Should You Do Your Own Taxes or Pay a Professional?
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Should You Do Your Own Taxes or Pay a Professional?

Preparing your own taxes or professional tax preparation which is best?

With the beginning a new year, comes the beginning of Tax Season. There are two types of tax filers: early filers (those who receive refunds), and late filers, (those who have to pay). Regardless of the category to which you belong, the most important decision that must be made is whether to prepare own your own, or pay a professional to prepare them for you.

With such a large number of tax preparation software programs available, many individuals and companies opt to prepare their own taxes. This can be beneficial in saving large preparation fees that some professional preparers charge. However, even with the best software available, those who have little or no knowledge of current tax laws can miss out on important deductions that could save them money or increase their refund. For those filing simple returns, such as the 1040-EZ, the best method of preparation is often self-preparation. The 1040-EZ form is simplified and contains only one page in most cases.

Choosing a professional is often the best route when having taxes prepared. Professionals, whether they are CPA's (Certified Public Accountants) or simply a PTP (Paid Tax Preparer), have received training on ever-changing tax laws and have a knowledge base that will allow them to maximize your deductions. Even in the event that a paid preparer cannot find any additional deductions beyond what could be found with self preparation, a paid preparer will offer audit support if you ever receive an audit from the IRS (Internal Revenue Service).

Many people are put-off by the extremely high fees charged by many of the chain-store type preparers. These franchise tax preparation companies often have extremely high over-head and must charge outrageous prices for a service that a smaller company can do for sometimes less than half the price.

The big named companies spend untold amounts of money on advertising and promotion to bring you into their office. However, their fees are so inflated, many clients feel as though they have been taken advantage of when they leave. For some, using the big named chains is all they have ever known and they feel as if that a huge fee is simply part of having their taxes done. A smaller, non-chain, tax service or bookkeeping company can often complete your taxes for a much more reasonable fee and with the same or better outcome. A quick internet search or phone book check for accounting/bookkeeping or tax companies in your area will result in not only a list of the franchise companies, but also those that are locally owned and operated. Call around and check prices before you have your taxes prepared.

People are creatures of habit. Using companies that you have used previously is not always a bad thing. However, if you have always used a franchise company to prepare your taxes, check with smaller, locally owned companies to compare pricing. Many times people are simply not aware of what their options are for tax preparation. If you plan to change tax preparers this year, be sure to take a copy of your last year's tax return when you visit the new preparer. This will help the preparer follow suit with the filing of your previous taxes. This is especially important for those who have small businesses, rental income, depreciation, etc.

One of the benefits that large chain companies have over the smaller, locally owned companies is that they often offer RAL's (Refund Anticipation Loans). RAL's are a very high cost way of getting your refund quickly. The IRS offers e-file services that allow you to get your refund in as little as seven days, RAL's can allow you to have your refund (minus a very large fee) sometimes before you leave the tax preparer's office. RAL's, once high in popularity, are becoming the "black sheep" of the tax preparation world. Many professional tax preparers believe that RAL's take advantage of those who need their money the most by offering them a fast check in return for a large fee (sometimes as much as 20% of the refund due). Many small and locally owned tax preparers do not offer this service, simply because they feel their clients should not have to pay such a large fee for a service they could get for very little if they waiting a few extra days.

Whether you decide to prepare your tax return yourself, or hire a professional to complete your return, the fact remains that your taxes must be filed by April 15th each year. Deciding which method is best for you is a decision you should make after you have all of the facts and have done your homework as far as pricing. The IRS website (www.irs.gov) is a good place to start when looking for approved "e-file providers" in your area. The IRS website is also an excellent source of information regarding tax laws and changes.

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