is the accountability with the IRS. If you’re having a difficult time understanding your filing status, hiring a tax preparer will provide you with peace of mind, which is worth the investment.
Are there other options?
Of course, working with a tax preparer is not your only option! Tax payers making $54,000 or less per year, people with disabilities, and those who speak limited English may be eligible for the IRS’s Volunteer Income Tax Assistance (VITA) program which includes assistance from IRS-certified volunteers. If you make $64,000 or less per year, you are eligible to utilize the IRS’s Free File Software. PFCU also offers TurboTax Federal Free Edition to all members conveniently located within Teller Net. Before you take your taxes to a professional, check out these alternative options.
Additional Things to Know
Before you file, don’t forget to check out PFCU’s free Financial Calculators and tools for loan and credit line tax savings or 1040 tax estimator. We also offer a Savings, Taxes, & Inflation Calculator to determine how much your investments are truly worth after taxes are taken into account. Once you’ve checked filing taxes off your to-do list, stay tuned for our next post on spring cleaning your finances!
Erin Ellis
Accredited Financial Counselor ®
Philadelphia Federal Credit Union
eellis@PFCU.COM