Weighing the Pros and Cons of Filing Your Taxes Online
Filing your taxes can be a complicated process and can put you at risk of penalties and fees if you make a mistake. Fortunately, the internet has provided an easy way to self-prepare your taxes, check them over for mistakes and file them quickly online. These services don’t come without their limitations, however, and may not be appropriate for all tax situations.
Find out the benefits and drawbacks of preparing and filing your taxes on your own versus professional filing options.
Pros and Cons of Doing Your Own Taxes
When it comes to doing your taxes, deciding whether you should be filing your taxes yourself can be a tough choice. Before opting for taking your taxes into your own hands, it's a good idea to weigh the benefits of self-preparing your taxes and filing them online to see if it works for your situation.
One of the reasons filing online is so enticing is that it gives individuals and businesses greater control over filing options. There are a number of benefits that come with filling out your own tax forms and submitting them over the internet.
- It's quicker. Preparing and filing your taxes online allows you to fill in the appropriate numbers and let the online program or service handle the calculations and form selections. Once you're ready to file, it's done with the click of a button, and your return goes directly to the IRS, often being accepted in only a few business days.
- It's often cheaper. If you have a simple tax situation, online preparation and filing services are significantly cheaper than hiring a professional. Depending on when you file and the service you use, it can even be free.
- Fewer errors. Because the program you use chooses the appropriate forms and does all the calculations for you, there is a lower chance of error. Most services also run a final check or offer a review by a human tax professional before submitting your return to ensure everything looks accurate.
- Offers financial insight. Preparing your own taxes can help you identify areas where you may be paying more than you think you should, creating a starting point for reducing your tax obligations in future years.
There are a few limitations that you should consider before taking the plunge into self-preparation. You'll want to consider whether any of these factors are an issue for you:
- You'll need computer knowledge. Since you prepare and file your taxes online, it's important that you're comfortable working on a computer. You’ll also need a solid internet connection.
- It could be more expensive. If you have a complex return that involves multiple states, or you require additional assistance, it's possible that online preparation can actually cost more than just hiring a local professional.
- Full accountability. Unless you're willing to pay extra money for audit protection, you are held solely liable for any mistakes found on your tax return.
- You’ll need a basic understanding of taxes. Tax software programs aren’t mind-readers. To make the most of self-filing, you’ll need to know the basics of your tax situation, like what kind of information you need to include and what unique circumstances may apply to your return.
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When you hire a tax accountant to handle your preparation and filing, you can get certain services or insight that you don't get or are difficult to get from online services.
- Reduced liability. As long as you're honest with your tax professional, the liability for any mistakes on your return lies with the person you've hired. This is especially helpful if you're audited.
- Customized service. Online tax services are designed to meet the general filing needs of the public. A professional focuses on the areas that matter most to you and helps you understand anything that might be confusing. It's also beneficial to have a live person you can call and speak with any time you have questions or additional documentation is needed.
- Less time out of your day. When you work with a tax professional, you often just drop off the necessary information and documents and let the professional handle the preparation without your presence. Then, when your taxes are completed, you simply return to verify everything is accurate before they are signed and submitted.
- Personal knowledge: Tax professionals have often seen a variety of tax situations and may have knowledge about extra deductions and credits you qualify for, reducing your tax obligations. They can also make recommendations on how to improve your tax situation in the next year.
Choosing how to prepare and file your taxes is an important personal decision, but there are some general guidelines that could help you make the choice that offers you the greatest benefit:
Filing online is a good option if you:
- Feel comfortable on a computer
- Are eligible for a simple tax return
- Know enough about tax preparation to avoid needing much assistance
- Are confident in your ability to verify your information is accurate
- Want to know more information about your tax situation
You might be better off hiring a tax professional if you:
- Prefer a hands-off approach
- Have a complex tax situation
- Require extra guidance in the process
- Think you may be at risk of an audit
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