financial planner fills out tax paper workLast year, nearly 132 million of tax returns were filed using various tax preparation softwares. However, almost 79 million of those e-filed returns were completed by tax professionals on behalf of their clients.

As a tax lawyer I can tell you that one of the most important decisions that taxpayers ponder each year is whether to hire a tax professional to do their taxes or simply use similar software to file their returns on their own. As Americans age, grow their families, and increase business investments, evaluating when and if we need tax advice can get a bit confusing.

One of the major considerations for many Americans in deciding how to handle their tax returns is the cost factor. Paying a tax professional can be pricey, especially if a return is complex and time-consuming. The IRS estimates the cost of filing a Form 1040 with itemized deductions and a state tax return to be about $270. Meanwhile, tax software is usually available to buy for under $100 or even less with common tax season discounts. Additionally, if a taxpayer’s adjusted gross income lands below $64,000, they can use the IRS’ Free File tool to prepare and file tax returns at absolutely zero cost.

The IRS also estimates that when taking into consideration the time needed to gather records, do some tax planning and filling out and submitting the final return, completing a Form 1040 will take approximately 16 hours. Of course, gathering tax statements for a tax professional will take a bit of time, but once the necessary documents are delivered the time commitment is a fraction of what is needed to complete a return without assistance.

Tax software is perfectly fine to use for single filers without any real investments or changes to their tax situation from the previous year. Even for slightly more complex tax situations like getting married, having children and/or itemizing deductions for the first time, tax prep software is totally adequate.

However, if you bought a home, inherited property, or own your own business, personal tax advice is usually advisable. Although high-end tax software has the capability to take these situations into consideration, it cannot give personal insight into your unique circumstances. A tax professional is experienced in advising their clients about whether to take specific actions now or wait until a better opportunity arises.

The bottom line is that once you sign your tax return, you are completely responsible for its contents. If you do your taxes alone, the IRS can approach you with any questions or issues, even years later. However, by simply filling out a line on your 1040, the IRS will bring any questions to your tax preparer. Even further, you can give certain types of tax professionals the power of attorney to represent you before the IRS.

In the end, how to handle your tax return is completely up to you. However, having a trustworthy tax professional in your corner can make all the difference if IRS issues do arise in the future.

Is the US Tax-Filing System Deliberately Complicated?

Is the US Tax-Filing System Deliberately Complicated?

According to Chuck Rettig, Internal Revenue Service Commissioner, the IRS is trying to help taxpayers navigate the unusual circumstances related to this year’s tax-filing season. Most of the confusion is due to temporary tax-regulation changes related to the 2020...

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