One of the questions we hear pretty frequently here at Umbrella Financial Services is whether paying for a tax specialist or software to file a tax return is worth it. While it is possible to file your federal and state tax returns for free—or, at least, for the cost of an envelope and stamp—is that savings really worth it in the grand scheme of things? There are more factors in play than just cost versus savings. If you’re just now joining us, be sure to check back and read part one of this blog so you don’t miss out on what we covered before. Here is what you ought to consider before deciding on handling the income tax return filing process on your own:
Time and Knowledge
As we discussed last time, two of the biggest factors that should factor in to filing your own tax return rather than using a tax prep app or software are how much time you have and how knowledgeable you are on the subject. First and foremost, it can be frighteningly easy to accidentally commit tax fraud if you claim a deduction that is no longer available, or if the restrictions have changed. The IRS changes tax regulations pretty frequently and, unless you keep up with each one, you could do more harm than good without meaning to. In addition, a thorough knowledge of the current tax code will ensure you’re getting the most savings possible by way of the array of deductions available based on a slew of different circumstances. The more you know about the current tax code, the more you’re likely to save.
In addition to having a thorough knowledge about tax codes, filing a tax return requires time. And, unfortunately, the less familiar you are with the process, the longer it is likely to take you. Where a tax prep app or online software will guide you step-by-step through the process and do all the hard work for you, filling out a tax return on your own doesn’t come with those nice, easy-to-follow prompts—nor does it have a handy built in calculator. If you decide you’ve got the time, be sure you double-check your math!
Often, a major reason for the holdout, especially for the older generation, is the hurdle of technology. Being computer savvy will make a big difference in the ease at which you can navigate that online tax prep app or software successfully. Of course, if you’re not a computer whiz, that doesn’t mean you are stuck filing your tax return on your own; a local tax return preparer can offer the same help without needing to jump online. For many, filing digitally is both safer and a more effective use of time, but that will depend on how comfortable you are navigating a computer.
Peace of Mind
Filing your tax return by way of a tax prep app, software, or a tax return preparer offers something that filing on your own cannot: an assurance of future assistance. The IRS can challenge a federal income tax return up to three years after it was filed (with the exceptions of fraud or underreporting, which have even longer time spans). This means that, for a tax return filed in April of this year, the IRS can come back to you in April of 2020 and challenge every single number you reported to them. If you claimed deductions, you’ll need to be able to show that what you’ve filed is accurate. The difference between filing on your own and filing through a tax prep app is support. Most services offer audit support as part of their service or for an additional fee. This means that, if the IRS comes to you for an accounting, you can get help from someone well-versed in navigating the tax world.
Should I Pay Up?
Paying for a professional tax service may seem like an unnecessary expense up front, especially when you can file both federal and state tax returns for free. However, you have to factor in how free that free filing really is. Whether you go the route of tax prep software or an in-person tax specialist, you will be paying a fee but, often, that fee for services is less than the amount you’ll recoup from additional deductions a tax specialist can find for your specific circumstances.
Get help from a tax specialist when it’s time to file. Try the Umbrella Financial Services tax prep app today!