Pay someone to do my taxes?

February 7, 2005 3:22 PM

Is it worth it for me to pay someone to do my taxes? [MI]

I typically complete the 1040EZ over the phone in about 5 minutes. I’m trying to determine if there’s any benefit to having someone else do it – am I missing some huge deductions, or some major thing that might increase my refund? Or are my taxes really that straightforward?

I am: single, no dependents, not a home or business owner and make somewhere around $50k a year. Have a car loan, student loan and I don’t donate more than $500/year to charity.

Should I call HR Block or save my pennies ‘cause they won’t get me anything I can’t get for myself?

posted by tristeza to work & money (26 comments total)

I just called H&R block and made an appointment. I started asking questions about what I needed to bring, how I needed to tabulate my receipts, etc. They put me on with the accountant I would be meeting with. His replies to these questions more or less answered the only real questions I had, and I think I will be cancelling the appointment now. $200? I don't think so.

Moral: work them on the phone if you have big questions looming. If you're a complete tax idiot, you may still want to go in.

But given your vital statistics, no there is no magic trick to save you money. I've gone in to pros in your situation, asked the exact same "what magic loopholes am I missing" question, and they've said, basically: none, go home and fill out a 1040.
posted by scarabic at 3:29 PM on February 7, 2005

The car loan is irrelevant, but the student loan is worth something. Your lender should have sent you a form 1098-E which tells you how much interest you paid in the last tax year. You are entitled to deduct up to $2500 of that. By using 1040EZ, you don't get to subtract that frmo your income, which could drop you into a lower bracket.

1040A is the next-easiest form to fill out and allows for the student interest deduction. Depending on what interest you paid, it may make a significant difference in your taxes owed (less) or tax return (greater).
posted by pmbuko at 3:34 PM on February 7, 2005

I'll preface this with the fact that I don't much about taxes in the general sense. But, I've become very good at doing my own taxes which includes small business, home owner, etc.

Given your profile I say just save yourself some money and do your own taxes. If you're worried about missing something important then get a dummies book or visit the IRS website for common questions.
posted by quadog at 3:36 PM on February 7, 2005

Are you deducting your student loan interest? If not, try the 1040A form that has a line item to deduct it. Also, this year you can deduct sales taxes if youre state has them. Other than that I vote no on the tax preparer.

As a free alternative, you could use the Turbotax website (free unless you actually print or file your return online) to check and make sure you get all the deductions you deserve and then copy the info by hand into a paper return.

Standard caveat about not being an accountant, YMMV, etc.
posted by ..ooOOoo....ooOOoo.. at 3:37 PM on February 7, 2005

I used the TurboTax website to doublecheck the notion that I might be missing something. You can walk all the way through the process and not pay a cent until/unless you process your return through them.
posted by FlamingBore at 3:38 PM on February 7, 2005

or what pmbuko said. Damn you preview!
posted by ..ooOOoo....ooOOoo.. at 3:38 PM on February 7, 2005

This is all super helpful, thank you.

this year you can deduct sales taxes if youre state has them.

How on earth does one claim this? Do you have to have a receipt for every purchase made in a year, or what?
posted by tristeza at 3:42 PM on February 7, 2005

However, if you paid less than $4850 in interest on your student loan, then there is no point in itemizing. The standard deduction is $4850 and you should just claim that unless you have more than $4850 worth of itemized deductions (student loan interest, home loan interest, donations, state income/sales taxes). Most likely, your best bet is to continue doing the 1040EZ and save yourself the hassle/cost of an accountant.
posted by knave at 3:52 PM on February 7, 2005

I'm with Flaming Bore. I actually did my tax return, the whole thing, through TurboTax's website. They were having a half-off deal for the federal return, so I ended up paying $35 total (including my CT return). About an hour's worth of work, and 24 hours of waiting later, and I was completely done with my taxes. On February 1. I thought about throwing a party.

My financial situation is very similar to yours. I'm even paying for a current student (my wife), which complicated my return slightly and it was still extremely simple through TurboTax. This really sounds like a shill, but it was really way simpler than I was expecting, and far cheaper than my parents' paid for the boxed retail version. I absolutely recommend it.
posted by Plutor at 3:52 PM on February 7, 2005

tristeza: you can either specifically itemize them, or use the IRS formula that is based on income-level.
posted by reverendX at 3:52 PM on February 7, 2005

knave, the student loan deduction is OUTSIDE your regular deduction. It's an extra special one I guess. Plus, your paid interest is taken off dollar for dollar from your adjusted gross income so it has a better effect than other deductions. Or that's how it was explained to me via the accountant the first time.
posted by ..ooOOoo....ooOOoo.. at 3:57 PM on February 7, 2005

Please pay close attention to what ..ooOOoo....ooOOoo.. just said! The student loan deduction comes off of your income before the standard deduction. You don't need to itemize to get it, and you can still claim the full standard deduction. It's almost certainly worth filling out the 1040A if you spent any money on student loan interest in 2004.

I did my taxes last week, and was absolutely delighted to find this out....
posted by mr_roboto at 4:23 PM on February 7, 2005

Just buy TurboTax or something similar for ten bucks, answer a few questions and be done. I wouldn't get too excited about sales tax deductions unless you made some major purchase like a new yacht.
posted by fixedgear at 4:44 PM on February 7, 2005

I am in Canada, and (as a student) H&R block only charges me like 35 bucks, PLUS I get my return within two days.
posted by Quartermass at 5:35 PM on February 7, 2005

I had gone through my 1040EZ and figured out my refund was going to be in the vicinity of about $179. Then, I did my 1040A, and with the student loan deduction (which goes on top of the standard deduction — it's not something you'd itemize separately), I ended up getting about $764 back. So, yes, it's definitely worth it to go with a 1040A in your case!

By the way, I was surprised to learn that many IRS "partners" will allow you to freely use their service if you go through the IRS' "free file" subpage. You can see if you're eligible here:

http://www.irs.gov/efile/article/0,,id=118986,00.html
posted by WCityMike at 5:37 PM on February 7, 2005

Ir doesn't sound like you'd benefit that much from an accountant.

However, it is nice just being able to pile up your paperwork, dump it in someone's lap and have them deal with everything. Plus, the $100 - $200 you spend on a good local accountant (not an H&R chop shop) will entitle you to a free year of tax consulting, just in case an inheritance, 1099 work or something else unknown comes up.
posted by alan at 9:08 PM on February 7, 2005

IRS on the student loan interest deduction
posted by nakedcodemonkey at 9:49 PM on February 7, 2005

That new sales tax deduction is reason enough for anyone in an income tax-free state to go 1040A or 1040. tristeza, you're in WA, right? Looks like a windfall for you. But you shouldn't need a tax pro just to get that. 1040A takes an hour or two, but it's not hard really. Just more detailed. TurboTax/TaxCut makes it painless.

Do you have to have a receipt for every purchase made in a year, or what?

Receipts are optional. The IRS has tables for calculating the deduction if you don't want to bother with receipts.
posted by nakedcodemonkey at 10:07 PM on February 7, 2005

Most people won't benefit from the sales tax deduction unless they already have other deductions such as a big mortgage or unless they can document a whale of spending with actual receipts. The deduction won't apply unless all of your itemized deductions would exceed the standard deduction. If you don't have a mortgage, I'd say don't bother.
posted by kindall at 10:59 PM on February 7, 2005

I am: single, no dependents, not a home or business owner and make somewhere around $50k a year. Have a car loan, student loan and I don’t donate more than $500/year to charity.

Sorry to hear that. You're in about the worst tax situation possible under the US system. The only thing that can really help you is a 401(k) or IRA, although it sounds like you're now on top of the student loan interest deduction. The other deduction available here is the Lifetime Learning Credit or HOPE Credit [Form 8863]; they're not well known.

The standard deductions have risen a great deal (and advance with the cost of living, more or less) so most people in your situation will have a hard time exceeding it unless there's a mortgage involved. That's just the way it is.

Having someone do your taxes is only really worth it if you're having them fill out Schedules C, D, or E (business, investment, and real estate/ royalty income, respectively), because then you have choices to make about how to treat various types of income and outcrap.
posted by dhartung at 1:06 AM on February 8, 2005

Wait a second--I just read the IRS page about sales tax deduction. It says you can deduct either state and local sales tax OR state and local income tax. Only if you live in a state with no income tax would this be to your advantage, I'd think.
posted by MrMoonPie at 7:49 AM on February 8, 2005

I just wanted to make a clickable link of WCityMike's excellent suggestion: IRS Free File. Various commercial and non-profit preparers, including H&R BLOCK, can be accessed online for FREE! That's right, I said FREE! In most cases the service reached via IRS is identical to the paid version. And some will do state returns as well. And you can file the returns automatically from the comfort of your own home! You should at least be able to do "what if" comparisons.
posted by TimeFactor at 8:01 AM on February 8, 2005

Adding to what TimeFactor said, I've been using TaxSlayer for three years now. I get to file my taxes prepared and filed for free.
posted by Captaintripps at 9:24 AM on February 8, 2005

The IRS free filing page (two mentions above) links to a 20 different on-line tax preparation options. For those overwhelmed by that set of choices, I recommend either TurboTax or H&R Block (in that order) - these are the dominant companies, and (all other things being equal) should have the best processes.

For both: Free federal online tax preparation and e-filing for all taxpayers. No restrictions. Everyone qualifies
posted by WestCoaster at 9:46 AM on February 8, 2005

I used the HR Block free federal e-file last year, and found it to be mostly painless. The kicker is that they want you to pay for the state e-file... So anyone got any free state e-file sites? I've gotta file in both Oregon and California this year...

Argh. Previewing this makes me realize this thread is probably off the ask front page. DAMN YOU BLOGLINES! DAAAAAMN YOU!
posted by lpqboy at 10:56 AM on February 9, 2005

Not in California you aren't. Free file is only good for the EZ return crowd. Else you either pay for the state or pay for the federal and file the state for "free".
posted by calwatch at 11:18 PM on February 9, 2005