Question: I’ve always done my own taxes using a free e-file service, as up until now my returns have been fairly straightforward. However, in the past year I have gotten married, purchased a house (and qualify for the $8k tax credit), taken on student loans, and undergone several other changes that are sure to make my return much more complicated. At what point does an individual cry uncle and get professional tax help? I don’t want to spend the money on TurboTax if halfway through I realize I’m in over my head. Mainly, I’m concerned about doing everything correctly and want to get us every penny of the sizeable chunk of change the government owes us.
Answer: Life changes can make your once-simple taxes suddenly seem daunting. When we got married, my husband was freaked out about our combined taxes because I’m self-employed and fill out a Schedule C (which is kind of a hassle). So we went to see an accountant—and watched as he basically plugged our information into his version of Turbo Tax. Great, dude. Thanks. Here’s $250.
In your case, the good news is that your life changes are common ones. If you’d told me that you received rental income, started a side business and sold some stocks and bonds, I’d definitely point you toward a professional. But most tax software these days will lead you through a series of questions that will pinpoint life events (such as getting hitched) and other big changes (like buying a home).
So I say this: If you’re fairly comfortable with tax software and able to look up answers when you run into trouble (online or in a software’s “help” section, for instance), give an online tool a go. Many of them (H&R Block at Home, Turbo Tax, TaxAct) allow you to start a return for free, so if you get hung up in the middle, you haven’t spent anything.
If the whole idea makes you break out in a cold sweat, try a tax professional this year. You’d probably be fine with someone like an H&R Block, because your situation isn’t unusual. You got married and bought a house—something they’ve dealt with thousands of times over. If you find yourself in a more complicated tax situation in the future, ask for references from friends and colleagues who have their taxes done by pros. (Although you should look for a reference from someone whose situation is similar to yours—that way you know the accountant handles it.)
If you’re somewhere in the middle, consider a solution like H&R Block’s “Best of Both.” (I am NOT a paid representative of H&R Block, by the way. Just a fan.) You use their tax prep software, but you can ask questions of H&R professionals at any point, and someone will review your return before you send it in. My husband and I used this service last year, and the rep discovered that I needed an Employee Identification Number (EIN) to go with my self-employed retirement plan. It costs about $100 for your federal return, which is a pretty good deal. And if there are no hiccups, next year you know you can do it on your own.
A caveat: The question is slightly skewed by the $8,000 home buyer tax credit you’ll be able to claim this year, which makes things more complicated. I still maintain that it’s possible to figure it out on your own, but the sheer newness of it may make a tax pro worthwhile. Check out this article from MoneyWatch.com for more info on the credit.
Readers, will you be doing your own taxes this year?