Should I Prepare My Own Taxes?

The age-old question has flooded my in-box: Should I do my own taxes?

I try to give a short encouraging reply, but it always feels contrived. Normally I write: If you are comfortable preparing your own taxes you should at least see how the process works by trying. If you run into an issue or don’t know the tax law on a certain area of your return you can always call in a professional.

You may have already received a similar email from me if you asked the question. In the name of efficiency I should keep my reply in a file for a faster copy and paste. But I don’t. I write the thing out every time and it’s starting to sound like a broken record.

The short answer salves my conscious by answering a call from the dark. There real answer, however, is a bit more involved.

If I do this right you should be in a better position to determine if you should be doing your own tax return so pay close attention. I’m only going to say this once.

Either Way I Win

The reason so many people email me with “the” question is because they see I offer a DIY tax program on this blog. The banners and links are an affiliate program. I also get paid when I prepare a tax return. I win either way.

Don’t take this as an arrogant slight. My intention is to disclose my relationship to whatever decision you make. Someone in my profession is getting paid regardless.

Comfort Zone

My biggest concern when people prepare their own return is they think they know what they’re doing when they really don’t. I see self-prepared returns often enough to see some really ugly problems the IRS will take a serious interest in.

That doesn’t mean you should hire a pro. Many errors I see on self-prepared returns have nothing to do with tax law! Unreported income and missed deductions are the two biggest issues I see. This isn’t a tax law issue; it’s a sloppiness issue.

A recent return my office amended, the client reported all the rental deductions (except depreciation) but missed adding any rental income. It was a serious matter!

My first recommendation for you when considering preparing your own taxes involves organization. If your tax records are stuffed in a paper bag or scattered everywhere you probably need a tax pro to crack the whip. Guys like me are in a better position to make a judgment call on missing information. There are disclosures a tax professional can attach to a tax return telling the IRS how the situation was handled. If the tax pro uses a reasonable method it virtually avoids an audit on an issue with no clear answer. Remember, the last thing you want is to be in an audit going, “Ahhhhhhh . . . .”

Call in the Troops

There is nothing wrong with doing your own return to the best of your ability and then hiring a tax pro for the return you will file. (Read the last sentence again and again until it sinks in.) Yes, you might have two prep fees for the year: one for the DIY program (required when you print) and the accountant. But you will also see where you missed things.

An alternative is to hire a tax pro when you have a unique issue and then go back to preparing your return for a couple years. Some accountants hate this. I don’t. What you consider hard I consider a normal day at the office. My computer updates your personal information annually so when you come back is six years I just pick up where I left off. I probably have data you already forgot about allowing me to bring you back up to speed.

Finally, there is no harm in having a tax pro review your return prior to filing. Yes, you will be charged. You want to be billed for the review! A knowledgeable tax pro will demand payment for her time. Payment also increases the chances the tax pro will give your return the review it deserves.

Preparing your own tax return is scary for some people. It shouldn’t be. Most software, including the program on this blog, has plenty of help features. If you plan on preparing your own return I hope you consider the 1040 program links and banners here. (Man has to eat.) If not, no worries. (Zig Ziglar always said you must ask for the sale. I never argue with Zig.)

Even if you hire your tax work done, consider opening a file at 1040 (the DIY software here) and seeing how well you do compared to the pro. There is no cost until you print and/or e-file. You might be better at it than you think.

Regardless, you can always call in the troops if you find yourself in too deep. Hiring a pro if you are concerned about anything on your work is not a sign of weakness! At the very minimum you have a better understanding of what the accountant is doing on the other side of the desk.

Tax pros get it wrong, too! Much of what we get wrong is the result of a misunderstanding or outright lack of knowledge of your personal situation. You know you better than I ever can. If I don’t find the right questions to get the answers needed for an accurate return I’m going to get it wrong. Even practicing DIY preparation can open your eyes to additional tax liability reductions. No tax pro would ever be offended by that!

The Boss is Back

After several years of adjustment to a national footprint my firm is finally gaining traction. I’ve trained new staff, added new technology (something old guys set in their ways resist) and focusing on our niche, we are ready to accept a few additional clients this year.

I’m opening the gate (LOOK OUT TEAM!!! THE HERD IS LOOSE!) a smidge. Technology will free serious amounts of my time to work with more clients directly. Scanning technology enters virtually the entire return so my task is to review and organize the return for maximize efficiency and audit proofing.

Now that the computers will enter most data I stand a lower risk of a carpel tunnel relapse. (I never had carpel tunnel issues and hope to keep it that way.)

You don’t want to pay me for data entry services; you want me for my experience and tax knowledge. By unleashing the IT guys we can do more, better than before.

Game Plan

If you need an accountant, contact me. We aren’t the cheapest (just so you know up front), but I dig deeper than most accountants you’ve met. I don’t stop at a merely accurate return. I’m always looking for items missed. In short, I give every return moving through my office a proctology exam. Don’t worry. I have plenty of latex gloves.

Be prepared for a summer consulting session considering the new tax laws if my office handles your tax return.

I strongly encourage you to try your hand at preparing your own return. If you have a business or rental properties you might want to forgo the DIY option. A good tax pro will know many ways to cut your taxes the DIY programs can’t possibly ask in these situations. It is still a valuable exercise to walk through the process yourself, however, to see if there are things even the accountant didn’t ask.

If you start to feel uncomfortable you can always call in the troops.

An Even Better Game Plan

2017 tax year will look and feel like previous years. You can continue preparing your own return without much issue. The few changes from the TAX CUT AND JOBS ACT that do affect 2017 should be handled automatically by the DIY software (all of them, not just mine) as long as you enter the data correctly.

2018 is another animal. You might want to plan ahead. Secure an accountant for the 2018 tax return or at least have a consultation on issues pertinent to you.

Finding a qualified tax pro is hard to impossible. I feel your pain. I need to hire tax pros to do the work and face the same issues. But it’s not impossible.

Accountants will be under a lot of pressure over the next year as small business owners plan for the tax law changes affecting them. Time will be at a premium.

A summer consultation is probably a good idea. Be sure to provide the tax pro a copy of your filed 2017 return. Nobody has been shot amending a return to correct missed or incorrectly handled data except for three guys in Ohio, but they had it coming. (Sorry for picking on Ohio. I still love you guys. (Maybe I should have said Delaware.))

If you find yourself in too deep preparing your own return, call a tax pro! Yes, we are all busy during tax season. But nobody has ever been shot for filing an extension except for those three guys again from Ohio.

Oh, who am I kidding? Use good judgment preparing your own return or call me (or another tax pro).  It’s your only hope, especially if you’re from Ohio.