Filing your taxes can feel like a chore, so you might be tempted to outsource the labor to a tax professional. This will save you time and potential headaches, plus having a pro do your taxes can help ensure everything in your return is accurate.
However, getting someone else to prepare your tax return is not exactly cheap — which is why it's important to determine whether the cost is really worth it. Ultimately, it might not just be about the price, said Business Insider, but rather about doing "what you're most comfortable with."
In what situations does it make sense to have a professional do your taxes?
If your tax return is pretty straightforward — think no dependents, few accounts and minimal expected deductions — shelling out for professional help with your taxes might not make sense. Similarly, if you have no qualms about taking the time to figure things out on your own, you might opt to DIY your taxes.
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But in the following situations, hiring a tax professional could prove worthwhile:
You have a complicated tax situation. If you have "a complicated tax situation with dependents, investments, or significant assets or charitable contributions," then hiring a professional might be helpful, said Business Insider. That is because "the more transactions you have, the more things you need to take into consideration."
You are self-employed or own a business. Filing can be more complicated for those who are self-employed or own a business. For instance, people who are self-employed can have estimated tax payments and different deductions to factor in. Business owners, meanwhile, "are subject to a different set of tax rules than individuals," said SmartAsset.
You have experienced a significant life change. Experiencing a major life milestone in the last year — such as buying or selling a home, having or adopting a baby, getting married or divorced, or receiving an inheritance — is another reason to hire a tax professional, as it can lead to changes in your tax filing.
You are planning to itemize deductions. Itemizing deductions "can help you lower your tax burden, but figuring out how much you’re able to deduct can be tricky," said SmartAsset, which is why consulting a tax pro for guidance can be worthwhile.
You have made mistakes before. Messed up on a previous tax return? "A professional can help you file an amended return if you’ve made mistakes in the past — and help you avoid them in the future," said U.S. News & World Report. Similarly, said Business Insider, "if the idea of entering numbers and talking about dependents and deductions makes you break out in a cold sweat, you might want to leave the preparation to a professional."
What are the pros and cons of hiring someone to do your taxes?
The benefits of hiring a tax professional extend beyond just getting back those hours you would have spent preparing your return. A tax pro can also help "to make sure your tax return is free of errors, protecting you from penalties or audits," and in the case of an audit, they can represent you and help you throughout the process, said U.S. News & World Report. Additionally, "tax preparers can help you identify all the deductions and credits you qualify for — even lesser-known ones."
But there are downsides to consider, too. For one, it is necessary to pay a tax professional, while many tax softwares allow you to file for free, or at least for a lower fee. Additionally, said SmartAsset, you will be "sharing your personal information with a stranger" if you hire a tax professional, which may raise privacy concerns for some.
How much does it typically cost to hire a tax professional?
While exact costs will vary depending on your location and tax situation, "tax professionals charged an average of $220 for a Form 1040 with a state return and no itemized deductions in 2021, according to the most recent report made available from the National Society of Accountants," said The Balance.
For comparison, filing yourself typically "ranges in price from free to more than $100," depending on whether you use a tax preparation software and which you use, said The Balance.
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