Saturday, January 29, 2011

Should I Use Software To Do My Own Taxes Or Get Help From A Pro?

Most people use a computer to prepare their yearly income tax returns now.  The laws just get more and more complicated -- it's VERY difficult to do it any other way now.  The IRS has even stopped mailing the forms booklet now, if you do still want to figure your taxes out by hand, you'll probably have to use a computer anyway so you can go to  and download and print the blank forms you'll need.  (A few libraries and post offices still have a handful of the forms, and what is left is drying up quickly.)

So your choice has pretty much come down to -- are you going to get the software and do it yourself, or are you going to see a tax professional and have the help of their software? 
Interestingly, in many cases the software used come from the same sources either way.  An example:  One of the largest providers of software to tax preparation firms is Intuit, the same folks that bring you Turbo Tax.

Another example came when I was watching a basketball game with one of my sons last night.  On comes an ad for TaxSlayer, featuring a prominent NASCAR star who is now driving the TaxSlayer car and is telling us that he and his guys do their own taxes using TaxSlayer -- with the message:  if it's good enough for them, it's good enough for you the viewer too.  Meanwhile, if you go to a tax preparer's continuing education convention, you'll see booths for both TaxSlayer and Intuit software that the preparers can use to prepare their clients' tax returns more effectively.

The NASCAR vehicles are quite complex.  They don't let just anyone get behind the wheel.  They don't let just anyone do the mechanical work on those cars.  It wouldn't be enough for you to make the investment in the equipment to do the work, you would need the training on how to use the equipment too before you would be allowed anywhere near those race cars.

It seems worth contemplating, just because you buy tax software, does that mean you know how to use all of its features to do the best possible tax return for yourself?  Even the seemingly simple stuff isn't anymore.  Do you get to take your child as a dependent, or does your ex, or maybe your parents?  Do you qualify for the earned income credit?  When is it better to pay somewhat more on your federal tax return as a trade off to pay less on your state tax return?  (yes, that is possible).  Should you take one of the higher education credits or the deduction?  If you make a contribution to an IRA, are you better off choosing a Roth or traditional?  If that contribution is made between January 1 and April 15, are you better off claiming it last year or this year (you can choose either in most cases)?

For these and countless other questions, the answer is ... it depends.  It depends on your individual circumstances.  The decisions you make now will not only impact this year's return but others in the future (and in some cases may allow you to amend past year's returns to get some of those taxes refunded).  The software has gotten quite good and will go a long ways towards helping you make effective decisions.  But there is still a lot to be said for an experienced, trained, second set of human eyes to go along with your eyes and the math power of the computer to get you the best long-term result.  Especially if you can find one that is passionate about taking the time to learn about you and do more than just get an error-free return done quickly.  That's just the minimum -- there's a lot more help available to you than the minimum!

You're probably making your decision right about now how you plan to do this year's taxes.  I hope this gives you a little more information to base that decision on in addition to the 30 second sound bites you have been hearing!  And if you have a personal tax question I can help you with, I offer a free 30 minute initial consultation.  Please send me an e-mail at and you'll get a response to set that up for you.  I look forward to hearing from you!

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