Paying taxes often feels bad enough, without paying more money on top of it for someone else to do the accounting for you. Is it worth paying an accountant to do your taxes, or could you manage just fine on your own? Many Americans face this question as tax season approaches, and the answer isn’t always straightforward.
To help you decide, we'll explore both sides. By the end, you’ll have a clear understanding of whether outsourcing your taxes is the right move and at what point you should get an accountant.
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What an accountant can do for you
An accountant's role goes far beyond simply filing your taxes. They're financial experts trained to understand and apply the complexities of tax laws, ensuring compliance with all regulations while maximizing your deductions and credits.
Accountants also tailor their services to meet individual or business needs and provide strategic tax planning advice, helping you plan for future tax obligations and potentially saving you money in the long run.
They are well-versed in identifying opportunities to reduce your taxable income, such as through retirement contributions, charitable donations, and other deductions you might overlook on your own. Plus, they handle tax filing and keep your financial records in order, making sure everything is managed efficiently and accurately.
Is it worth getting an accountant to do your tax?
“Do I need an accountant?” you might ask. The decision to hire a professional depends largely on the intricacy of your financial situation.
In certain situations, hiring an accountant can be highly beneficial. “For example, if you’re a freelancer juggling multiple income streams or someone who’s navigating the intricacies of investment portfolios, an accountant’s expertise can save you not just money but potential headaches from missed deductions or audit risks,” says Justin Godur, finance advisor and founder of Capital Max.
On the other hand, “if your finances are straightforward—think single income, no significant investments, or just a couple of deductions—then you might find that tax software suffices, making an accountant unnecessary,” Godur says.
When it might be worth it
You manage multiple income streams: This can complicate your tax situation. An accountant can help ensure all income is properly reported and deductions are maximized.
You have investment portfolios: If you’re dealing with complex investments, an accountant can navigate the tax implications, helping you avoid mistakes and optimize your returns.
You experience major life changes: Situations like starting a business or buying a home, for example, can increase your tax complexity. An accountant can guide you through these changes and ensure you’re taking advantage of all applicable tax benefits.
You feel overwhelmed: If the thought of filing your taxes is overwhelming or if you’re unsure how to correctly claim deductions and credits, an accountant can simplify the process, reducing your stress and minimizing the risk of costly errors.
When it might not be worth it
You have simple tax situations: If you have a single source of income, no dependents, and few deductions, a tax software may be sufficient. For W-2 employees without additional income streams, the process is typically simple enough to manage independently.
You are familiar with tax software: Modern tax software is designed to be intuitive, with step-by-step instructions and error-checking features. If you’re confident using these tools, you might not need an accountant.
You have limited deductions and credits: If you don’t qualify for many deductions or credits, the complexity of your tax filing is reduced. In such cases, DIY tax filing can be more cost-effective.
You're comfortable with financial details: If you’re detail-oriented and comfortable managing your finances, you might prefer to handle your own tax preparation. This approach can save the cost of hiring an accountant.
You have budget constraints: If hiring an accountant is too costly for a simple tax return, using affordable or free tax software may be the best option.
Pros and cons of hiring an accountant to do your taxes
Besides the complexity of your financial situation, it’s worth considering the potential benefits and drawbacks of hiring a tax professional. So, what are the pros and cons of an accountant? Here’s a breakdown:
Pros:
- Expertise and accuracy: An accountant's deep understanding of tax laws ensures accuracy in filing, reducing the risk of errors and audits. They know how to maximize deductions and credits that you might miss on your own.
- Time savings: Preparing taxes can be time-consuming, especially if you have a complex financial situation. Hiring an accountant frees up your time to focus on other important tasks.
- Peace of mind: Knowing that a professional is handling your taxes can alleviate stress, particularly if you’re worried about making mistakes or missing important deadlines.
- Strategic financial advice: Accountants can offer valuable financial planning advice, helping you make informed decisions that could save you money in the long term. Can a good accountant save you money? Absolutely—by identifying tax-saving opportunities you might overlook.
Cons:
- Cost: Hiring an accountant often comes with a significant expense, particularly if your tax situation is uncomplicated. “The cost can sometimes outweigh the benefits for simpler financial situations,” Godur says.
- Over-reliance: Depending too heavily on an accountant might lead you to lose track of your own financial details, potentially causing issues if you ever decide to file your own taxes again.
- Risk of poor service: Not all accountants are created equal. If you hire someone who isn’t up to par, you might face errors or even legal issues.
Are you less likely to get audited if you use an accountant?
Yes, using an accountant may reduce the likelihood of errors in your tax return, which could, in turn, lower your chances of being audited.
Accountants are trained to understand and apply complex tax laws, ensuring your return is accurate and compliant with IRS regulations. While hiring an accountant doesn’t guarantee you won’t be audited, their expertise can help avoid common mistakes that might trigger an audit.
So, is an accountant worth it? For peace of mind and reduced audit risk, it might be.
How much does it cost to have someone file your taxes?
For simple tax returns, the cost is typically on the lower end, around $200, while more complex returns—such as those involving business income or multiple deductions—can be more expensive, potentially exceeding $1,000, according to the NSA's Income and Fees Survey. Consider whether the potential savings or peace of mind from having a professional handle your taxes justifies the cost.
How to choose the right accountant?
The key factors here are trust and proven competence. “Look for credentials, such as CPA certification, and testimonials from clients who have similar financial profiles to yours,” Godur says. Carefully consider their qualifications, experience, and fit with your specific financial needs.
It’s also important to interview potential accountants to ensure they understand your financial situation and can provide the services you need. Ask questions about their approach to tax planning. This will help you feel confident and comfortable with the person managing your finances.
Alternatives to using an accountant
Most anyone can do their own tax return without an accountant. If hiring an accountant doesn’t seem necessary or cost-effective for your situation, there are several alternatives to consider.
1. Tax software
“If you’re tech-savvy, tools like TurboTax or H&R Block offer solid alternatives, often at a fraction of the price,” Godur says.
These programs have user-friendly interfaces designed to guide you through the tax filing process step-by-step. They often include features like error-checking, deduction maximization, and even live support. How difficult is it to do your own taxes with these tools? Not very—if your tax situation is straightforward, tax software can simplify the process significantly.
2. Online tax services
In addition to downloadable software, there are also online tax services that provide a similar level of guidance. These services often offer additional perks, such as cloud storage for your tax documents, easy access from multiple devices, and even audit protection. Many online platforms also allow you to start your return for free and only pay when you’re ready to file.
3. IRS Free File
For those with simple tax returns, the IRS offers a Free File program that partners with tax software providers to offer free federal tax preparation. This option is available to taxpayers who meet certain income requirements and is a great alternative if you’re on a tight budget.
4. Volunteer Income Tax Assistance (VITA)
If you qualify, the Volunteer Income Tax Assistance (VITA) program offers free tax help for those who make $60,000 or less, people with disabilities, and limited English-speaking taxpayers. IRS-certified volunteers provide basic income tax return preparation with electronic filing to qualified individuals.
5. DIY tax filing
If you’re comfortable with numbers and have a simple tax situation, you might opt to file your taxes on your own, even without software. While this approach demands more effort and attention to detail, it gives you complete control over the process.
“Whether you go DIY or hire a pro, the key is to align the choice with the complexity of your financial life and your comfort level with tax laws,” Godur says.