RelayRides blogger Eric Rosenberg answers a question that many financially savvy RelayRides members find themselves asking: should I hire an accountant?
As January comes to a close, most Americans have their eyes on their mailbox for the prior year’s W-2, 1098, 1099, and other forms to file their taxes. While we are always looking to maximize our refund, we have to choose between doing our own taxes and hiring an accountant.
Do It Yourself
Unless they have incredibly simple taxes, most people who file their own taxes prefer to use software like TurboTax or H&R Block to file their taxes.
For many people, this is the best option. With these programs, you can fill out everything in your required tax forms online or with a program you can download. Depending on the complexity of your taxes, these program cost anywhere from free to $80, though you have to pay extra to file your state taxes.
All in, the total cost of filing even the most complicated taxes with software will end up around $120, or a little more if you have to file income taxes in multiple states.
While the DIY approach is cheaper than hiring an accountant, it does take quite a bit more work. You can’t just bundle up your W2 and other tax forms, like the 1099 you may receive from income earned by renting your car on Relay Rides. and drop them with someone else to deal with. When you file your own taxes, you have to enter all of the information into your tax program and you are responsible for answering to the IRS if they ever show up for an audit.
Hiring an Accountant
Hiring an accountant may be viewed by many as the lazy, expensive way to get your taxes filed, but that is not the case for everyone.
Yes, having an accountant take care of your taxes for you does save some work and add a bigger expense, but that doesn’t always mean you don’t get a better value from an accountant.
If you have very complicated taxes, an accountant might save you money and help you navigate tax issues you didn’t think of or might have handled the wrong way. I call or email my accountant a few times per year to ask questions about my real estate, investment, and small business taxes and how to handle certain situations.
Whenever I am doing something for the first time, he is there to answer. If I am confused about a form or want to know the rules for writing off business assets, I just have to write an email. And, while it will hopefully never happen, my accountant will handle all contact with the IRS if I am ever contacted for an audit.
For those added protections and luxuries, I pay more than a typical tax software program would cost. According to the CPA Practice Advisor, the average cost to file a simple 1040 tax return is $152, while itemizing your taxes or adding a small business can add hundreds more.
What’s Best for You?
I have used an accountant for my taxes since I was sixteen. He hooked me young with a very low fee for my filings through college, but now I pay quite a bit more to handle my very complicated tax return including multiple small business filings.
A few years back, I did my taxes myself using TurboTax (without filing) and had the accountant do my taxes as usual. When I got my taxes back from the accountant, I found that he saved me his cost plus a few dollars more.
So, what’s best for you? That completely depends on your own situation. If you feel confident you can handle things yourself, there is little harm in using a web or desktop based program to file. If you have complicated taxes or just feel a little more comfortable knowing someone has your back, an accountant can be worth their cost, and then some.