Should You Do Your Own Taxes or Hire a Professional? Find Out in This Episode of the Money Confidential Podcast
The saying "it gets easier" unfortunately doesn't apply to taxes. Tax laws change constantly, and your taxes often become more complicated the older you get. However, if you're trying to save money, the decision to hire a tax professional for help isn't always easy. This episode of Money Confidential discusses the factors you should consider when deciding whether to do your own taxes or hire help.
For the third installment of our "Taxes in Ten" series, we talked with Kendall (not her real name), who settled a debt (from $9,000 to $3,000) without understanding the tax implications. The following year, she got a notice from the IRS telling her that they were going to take 70 percent of her tax refund due to under-reporting her income for the previous year.
"That's the thing about taxes—sometimes, you don't know what you don't know," Money Confidential host Stefanie O'Connell Rodriguez says. In Kendall's case, what she didn't know was that the IRS would count the difference in the debt she'd settled with her creditor as income.
O'Connell Rodriguez tapped Kristin Myers, editor-in-chief of The Balance, and Caleb Silver, editor-in-chief of Investopedia, to discuss when it makes sense to do your taxes yourself and when it's time to call for help.
As complicated as taxes can be, Myers also believes it's OK to do your taxes yourself—if your lifestyle allows for it. "If your financial picture is fairly simple—[meaning] you go to work and that's the primary source of your income, you don't have side hustles, it's just very basic and straightforward—it is perfectly fine to use tax software."
Silver agrees, explaining that the decision—to do your own taxes or have someone else do them—depends on the complexity of your financial situation. For example, things like having a lot of investments, multiple stock options, receiving a large inheritance or money gift, can all make your taxes more complicated. In these cases, "It might be time to talk to a professional," Silver says.
However, there's more than just one option when looking for tax help. "There are a lot of registered investment advisors that can help you not only with your investments, but also with your taxes, also with your insurance, so maybe it's not time for a tax preparer on its own, but maybe you need broader financial advice," Silver says. "So, there are ways to be thinking about this beyond, 'Can I just have somebody help me with these forms?' Maybe it's part of your holistic life planning, and we see a lot more financial planners offering that service."
Myers also notes the free options out there. "If you earn under a certain amount, and it does depend on the state or municipality, you can actually qualify for some free tax advice," she says. "And even with the IRS, there's something called the IRS free file. If you earn under a certain amount, you can actually make use of some of the software through the IRS website."
To learn more about all the options for filing your taxes—and what to do if you get a dreaded letter from the IRS—check out episode three of Money Confidential's six-part series, "Should I do my own taxes, or hire a professional?" on Apple podcasts, Spotify, Amazon, Player.FM, Stitcher, and wherever you get your podcasts.