As an entrepreneur or self-employed professional, the thought of April is enough to strike fear into your soul.
It means tax season is upon you and you’ll be forced to make major decisions.
Chief among these decisions is the choice between the DIY approach and a professional accountant.
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3 Reasons to DIY
Let’s start by analyzing the DIY approach, which has gained immense popularity in recent years.
This is due in large part to the introduction of streamlined software platforms that handle the complicated details and allow you to focus on answering simple questions.
In particular, the benefits of doing taxes on your own include:
- Cost. The most obvious benefit is price. You’re going to pay far less for a software package than you will for a CPA or tax professional. Popular software like TurboTax and H&R Block can typically be purchased for $120 or less – with coupons readily available for discounts in the 15 to 20 percent range – whereas a CPA will normally charge $200-plus just for basic filing. If you find these platforms as intuitive as they claim they are, you can save some money up front.
- Simple. If your business only has a handful of deductions, a few isolated sources of income, and a couple of investments, there’s really not much of a need for a CPA. A DIY tax service will walk you through the process and handle everything for you. It’s a lot simpler than some people in the industry would like you to believe.
- Fast. Whether you go with a CPA or tax software, you have to spend time gathering all of your documentation and organizing receipts, forms, etc. Once it’s all gathered, you may as well do it yourself. Today’s tax filing software streamlines the process and allows you to complete your taxes in a matter of hours. Even the best accountant will require days to complete your paperwork.
It’s hard to deny the effectiveness of the DIY tax approach. With a handful of helpful platforms now on the market, it’s possible to handle most filings on your own. If you’ve never considered it in the past, now may be the time to start. Don’t write-off this option.
3 Reasons to Hire a Professional
CPAs and tax professionals exist for a purpose. They’ll never be replaced by DIY software, regardless of how intuitive and streamlined it becomes.
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There are many distinct advantages that come along with hiring a professional, including the following:
- Someone to speak with. Perhaps the biggest benefit of hiring a professional is that you get to interact with a real person. While DIY tax software may be able to suggest certain deductions and exemptions, there’s only so much a computer algorithm can do. An accountant has spent years in the industry and understands the complexities of the IRS code. As a result, they can suggest tax savings and help you develop strategies for saving the most.
- Better software. The tax software you purchase for personal use is certainly efficient and accurate, but it’s nothing compared to the software CPAs use. They regularly pay thousands of dollars for their technology, which means it comes packed with extra capabilities and resources. This reduces the risk of error and makes the process more thorough.
- Less risk. “There are so many things that can go wrong,” says Mike Ryan, director of the Twin Cities Small Business Development Center in Minneapolis, when asked about the DIY approach to tax filing. All it takes is one misstep and you could tip the IRS off to bigger issues. However, when you use an accountant, you’re able to mitigate that risk. There’s a much smaller chance that you’ll be audited when you use a professional.
As you can see, there are a number of advantages that come with hiring a professional to file your taxes this year.
This isn’t to say you should hire an accountant, but it does give you something to think about. When making your decision, keep this option in mind.
Putting It All Together
In the end, an entrepreneur or self-employed individual has two primary choices: Use one of the handful of advanced tax software available on the market, or hire a CPA to handle everything for you.
There are pros and cons to both options, so it’s important that you weigh them accordingly.
What you’ve done in the past may not be the best option for you this year. Circumstances change and you must be willing to adapt to changing requirements.
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Finally, remember that it isn’t all about cost. While you don’t want to spend more than you have to, the more important thing is that you file an accurate return that doesn’t raise red flags or violate any IRS rules.
The peace of mind that comes along with filing a comprehensive return is invaluable.