Am I likey to get a higher tax refund by doing taxes myself or having a professional do them?

Question

I'm thinking of doing my taxes this year. I plan to buy Turbo Tax, and a book called 1001 Tax Deductibles and research which ones I am elegible for... but is it better for a professional to do it?

Answer 1

It will save the money that you pay the professionals, but since they are professionals, they might know some things you are eligible for, that you might not find on your own, or in that book of yours.

I would suggest using HR Block.

Answer 2

If you are inclined to spend the time doing your own taxes and tax research, give it a try. If your return is not too complicated, you will probably be OK.

A good professional is worth the money if they can find deductions or credits that you did not find. Also consider the value of your time, and the stress of doing your own taxes. A simple return may take a tax professional 20 minutes to do. It might cost you $75 or $100, but you have not spent your own time at home with the software. Plus by paying a professional, you have a guarantee of accuracy should a problem arise.

Answer 3

Don't worry about Bostonia's answer. There are quite a few qualified people in these so call store front mills (as Bostonia calls it) that can handle your tax situation. Of course you can save some money by doing your taxes yourself on TurboTax but it helps to know how to do your own taxes manually. Then you will understand TurboTax much better. I would also suggest to buy J.K. Lasser's Your Income Tax 2008 than the book 1001 Tax Deductions.

Answer 4

Just an add on to what has already been said:

If you share kids with someone that you do not live with, you will not want to try this at home.

Also, you may not even need tax software. If you qualify to use form 1040-A or 1040EZ, try following the instructions before buying tax software. Software is only as good as your ability to understand the questions. This is "Tax-ese" not English, so mistakes are likely.

Finally, if you do engage a tax professional you will find an Enrolled Agent to be the best value. CPA's charge a lot of money because they have great risk when they act as an accountant and render an opinion on financial statements, and they charge the same rate for tax retuns even though the risk to them is far less.

EAs live by tax law only, not accounting rules. We are a cut above unenrolled preparers by virtue of having satisfied the Secretary of the Treasury's criteria by test or experience.

By the way, you really are not asking the correct question. I think the real question is: is my tax return more likely to be correct if I prepare it myself or engage a professional?

Your question is off the mark because you might prepare the return incorrectly, get a refund and have to give it back with late fees, long after you spent the money. That is very unlikely with a true tax professional.

Good luck!

Answer 5

You'll certainly have more money in your pocket if you do it yourself if you're like the typical taxpayer. Unless you own a home or had very high out-of-pocket medical expenses that you paid it's not likely that a pro or that book will do any better than you can with TurboTax alone.

You would want to consult with a pro (NOT a store-front tax prep mill!) if you had any of the following:

1. Sold rental property.
2. Sold a home that you had lived in for less than 2 out of the last 5 years.
3. Traded stocks or bonds, particularly if you sold a large number of stocks that were purchased at different times.
4. Earn more than about $75,000 if Single or $100,000 if married filing jointly and either have more than 3 children or have a large amount of itemized deductions or depreciation deductions for rental properties.
5. Made a large non-cash donation to charity or donate more than half of your income to charity.
6. Exercised any stock options from your employer, especially if you did not subsequently sell the stocks during the year.
7. Filed or completed a bankruptcy.
8. Lost a home to foreclosure or had a car repossessed.
9. Receive one or more Forms 1099-C or 1099-A from a lender.
10. Own stocks and had dividend reinvestments.
11. Own mutual funds.
12. Have a self-directed IRA.

If you're uneasy about it and have a relatively simple return then one of the store-front mills would be acceptable but I would not use them for a complicated tax return.

Answer 6

If neither of you makes a mistake, should come out the same. A lot depends on how complex your return is. If you own a business, then a CPA (not H&R Block) is probably a good idea - they might know of some deductions you can take that you wouldn't have thought of. If you just have income from a W-2 job, and maybe some interest from a savings account, you can probably do it yourself fairly easily, particularly with something like TurboTax which will lead you through each step.