Five Arguments For Self-Preparing with Tax Software

I’ve prepared and filed my taxes without the help of an accountant since I was 18 years old.  At first, I was intimidated into thinking that it was a complicated process and that I needed outside help to figure it out.  Then, I was lured in by Tax Slayer web-based tax preparation software (note: I am not paid a dime by Tax Slayer, I’m just a happy user).  I’ve been using it for more than five years now, and I keep going back. In fact, many people are doing the same with a variety of e-filing software. For tax returns filed in 2010, about 25% of returns were self-prepared and e-filed.  This is an 8% increase from 2009.

If you don’t have an incredibly-complicated tax return, here’s why you should prepare your return yourself:

1.  It’s intuitive and much easier than filing by hand.  With all the proper documents in hand, it’s basically as simple as reading instructions on a screen.  All the calculations are done automatically.  The software picks up on errors, too.  There are different “wizards” that help find areas that might lead to different deductions or credits.  I rarely run into problems, but when I do, a simple search through the help section or IRS website have given me the answers quickly.

2.  It’s cheap.  On Tax Slayer, you can e-file a federal and one state return for $15! That’s an amazing bargain to me.  Paying an accountant costs about $200, on average. There’s also more expensive tax software, like Turbo Tax, but you might get the same results with the cheaper Tax Slayer.  This year, I tested to see how Tax Slayer stacks up against Turbo Tax by preparing and comparing my refund results on each website.  Turbo Tax does have some extra bells and whistles that are convenient but not necessities.  In the end, I got the exact same refund amounts on both sites. The big difference: Tax Slayer cost $20 for federal and two state returns, while Turbo Tax wanted $109.  Obviously, I filed with Tax Slayer.

3.  You can produce the same results as an accountant.  So you aren’t a professional when it comes to taxes? That may not matter.  J.D. at Get Rich Slowly uses an accountant, but some readers question if this is necessary.

The general rule of thumb is the more complicated the return, the more beneficial an accountant might be.  For the younger crowd that doesn’t own a house or any investments, the process should be really straightforward as you probably only need to file at 1040EZ. If you don’t have many deductions, taking the standard deduction, which is $5,700 when filing as single for 2010, is definitely preferred.  If your deductions are less than this, there’s no need to itemize.  This can cut out a lot of rules and time spend looking at receipts and other records. When you don’t have many complicated tax situations like capital gains or self-employment, a tax return is simple with little room for improvement with an accountant.

4.  You can start (and basically finish) a return for free.  If you don’t like the software, you owe nothing.  If I haven’t convinced you yet, you can give Tax Slayer a shot without obligation. I tried Turbo Tax without paying this year, but didn’t end up filing with Turbo Tax after the results were no better than the cheaper Tax Slayer.  Give it a try, and if it’s not for you, you won’t be out anything more than a little bit of your time.

5.  You get a real sense for how taxes work and where you can find deductions.  Many people that I’ve talked into doing that own taxes really had no idea what different factors determine what you owe.  They had no idea how taxes were calculated and what types of deductions could be taken.  While I’m not an expert on tax code by any means, I’m far more knowledgeable that I was before I did my own tax returns.  That helps with decisions I make during that year that will have tax implications in the future.

I have to admit, since I haven’t had an accountant prepare my taxes in recent years, I have no independent verification that I’m receiving all the deductions and credits I’m entitled to.  I’ve pondered switching to an accountant, especially when I receive income from being self-employed this year.  Things can also get a little confusing when capital gains, tax lots, and dividends from investments come into the picture.  Maybe next year I’ll hire an accountant AND attempt my return on Tax Slayer as an experiment.

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photo by: jekert gwapo