Have you read the current iteration of the IRS’s tax code? It’s only 4 million or so words long. That should be no big deal to whiz through on a weekend, right? At Umbrella Financial Services Tax Solutions Group, one of the questions our team hears time and time again is from skeptics who wonder whether they really need tax preparation help. Whether we’re talking about a tax prep app on your smartphone, software you access on your computer, or the services of a local tax preparation professional, many feel it’s a waste of money to make use of a tax preparation service when you can file a hard copy of the form 1040 for free with the IRS. But is free really free?
Let’s start with the basics. When it comes to straightforward cost, filing a hard copy of the form 1040 is pretty close to free. You can download a printable version from the IRS website, fill it in by hand, and mail it to the IRS. So really, you’re only spending the cost of paper, an envelope, and a stamp. It’s the middle step—the filling in the form accurately part—that throws a wrench in the works for most people. Because, as we mentioned above, the IRS’s tax code is pretty extensive. Even with all the online resources available, it’s immensely difficult to ensure you’re getting every deduction available to you and calculating everything properly. So, when it really comes down to it, there is more that goes into the cost of tax prep than just the actual cost of filing.
Knowledge is Savings
First and foremost, the more knowledge you have about federal and state tax codes, the more likely you are to save on your tax return. A greater familiarity with the current deductions and laws means you’re more likely to know just how many will apply to you. If, however, you don’t really want to re-read the multi-million word tax code every year to ensure you’re filing everything properly, this is where a tax prep app or software can come in handy.
Companies like Umbrella Financial Services or TurboTax have the resources and staff available to comb through all the new tax code updates each year. This allows us to keep our tax prep app up to date with the most recent adjustments or alterations which, in turn, allows us to ensure you’re getting all the deductions and savings available based on your individual situation. You’re more likely to get more deductions (and more savings) if you file with a tax prep app or service because we have the resources to stay up to date and knowledgeable on a deeper level of the tax code.
Time is Money
Another big element to factor in is how long it takes you to actually calculate everything and fill out the form 1040. If you’re fresh out of college, you don’t own property, and you only have one job, filling out your tax return probably won’t take a ton of time. Conversely, if you own your own business, have multiple properties, have a spouse and/or kids, or any other number of things that make tax filing more complicated, it could realistically take multiple days to prepare your tax return. What is your time worth?
Generally speaking, unless you’re knowledgeable about the tax code and all the changes made from year to year—or your tax filing needs are very simple—the savings of filing on your own will be negated by all the time it takes you to find every deduction, calculate out every line, and figure out the end result. And that’s after you take the time to parse through the complexly written instructions that come along with the form 1040. If it’s going to take several hours on a weekend (or multiple days), ask yourself whether it’s worth it to lose those hours of free time in exchange for the savings of filing a tax return on your own.
There is more to tax preparation than time and cost, however. Stay tuned for the Umbrella Financial Services blog for part two of this post, where we’ll offer even more factors to consider before you decide whether filing for free is worth it. If you need tax help, check out our easy to use tax prep app today!