Is hiring someone to prepare taxes on your behalf a smart way to reduce pressure and avoid costly mistakes, or just an easy way out of doing the filing legwork yourself? It depends on your tax situation, your temperament, and how comfortable you are working with numbers.

In this blog, we take a look at the pros and cons of paying someone to prepare your taxes, and when choosing this option is a wise choice. Read on to learn more.

Getting Help: Should I Hire Someone to Do My Taxes?

Tax time can be overwhelming, even if you are well prepared. There are heaps of statements to sort through and always one more document you need to locate, and tax preparation software never seems to work quite as flawlessly as it’s supposed to.

It’s tempting to hand it all off to a tax preparation professional. For a fee, this expert will obtain the exact information they need, ask you a few questions, and plug your information into their own well-oiled tax filing machine. You’ll sign off, pay any taxes due, or (hopefully) await a refund, secure in the knowledge you’ve completed your taxes quickly, accurately, and on time.

Is the peace of mind and convenience of hiring a tax professional worth the expense, or is it just taking the easy (although more expensive) way out of a tiresome annual task?

It really depends on how complex your finances are, and how well-equipped (and willing) you are to do it yourself. Hiring a professional can potentially save you thousands in deductions or credits you might otherwise have missed, or prevent you from underpaying on your taxes.

On the other hand, paying good money to have someone do a task you could probably handle yourself (or because you’ve waited too long) may take a large bite out of the tax refund you were due.

So what are the main benefits and drawbacks of hiring a tax professional versus completing your tax return yourself? Keep reading to learn how these factors may apply to your situation.

Benefits of Hiring a Tax Professional

Tired, frustrated, and ready to make the call. Here’s why hiring a tax professional to complete your return might be worth it:

• Expertise and accuracy: A tax professional offers the specialist knowledge and experience you need to ensure your return is accurate and complies with current tax law. It’s the best way to avoid potential penalties and minimize the chance of an audit.

• Maximize your deductions and credits: An expert can spot potential deductions and credits you might overlook. These can help increase your refund or reduce taxes owed.

• Save time: A tax expert will get your taxes faster than you can. Getting help can be a smart investment if your time is limited or can be more profitably spent on other tasks.

Disadvantages of Hiring a Tax Professional

Alternatively, handing off responsibility for this crucial tax does come with some potential downsides:

• Cost: Hiring a tax professional can get expensive, especially if your finances are complex. The cost might also outweigh the benefits if your taxes are simple and your expected tax bill or refund is relatively small.

• Control: Choosing to let someone else file your taxes might mean you have less understanding of your taxes, or how it might affect other aspects of your finances. This could be significant if you face major money decisions, such as whether to take a loan.

Benefits of Completing Taxes Yourself

Ready to step up to the plate? Here are some reasons why keeping your tax preparation in-house makes sense:

• It’s cheaper: Doing your taxes yourself is less costly than hiring a professional, provided your taxes are relatively simple and you get them right. Free or low-cost software is making it easier than ever to do your own taxes, and free tax help can often be found through libraries and other institutions around tax time.

• Better financial control: Completing your own taxes will give you a better understanding of how your finances affect your liabilities, and may help you make better — or at least tax-smarter financial decisions going forward.

Disadvantages of Completing Taxes Yourself

Doing your taxes remains a serious business. Here are some reasons why it might not be the best choice for you:

• Potential for mistakes: Unless you’re willing to do your homework on the applicable tax rules and regulations, you’re at risk of making errors that could cost you extra taxes or lost refund dollars, even leading to tax penalties. This is especially important if you own your own business or your tax or financial situation is more complicated.

• Time-consuming: Doing your taxes can take a lot of time, especially if your financial situation or filing status has changed or you are unfamiliar with the tax system. Your time might be better spent elsewhere, especially if you’re a high roller with complex finances and tax obligations.

Which Option Makes Sense for You?

Choosing whether to hand over your tax preparation to a professional is a personal choice, but doing so makes the most sense, and has the potential to yield the most benefit if:

• You’ve left filing too late or you have other pressing priorities, and you need your taxes done right and done now.

• You can use the time you spend preparing your taxes to make more money than it costs to have them done by a professional.

• Your taxes are more complicated because, for example, you have complex financial holdings or investments or you run your own business.

That said, it can be wiser to keep your taxes in your own hands if:

• Your taxes are relatively straightforward and you expect to owe a relatively small amount or to receive a relatively modest refund.

• You want to understand fully how your taxes affect your finances so you can make tax-smart decisions and maximize your tax savings in the future.

9 Tips for Smart Tax Preparation

Decided to go it alone? Here are some smart tips to make completing your taxes easier and more convenient:

1. Get organized early: Gather all your tax documentation, including your W-2s, 1099s, and receipt for deduction, in a file or folder as soon as you receive them, even if you don’t plan to get to them right away, so they’re handy when you’re ready to get started.

2. Check for changes to tax law: It’s your responsibility to be aware of any changes that might affect your tax liability. The IRS will publicize important tax changes in the months leading up to tax day.

3. Maximize credits and deductions: Certain tax credits and deductions (such as deductible contributions to retirement accounts) are often adjusted annually. Stay up to date with the latest limits on measures that might affect you.

4. Understand the standard deduction: The IRS offers a standard deduction (adjusted annually) to save taxpayers from having to itemize expenses for commonly deducted expenses. Know what the latest deduction is, and understand when it pays you to claim it, and when you stand to benefit by itemizing further deductions.

5. Use reputable tax software: There are several excellent packages on the market. If you earn $79,000 a year or less, the IRS provides free access to tax software (and electronic filing) through its Free File program.

6. Make use of community resources: Libraries, community centers, and other organizations sometimes offer free tax help for those preparing their own returns. Use these resources, but be careful of being approached by strangers who offer to complete your taxes for free or for a cut of your refund.

7. Double-Check Your Return: Double-check your return by explaining it to a family member or trusted friend. It’s a good way to catch mistakes or omissions that could end up costing you. Verify that you’ve signed your paper return before mailing it.

8. File Electronically: Filing your return electronically (e-filing) is safer and faster than filing by mail, and can help ensure faster processing and a faster refund. You can do this directly using IRS forms or its Direct File service. Many software packages now also come with secure e-filing built in.

9. Plan for Next Year: Make things easier in the future by starting your preparations for next year’s taxes as soon as you’ve filed. Create a filing system and keep copies of your tax return on hand, so you can hit the ground running next time around.

Listerhill: Helping You Take Control of Your Finances

Whether you decide to file your taxes yourself or entrust them to a tax professional is a personal choice, and so is where you choose to do your banking.

At Listerhill, we’re committed to helping our members take control of their finances through our range of personal banking products, from checking accounts to certificates to IRAs. We’re also dedicated to helping you make the most of sensible, tax-advantaged investing through Listerhill Investment Services.

Contact us or visit a branch today to find out more about how we can help you make the most of your earnings and savings.