Should You Do Your Own Taxes Or Hire a Tax Pro?

When it comes to taxes, you're probably doing it all wrong.

Hiring a Tax Professional vs. DIY

Imagine this... We often find ourselves at a crossroads. One path involves your tax documents and do-it-yourself tax software; The other, an experienced tax professional who will take your documents, charge you a fee, and prepare your tax return free from confusion and tax headaches.

Which path do you choose? Which one is right for you? Let's explore this and by the end of this blog post, you'll be armed with the insights and the understanding to make an informed decision that aligns with your personal financial situation. Maybe it's time to hire a tax pro.

Before we dive in, in case you don't know, I'm Noel Lorenzana. I've been a CPA for several decades now. When I first started working when I was 16, I always prepared my own tax return.

My first job out of college was with the local CPA firm and all of a sudden, I found myself with huge stacks of tax returns that I was expected to prepare.

It was intimidating at first, but I always remembered some words of wisdom from my old pool hall days which goes something like, "Take the easiest shot first and the rest become easier".

So naturally, I started with the easiest tax returns and it did eventually get easier.

Believe me, when I tell you that I understand the challenges firsthand of preparing your own taxes and having to struggle through complex topics. This experience I gained wasn't just a challenge, it was my first step towards becoming experienced and really good if you don't mind me saying, CPA.

What Are The Benefits of Doing Your Own Taxes?

Let's talk about the benefits of doing your taxes with software like TurboTax. Not gonna lie, consumer tax software like Turbotax is pretty great and can guide the average Joe or Jane in completing their tax return, their guided interview process works well for most people, finding deductions, tax credits, avoiding problems, etc.

While do-it-yourself tax software is not that expensive and it is convenient, it's not a great solution for everyone, especially if you have a complicated tax situation.

...So What is a Complicated Tax Situation?

In my opinion, that's anything that starts to make your head hurt.

My brother, for example, does his own taxes and occasionally has questions on how to handle something in TurboTax.

Fortunately for him, he has me to lean on when he has tax questions. But not everybody has someone like me to turn to when they get stuck. Although I do have a free Facebook group that you can join to connect with other tax professionals like myself.

What Are The Cons of Doing Your Own Taxes?

Anyway, when doing your own taxes, you can miss out on deductions or credits for a couple of years.

I know a friend who missed a state tax credit worth about $800 and this was for two years. He called it a glitch in the software, but it was really because of a tax threshold that applied one year but not the next, and as a result, the software didn't carry it forward the following years.

So there is a risk for errors when doing your own taxes. And I see it all the time. I get new clients who decided their tax situation either got too complicated or they didn't want to spend their whole Sunday trying to figure out their taxes.

This one in particular that I'm thinking about, he's a Chicago police officer, married, owns a home, has some investments, children. Nothing complicated. Well, for me at least.

But upon reviewing his prior year return, he left his child off the tax return. This was worth at least a $2,000 child tax credit and about another $100 with the state. He was delighted I discovered the error and I get to charge him for another amended tax return.

Key Tips When Doing Your Own Taxes

So if you do your own taxes, what are some things you can do to ensure you've done them correctly?

First off, after you think you're done, double-check that all your source documents got entered into the tax software correctly.

You would also want to review the final return carefully. Make sure all the numbers make sense. Verify the names, Social Security numbers, and the addresses. Make sure they're all correct.

Flip through the tax return page by page, trying to make sure that everything looks reasonable to you.

Also, look at the prior year's tax return for the sake of comparison with something on last year's return that isn't on the current year's return.

Finally, when switching tax software from one company to another, like maybe you used H&R Block one year, then now you're moving to TurboTax, you need to be careful of items that carry forward. Such as maybe you had stock losses, other carry-forward items, or maybe there's a taxable refund situation.

When doing your taxes, just try not to get lulled into a false sense of security that everything is automatically 100% correct.

Free Tax Deductions Cheat Sheet

To help you with preparing your own taxes, I have a special gift for you. It's my free tax deductions cheat sheet. Consider it as your go-to guide for maximizing your tax savings. You can grab your FREE Tax Deductions Cheat Sheet here. No gimmicks, just real, actionable tips to help you save more on your taxes this year.

When to Hire a Tax Pro?

So when should you hire a tax professional? My advice is whenever you feel that your tax situation has just gotten too complex.

Maybe you had a baby. Maybe you bought a house, got some inheritance money, received some stock options, from work. Maybe some stock trading with options and wash sales that you know nothing about.

Whenever you feel things are getting too complicated and you don't want to spend the time and stress of wondering how to report something on your taxes.

The Benefits of Hiring a Tax Professional

Most of my new clients are delighted to have me prepare their taxes their first year. They feel so relieved and often wish they had done it sooner.

I'm not exaggerating. Check out these brand new Google Reviews I just got from two new happy tax clients.

And if you're close to hiring a tax pro, I say do it sooner rather than later. Why is that?

Well, you may not have heard, but there's actually a shortage of CPAs and good Tax Professionals.

They've been quitting and retiring. It's becoming one of the least desirable professions, and I don't disagree. I actually made a YouTube video on this, which you can check out here.

Starting this year, approximately 4 million baby boomers are turning age 65, and every year after that through at least 2027.

And on top of that, baby boomers are retiring left and right, their finances soaring thanks to years of solid stock market and home price gains.

I mean, can you blame them? I'd retire if I could.

So finding a tax professional now who's actually accepting new clients will become harder and harder to find. I, for one, not accepting new clients. So don't call me.

And that's about it. Thanks for reading and see you in the next blog post!