Lawmakers promised a federal income tax system so simple that you could file an individual return on a postcard. The Tax Cuts and Jobs Act of 2017 didn’t quite hit that target – and even if it had, it wouldn’t have mattered until next year anyway.
Right now, your concern is filing your 2017 return by mid-April, and doing so remains a complicated and involved process. By the IRS’s estimate, Form 1040EZ takes an average of five hours to complete, while Form 1040 clocks in at an average of 15 hours.
Before getting into the specifics, ask yourself: How comfortable am I with handling my finances? If managing your online bill-pay account gives you hives, online tax software might not be for you. But even if you’re a whiz with your balance sheet, maybe your time is better spent calling on customers or coaching your daughter’s lacrosse team. If so, a tax preparer might be the answer.
There is no one-size-fits-all answer about whether you should do your own taxes, but below are some things to think about before deciding:
Many taxpayers work a traditional job, where they are paid directly by an employer who withholds taxes and submits those to the government. Filing your taxes in this scenario can be relatively straightforward, especially if you don’t itemize deductions (see below). Tax filing gets more complicated when a person has multiple jobs, works in one state and lives in another, is self-employed, or has significant income from such sources as interest, capital gains, spousal support, or a legal settlement.
Standard deduction vs. itemized deductions
According to the IRS, most taxpayers elect to take the standard deduction. For many, however, itemized deductions provide the greatest tax benefit. For example, a taxpayer who makes significant charitable donations or takes a substantial deduction for mortgage interest. But while itemizing can lead to a lower tax bill, it also multiplies the complexity of filing your taxes.
How much will it cost?
Doing your taxes on the cheap doesn’t have to mean picking up a tax return form from the post office and doing it the old-fashioned way with a pen and paper. The IRS provides links to free online tax prep options for individuals with a gross adjusted income of $66,000 or less, and many tax software companies provide discounts during the height of tax season. For the 2016-2017 tax season, the National Society of Accountants estimated preparer’s fees for a simple federal and state return to be around $176.
Can I plan for the future?
The ability to effectively plan for the upcoming tax year can be a drawback to doing your own taxes. While most tax preparation software include a planning function, it is not always easy to understand, nor does it offer the level of individualized advice you can get from talking to a professional. Given the changes on the horizon with the new tax law, this might be the year some seasoned self-preparers gather their paperwork and make an appointment.