The unrecognized fifth season of the year is here: tax season! We like crunching numbers, so maybe we’re a little partial to it being our favorite season. Some people want to do their own taxes. But is that the best choice for you? There are some definite pros and cons to doing your own taxes.
The Upside of Doing Your Own Taxes
1. Saving Money
Sometimes accountants can be out of your budget. That’s okay. Maybe you don’t want it in your budget. You can save money by filing your taxes because you aren’t paying someone else’s wages. You can file for a 1040EZ, and some companies will complete and submit your tax returns for free.
Everyone at some point feels like the only person they can trust is themselves. When it comes to finances, we don’t want to be gypped or feel judged for our income. It’s hard to trust someone with something that you worked so hard to get. Sometimes people take advantage of that, especially if one of your employees has taken from the till or has laundered from you or the company you work within the past. When you’re in charge of your own money in all aspects, you know what’s off.
3. Analyzing your Own Finances
When you’re combing through your finances with a careful eye and have complete control over them, you can analyze your cash flow. Could you be investing more in your 401K, reserving more in your savings account, donating to non-profits, or look to another health insurance plan? You’ll know your own habits and what habits to break.
The Downside of Doing Your Own Taxes
1. Not Knowing Everything
Though your intent may be to save money in filing your own taxes, you might just end up paying more. Some things, like solar power systems, can give you tax credits (for now), but if you don’t purchase a battery backup with it, you won’t receive the tax credit on the battery. Not knowing this could save you thousands of dollars on your tax returns. Some health insurance premiums can be deducted, but not all the time. Without the specifics, you won’t know whether you qualify and therefore save. If you qualify and don’t take the deduction, you’ll lose out on money. If you take it but you’re wrong, you’ll likely be audited or fined.
2. Making Mistakes
Like not knowing some elements of the tax system, you can also lose money in making mistakes. Those can be missing lines, numbers not calculating correctly, or unreported (even if accidental) income. Some things that have happened over the course of the year are easy to forget, especially if you don’t have a good record-keeping system. It’s easy to not report a remodeling project or a donation.
3. Cost in Time
Filling out your own forms can take a lot of time. That’s time you can use better spent on something else, especially if you’re not good at accounting. That time can be spent on bringing in more revenue by focusing on what you need to do to grow your business. Maybe that’s managing or building relations.
While doing your own taxes can seem like a good idea, it may not be if you’re not a professional accountant or bookkeeper. You can avoid major costs to your company, even as far as closing it if you hire an accountant to take care of your tax returns. Having an accountant all year can alleviate stressors of organizing, prevent mistakes on your bookkeeping and your taxes, and make sure that you can spend your time on what matters most. Hiring a CPA to file your taxes during tax season can prevent errors on your taxes and can save you more money than what you’d spend paying them.