For a lot of folks, preparing and filing their taxes is confusing, time consuming and a potential pitfall of tax problems. Living proof of this is Secretary of the US Treasury, Timothy Geithner. He endured a hailstorm of criticism when lawmakers learned he had prepared his taxes incorrectly and underpaid thousands of dollars in taxes. Reportedly, Mr. Geithner did his taxes himself using TurboTax to prepare his taxes in years 2000 through 2002 and again in 2005.
So how could the person who heads up the US Treasury Department, which oversees the Internal Revenue Service prepare his taxes incorrectly even when he used a tax preparation computer program? Apparently he was tripped up because he failed to pay self-employment taxes on the income he earned while he was while he was working at the International Monetary Fund. He laid the blame for this on his "careless mistakes" and not the tax software. Maybe he would have been better served if he had hired a professional to at least review his returns before he filed them.
Prepare Taxes Yourself or Hire a Tax Pro?
It's estimated that about half of all tax returns filed are prepared by a tax professional, according to the IRS.
Not having the time, willingness or ability to prepare ones own tax return are the most common reason individuals give for using a professional tax preparer. With times are they are today, a lot of folks may be tempted to try to save a few bucks, forgoing the tax preparers fee, and prepare and file their own tax return. But this may be penny wise and pound foolish.
Over the next few days, I'll give my advice on when hiring a tax pro is a good idea, how to find a tax pro and what you can expect to pay.