That time of year is fast-approaching: tax time.
And while that prospect is daunting enough, and we begin to gather our papers and receipts, we have to ask whether to tackle our returns on our own or hire a tax professional to do them for us.
"Early Show" financial guru Vera Gibbons shared some guidance:
According to the Internal Revenue Service, about 60 percent of taxpayers will be using a paid pro to file this year.
But is it right for you, or is this simpler than you think?
If you're single, if you have one job and not a lot of assets, and have a good understanding of basic tax codes, you might be just fine going it alone.
But there are a lot of situations people are in that could warrant calling in the cavalry of professional tax preparers - say - if you work in one state while living in another, or you've bought or sold your home or business in the last year. Perhaps you find filing your own taxes too confusing: The tax code gets more and more confusing every year. Or perhaps you don't understand all the tax breaks you're entitled to, since there are all sorts of new credits and deductions for the tax year of 2009 designed to stimulate the economy, such as the home buyer credit, a break for making your home energy efficient, and education credits. If that sort of talk overwhelms you, consider using a pro.
WHAT TO KNOW WHEN HIRING A PRO
How to Find One
One thing to consider when you hire a professional tax preparer is that, with the larger franchises, there's less quality control. They hire a lot of seasonal employees and, while some are good, some aren't. It's a bit of a crapshoot, depending on the individual preparer.
Here's the bottom line: You're going to want someone who has a decent reputation in terms of fees, performance and availability. You want someone who's up-to-speed on all the new tax laws, is accessible, and willing to spend time with you to learn about your particular situation. You should be asking a lot of questions, and should feel 100 percent comfortable asking them. Make sure they're not dodging them.
Get Their Credentials
Some people recommend word-of-mouth. Obviously, good communication is important. But the most important way to find a tax pro who's right for you is to check their credentials. You want your preparer to have IRS Certification, trade association membership, registration with a state agency, affiliations with professional organizations that hold their members to a code of ethics and that provide continuing education. Some level of credentials is a must, because the tax preparation industry as a whole isn't regulated. There are no mandatory licensing requirements. There's nothing at the federal level so, in many states, anyone can hang a shingle and call themselves a tax professional. That's something the IRS is working on, but for now, they estimate there are 900,000 to 1.4 million unregistered tax preparers, so choose wisely.
What It's Going to Cost You
The average cost, according to the National Society of Accountants (NSA)Z, is $229 for an itemized return, and $129 for a non-itemized one. Of course, the cost of using a pro to help you file is going to depend on where you live, how complex your taxes are, and the qualifications of the tax pro you hire.on. Those average fees are 10 percent higher than they were two years ago. But if you consider the ballpark figures, if your situation is complex, working with a boutique firm it could be ten times that, which is why you should get a rough estimate up front, so you get no surprises. And of course, before you go in there, have all your paperwork together.
DOING IT YOURSELF
Consider Software Options
Computer programs keep getting better and easier to use. TurboTax has the lion's share of the do-it-yourself market, but H&R Block also has an at-home system (formerly called TaxCut Online), and TaxACT also has a program. Bear in mind that, if your gross income was $57,000 or less in 2009, you may be eligible for free filing. The IRS has partnered with 20 software companies to enable that to happen. Learn more on whether you qualify at www.irs.gov/freefile.
EITHER ON YOUR OWN OR WITH A TAX PRO: CHECK YOUR MATH
There can be, and are, mistakes made. In fact, studies by both the Government Accountability Office and the Treasury Department found all sorts of errors. Math mistakes rarely lead to an audit, but can reduce your refund or result in owing more than you thought you did. So, double-check the math or, if using a software program, let their built in software calculators do the math. You, the taxpayer, are ultimately responsible for everything on that return, whether you do it yourself or consult a tax pro.