Who Should Do Your Taxes?

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Your payroll forms and stock records start to arrive in the mail and you begin to swear you’ll soon gather up all those receipts. Tax Day looms. Who’ll help file your 2014 return?

Every U.S. citizen living and working in this country or abroad must determine the federal income taxes he or she owes, as well as taxes owed to individual states or other local authorities. The deadline to pay those taxes for yearly salary earners falls on April 15 of most years, including 2015. If you pay taxes quarterly, you face deadlines in April, June, September and January.

Whichever category you find yourself in year to year, you must choose how to file a tax return before the deadline, as well as which filing status you qualify for. Generally, your choices for filing status are:

  • Single or head of household, meaning you detail on tax forms only your income, deductions and tax breaks.
  • Married filing jointly, meaning you and your spouse report your combined income and deduct your combined allowable expenses.
  • Married filing separately, which absolves each of you for the other’s possible unintentional omissions or deliberate errors.

Because some filing statuses can be more advantageous for you than others, determine the filing path that best suits your personal and financial situation.

Next, decide who if anyone will help prepare and file your return. The average fee nationwide for preparing a tax return, including an itemized Internal Revenue Service Form 1040 with Schedule A (for itemized deductions) and a state tax return, is $273 this year, according to a survey by the National Society of Accountants.

Using a certified public accountant or tax preparer is a common way to address your tax situation well before a deadline but many people continue to prepare and file federal tax returns themselves.

CPAs versus tax preparers. Even though CPAs and tax preparers may have significant experience in completing and processing tax forms, there are differences between each type of professional.

CPAs, for example, must undergo rigorous education and certification to become experts in many areas outside of tax preparation, such as accounting matters or other financial services. While you may very well pay more for the services of a CPA than for a non-CPA tax preparer such as an enrolled agent or a registered tax return preparer, the additional cost generally covers the expertise to analyze complex tax situations.

If you believe your tax situation is relatively straightforward and simple, choosing a tax preparer might be a more cost-efficient method to file. Another advantage: These professionals offer you a degree of protection. If one of these professionals makes a clear error or miscalculation on your return, the IRS often holds the preparer accountable before penalizing you.

Remember: Booking a professional preparer becomes harder the closer we get to the filing deadline.

Filing yourself. Individual or self-filing can be an option if you want to save money on hiring a CPA or preparer and especially if you’re experienced with tax filing. If you make less than $60,000 a year, you can find free forms and other tools on the IRS Free File page.

Several national tax chains, local and national organizations, and even makers of tax software offer free or low-cost preparation services both in-person and online. Online services allow you to enter employment information that generates the necessary documentation needed to file both state and federal income taxes.

Among those that charge a fee, these alternatives generally cost $12 to $25, depending on the complexity of your return. While these services may be cost-efficient and user-friendly, you do risk incorrectly inputting data or taking an inappropriate deduction.

Complexity of your employment often dictates the best option. For example, if you hold a long-time job with the same company or organization and take a few standard deductions, you might simply go with a preparer or an online, self-filing service. If you changed jobs more than twice in a year or are an independent contractor, you probably ought to consult a CPA or other experienced preparer.

Either way, start your preparing long before the tax deadline.

By Kimberly J. Howard

http://www.usatoday.com/story/money/personalfinance/2015/02/22/adviceiq-options-for-filing-taxes/23794703/

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