The Yanez family, in Glendale, Ariz., agreed to try three different approaches to see which worked out best, as part of The Early Show series, "Tax Secrets Reveled."
Oscar Yanez is a supervisor at a landscaping company and his wife, Nicole, an elementary school teacher.
First, they did their own, using Turbo Tax. Then, they gave H&R Block a shot. Finally, they had a certified public accountant try his hand.
They wound up faring best with the Do-It-Yourself approach, once costs were factored in:
Early Show financial contributor laid out scenarios when using a pro is best, and when you're better off on your own:
PROS OF D-I-Y TAXES
Less expensive: If you have time and patience and a relatively simple tax situation, this could be the best way. In fact, you qualify to do your taxes for free online at the IRS Web site. If you're looking for a little assistance, tax preparation software programs such as TurboTax, TaxCut and TaxAct range from $20 to $70; sometimes, there's an additional fee for to e-file those taxes. Of these, TubroTax is the most popular, with over 70 percent of the market. But they'll all walk you through the steps, and they have been updated for 2008 tax returns.
CONS OF DIY TAXES
Confusing Tax Code Changes: Last year alone, Congress made 500 changes to the federal tax code. If you're not aware of those changes, you could miss out on a bigger refund. A recent survey by The Tax Institute shows that 70 percent of those polled weren't aware of recent legislative changes that could affect their tax returns. In fact, experts say there are eight changes to tax code that affect almost everyone this year, including those for homeowners, the unemployed, and those paying college tuition. You want to make sure you're aware of them and getting all the credit and deductions you're entitled to. And of course, you don't have that interaction with a real live person to answer your question.
HIRE A PROFESSIONAL IF:
Your taxes are complex: That is, if, for instance, you sold a home or business, have significant losses in the stock market, or think you might be exposed to the alternative minimum tax
Your personal situation has changed: Say, if you got married or divorced, or your spouse died
Your employment status has changed: If you're unemployed, receiving unemployment benefits, have changed jobs, etc.: There are deductions for unemployment benefits, and even for the costs involved in your job search!
You, the taxpayer, are responsible for everything on that return! The most common mistakes, such as basic miscalculations, will very rarely lead to an audit, but could result in you owing more than you thought you did. So, always double check the math. If you're using software, let its built-in calculators do the math. And double-check the work of professionals: They, too, make mistakes. In fact, in an undercover investigation in which auditors had returns prepared at commercial chains and small, independently-owned offices, 17 of 28 returns contained errors and misinterpretations of tax laws; six of the misstatements were considered to have been willful or reckless. Bottom line: YOU're responsible for that return!