Should I do my own taxes or hire a pro?

January 14, 2009 8:36 AM

I'm making four times what I have in the past, so should I continue to do my own taxes or should I try an accountant this year?

I'm in the US.

I've done my own taxes since I started working at 15, and I don't actually mind the process. This year however is my first full year at my "career" job, and I've earned at least four times what I have in the past. My family is very working class so they have no experience with this sort of income and they have suggested that it might be worthwhile to use an accountant to make sure I'm not overpaying taxes.

I'm skeptical, because in many respects this is a more straightforward return than I have filed in the past. For example, I've only worked in one state/city and I live in that state/city (as opposed to when I worked four jobs in three states during my college years, for example). I have only one employer, and since I haven't been in school this year, I don't have any tuition deductions or credits. I don't own any property (live in NYC) or stocks (no capital gains/losses), and I make too much to be able to deduct my student loan interest. I have some charitable donations, but those are fairly straightforward and I have receipts. I don't have any client or business expenses I've shouldered personally (anything I've spent has been reimbursed by my employer) and I haven't spent any money on continuing education, etc. In short, I worry that going to H & R Block or finding a private accountant will be a waste of money because I don't know that they will find any deductions I'm missing.

Am I being cheap/naive/short-sighted? Should I find an accountant to make sure that I'm not overpaying my taxes? Or should I do my own taxes and only rely on a professional if my situation gets more complicated?

posted by anonymous to work & money (19 comments total)

Regardless of income, there is no reason to pay an accountant if your income taxes are straightforward. When you are in the position you are in (not enough itemized deductions to overcome the standard deduction, a threshold you usually pass when you buy property) your taxes are what your taxes are, and there's not much you can do about that.

All of the deductions you'll be able to take are on the first page of the 1040. Pay attention to the IRA contribution if you're looking to save a bit on your taxes.
posted by coryinabox at 8:42 AM on January 14

Single, salaried, and no capital assets? Pfft. Do it online.

I've used TurboTax Online for years- you can get yours done for under $50, and it walks you through the whole process. You'll pay an accountant at least twice as much for them to (in your case) essentially use the same software.
posted by mkultra at 8:48 AM on January 14

I was in your shoes a couple of years ago: One state, one city, and I was making something like five times my earlier income, simply because I was on my first post-college full-time job. All I had to deduct was student loan interest - no charity deductions simply because it's never made sense for me to itemize.

If you're at all uncertain about your tax situation, you could always pick up the year's tax software and let it figure everything out; not too expensive but anything you're likely to deal with, it'll figure out. But you definitely don't need an accountant purely on the basis of income, just complexity.
posted by Tomorrowful at 8:50 AM on January 14

Draft your taxes yourself this year. Then go to an accountant. Pay his/her fee and see what they do for you. Then decide if their work is worth what they charge.

Our accountant costs us $400 per year. (HR Block premium). The first year we used him, he saved us $3000 over what I did myself. Plus, I get to blame someone if it is wrong!
posted by brian60640 at 8:56 AM on January 14

I'd be really skeptical of using an accountant in a situation as straightforward as yours. Run the numbers, and if you don't break the standard deduction, there's really no point whatsoever.

brian60640, it'd be interesting to hear which deductions you missed when you did your taxes yourself?
posted by 0xFCAF at 9:01 AM on January 14

Private tax preparers aren´t necessarily making sure that you don´t overpay. The main reason people use them is because they can´t figure out how do to their own taxes. Occasionally I see articles in financial magazines where they have taken the same information to multiple tax prep services and it´s very common for them to make errors or fail to take advantage of all the deductions available.

If you need more direction than the IRS instructions provide, there are many books out there that cover tax questions. Some of these are reissued each year to cover the current tax laws.

Your taxes sound simple enough that you would probably spend about as much time selecting and visiting a professional as doing them yourself. I don´t think you would gain anything by spending a few hundred dollars to have someone else do your taxes.
posted by yohko at 9:02 AM on January 14

When you are in the position you are in (not enough itemized deductions to overcome the standard deduction, a threshold you usually pass when you buy property) your taxes are what your taxes are, and there's not much you can do about that.

I agree. The standard deduction is $5,450 and in all my years of filing as a renter I've never managed to have enough itemized deductions to exceed that. Generally accountants get you additional money by showing you deductions you didn't realize you could take (or that are shady), but it's unlikely even they could get you to $5,450.
posted by smackfu at 9:04 AM on January 14

I have a day job and two side businesses for which I file Schedule C's in addition to making other random taxable income (like focus groups or whatever). I moved last year, and the year before that, and the year before that. I have taken exactly one finance class, which did not cover taxes. I have never hired a tax professional--I do my own through TurboTax.

They're really not that difficult if you take the time to understand the tax implications of your financial behavior throughout the year and keep good records.

Your taxes sound remarkably straightforward, and I see no reason why you shouldn't do them yourself.
posted by peanut_mcgillicuty at 9:14 AM on January 14

I'd file online - your taxes are super straightforward. I use and like H&R Block's online tax service. Wait until you have deductions/a home office/children etc etc to hire an accountant, especially if you're comfortable doing it yourself.
posted by robinpME at 9:28 AM on January 14

Regardless of income, there is no reason to pay an accountant if your income taxes are straightforward.

Yep, when you have dependents, contract work, a house, investments, farm income, and a priesthood, then go to a pro.

I sympathize, though. There is this sense that you're making more now, so you'll be paying a lot more, and rich people use tax preparers, right? Will you suddenly fall into some kind of "capital gains" or "alternative minimum" shit? What does that stuff even mean?

You could always go to a pro once and settle your mind on it. I did that the first year I made real money. She did not allow me to pay her for her services, since my return was so straightforward. "I didn't do anything for you," she said, and sent me home.
posted by scarabic at 9:33 AM on January 14

I have a day job and two side businesses for which I file Schedule C's in addition to making other random taxable income (like consulting or whatever). I moved two years ago and two years before that. I have taken exactly one accounting and one finance class, neither of which covered taxes. I had never hired a tax professional until my second move--I did my own through Turbo Tax.

I went on and on about how they're not difficult and Turbo Tax walks you through everything and even a chimp could file their own taxes. Then I was busy one year and didn't feel like doing it myself and my accountant saved me many, many thousands of dollars because I am apparently dumber than a chimp.

In your case, however, I would recommend doing them yourself as they don't sound that complicated.
posted by MarkAnd at 9:33 AM on January 14

brian60640: Plus, I get to blame someone if it is wrong!

This is not always true from a legal standpoint- accountants commonly have you sign a waiver indemnifying them (YMMV).
posted by mkultra at 9:55 AM on January 14

I was once in the opposite situation -- I'd always used an accountant, and I was thinking of doing my taxes on my own for the first time. I was also running my own little business, so things weren't as simple as could be. I decided to try doing them myself, but also to pay my accountant to do them, figuring if I got it right, I'd do them independently from then on. I used TaxCut, and my accountant said I owed something like $600 more than I'd thought I did. So, I went in to go over with him what I'd missed, and item by item, it turned out to be stuff he'd missed. By the time I left the office, I was back to the numbers I'd reached on my own. It wasn't all his fault -- I hadn't known all the things that might be deductible, so I hadn't known to give him some papers that now I'd know mattered. Still, I've never been interested in going back to an accountant.
posted by daisyace at 10:01 AM on January 14

I had zero interest in doing my own taxes, AND my taxes are complicated by multiple jobs, so my gut reaction is always "Why bother! Go to an accountant!"

For you, I say "Pff, you're doing fine and don't mind the chore. Carry on as you were."
posted by desuetude at 10:03 AM on January 14

Married with child, investments, some contract work, lots of donations (stuff and money) . . .
Always use TurboTax.
I find it kind of fun.
It's pretty quick and easy.

We usually pay for it to make it easier, but I have stories of checking it out from the library.
Don't wait until April to do that.
posted by Seamus at 10:14 AM on January 14

When my taxes were as straightforward as yours, I used TurboTax online (or TaxAct, depending on the year). I also have done friends' taxes for them with similar software.

Now that I am married, own property, have a sole proprietorship, a partnership, an LLC and an S Corp, plus a mix of W-2 and 1099 income and significant income from interest, stocks, and dividends, I use an accountant. Saves me the headache. It's about complexity, not income level.

If you decide to do your own and then check with an accountant to see if you missed anything, send me a MefiMail & I'll send you the name of my accountant. He's reasonably priced and in NYC.
posted by bedhead at 11:01 AM on January 14

Oh, you're anon. Never mind on the MefiMail bit, unless you have a regular account and want to do that.
posted by bedhead at 11:03 AM on January 14

It's about complexity, not income level.

This is my perspective as well. My taxes are more complicated than many (schedule-C, home office, etc.) but each year after doing my own tax prep I feel confident that there are no more possible deductions available.

When I hear stories like those of MarkAnd and Brian60640 saving loads with an accountant/tax preparer, I do wonder if there are things that I am missing, but I honestly don't know what they could be. Anyone have specific examples of types of deductions that the tax preparer knew about that you missed on your own?
posted by camcgee at 2:01 PM on January 14 [1 favorite has favorites]

My CPA costs me less than 400 (deductible) dollars per year. Every year he finds a few things that I would have forgotten. I'm not useless or uneducated when it comes to personal finance, but he does taxes every day and he's up-to-speed on the latest tax laws.

When I moved wrote off things I would have missed, car registration is one I remember. He also correctly handled my work provided cell phone when the tax laws changed. He figured out how to handle my volunteer mileage when I drove 500 miles to volunteer, then left from there to a vacation.

There's level of comfort knowing my taxes are correctly prepared. Honestly, the guy has always saved me more than he costs.
posted by 26.2 at 10:51 PM on January 16