If you’re still wavering on whether to use tax software or to hire a CPA, there are a number of things you’ll want to take into consideration. There are pros to both, but ultimately your personal circumstances and financial situation will play a critical role in what you decide. For example, if you don’t have a very complex situation and have few investments, it may make the best sense to use tax software such as TurboTax, which can save you both a lot of time and money.
However, if you have multiple employers, a number of investments, or own a business, you may want the security of working with a CPA that fully understands all of the tax rules and regulations.
Before you make a final decision, consider the following points to help guide and assist you in understanding what might be the best option for you.
Certified Public Accountant (CPA)
Alternatively, there a number of pros to using a CPA, particularly if you need someone to assist you with complex situations and tax laws:
Comfort level. If you are unsure whether or not you’ll know if you miss something, it might be best to put it in the hands of professional. A CPA can help calculate your withholdings to keep money in your pocket through the year so that you can avoid having a large tax bill on April 15.
Continuous support. If you are self-employed or have a lot of investments, you may want the opportunity to rely on a CPA year-round. You may need them to advise you beyond the traditional tax time window, and having a trusted advisor at your disposable will help you sleep better at night.
Major life events. There are certain major life events that can have a big impact on the way you file your taxes. A CPA might be your best bet in these situations. For example, perhaps you just purchased a new home, you are newly retired, there’s been a change in your marital status or a spouse passed away. A CPA will be able to give you sound advice in these situations and many more.
Investments. A CPA will help you navigate your 1099 tax summary from your brokerage account. A CPA may also explore if you are picking up all the income in the proper place or check to see if there are tax exempt amounts that are not taxable to federal taxes, state taxes, or both.
Rental properties. Another common investment is the ownership of rental properties. A CPA will assess rental losses and rental deductions, and may even work with you to track this information throughout each year.
Tax Software
There are a number of pros to using tax software.
Cost efficiency. In some instances, filing your own tax return using tax software can save you a lot of money. Of course, this is ideal if you don’t expect many complexities on your tax return.
Time. If you have a single W2 form with a standard deductions, it’s possible to complete your taxes in minutes.
Information. If it interests you, good tax software can help you understand specific tax laws or guidelines you need to know that pertain to your specific situation.
Ease. Tax software can significantly simplify the tax process. Many tax software programs will also double check your return to ensure you are minimizing deductions and credits based on your responses.
Fast refund. Most tax software programs are compatible with e-file for the IRS. This can allow for faster filing and faster returns by direct deposit.
You’re good at crunching numbers. If you keep good records and enjoy numbers, filing on your own might be a great option.
Your tax situation rarely changes from year to year. If you’ve been filing your own taxes for years and there are rarely changes to your personal situation, you may want to continue to do so.
You do not own property or investments. If your life is simplified and you don’t own property or have much in the way of investment or retirement accounts, filing your own taxes is a good route to take.
You are comfortable with tax laws and keep up with them. If you stay up to date with changing tax laws, forms, and other important updates, filing your own taxes might be a great option. The tax software will guide you, but remember that you should still have an understanding of any deductions or credits you intend to claim.
Certified Public Accountant (CPA)
Alternatively, there a number of pros to using a CPA, particularly if you need someone to assist you with complex situations and tax laws:
Comfort level. If you are unsure whether or not you’ll know if you miss something, it might be best to put it in the hands of professional. A CPA can help calculate your withholdings to keep money in your pocket through the year so that you can avoid having a large tax bill on April 15.
Continuous support. If you are self-employed or have a lot of investments, you may want the opportunity to rely on a CPA year-round. You may need them to advise you beyond the traditional tax time window, and having a trusted advisor at your disposable will help you sleep better at night.
Major life events. There are certain major life events that can have a big impact on the way you file your taxes. A CPA might be your best bet in these situations. For example, perhaps you just purchased a new home, you are newly retired, there’s been a change in your marital status or a spouse passed away. A CPA will be able to give you sound advice in these situations and many more.
Investments. A CPA will help you navigate your 1099 tax summary from your brokerage account. A CPA may also explore if you are picking up all the income in the proper place or check to see if there are tax exempt amounts that are not taxable to federal taxes, state taxes, or both.
Rental properties. Another common investment is the ownership of rental properties. A CPA will assess rental losses and rental deductions, and may even work with you to track this information throughout each year.
Wes Moss is the Chief Investment Strategist at the financial planning firms Capital Investment Advisors and Wela. He is also the host of the Money Matters radio show on WSB Radio. In 2014, Moss was named one of America’s top 1,200 financial advisors by Barron’s Magazine. He is the author of several books including his most recent, You Can Retire Sooner Than You Think – The 5 Money Secrets of the Happiest Retirees, which has been one of Amazon’s best-selling retirement books in 2014.
