From the time I got my first job at sixteen years old, I used my family’s accountant to do my taxes. I would send him all of my 1099s, W-2s, and any other tax forms, and he would send me a tax return to sign and a bill. As my taxes became more complex over time, so did the bill. But four years ago while inspecting my taxes, I found some serious errors. Had I not caught them, it would have cost me over $600, about as much as I was paying my accountant.
At that point, I realized that I know more about my personal finances than anyone else. While I am not the biggest expert in tax law, I am an expert in my money. Three years ago I did my taxes on my own for the first time and have done so ever since. After two years with H&R Block and one with TurboTax, I have learned quite a few valuable lessons about doing your taxes on your own. Read on to learn about DIY taxes and whether that makes sense for you.
The first aspect to consider when doing your own taxes is your financial knowledge. If you feel completely clueless when dealing with money, you may feel better going with an accountant even if you are good enough with a computer to do it yourself.
More than 30 million people used TurboTax last year, and very few of them are “financial experts.” If you have an average knowledge of personal finance, you should be safe doing your own taxes. If you use a tax program like TurboTax, H&R Block, TaxACT, or the new, free Credit Karma Tax, the prompts and questions the software asks you along the way help the program take care of the difficult calculations. All you need to know is how to answer those questions accurately and which boxes to check off for more information.
While you can do your taxes with a pen, scratch paper, and a calculator, to get the most accurate return and take advantage of every possible deduction and credit, using a computer based program is the best option. Simple returns can be completed using your phone, but if you have anything more than a W-2 and one or two more tax forms to report, you are best off using a laptop or desktop computer.
You don’t have to know how to build websites or code to file your taxes using an online or desktop application, but you should feel comfortable using a keyboard and mouse and opening and closing files. If you know enough to save a picture from your phone or camera to your computer and attach it to an email, you have the skills needed for DIY taxes.
Complexity of your finances
Most people have a W-2 from their employer, get a few 1099s from bank interest or investments, and might have a 1098 or other forms for home interest, student loan interest, and retirement account withdrawals or contributions. If that sounds like you, doing your taxes yourself on the computer is fairly easy and straightforward.
As taxes become more complex, however, things are not so cut and dry. If you earn money through a side hustle, as a consultant, or own your own business, you may consider hiring an accountant to ensure you don’t do anything wrong. However, I own a solo member LLC business myself and did my own taxes and created the schedule C just fine three years in a row without bringing on a CPA. For my S-Corp, I did hire a professional accountant.
Which tax program is best?
If you decide to give doing your own taxes a try, you have a few different options to choose from. There are online programs, programs you download to your computer, and even options to complete your taxes with your smartphone. With so many options, it can be confusing to know which one is best for your needs. Here is a rundown of pros and cons from some of the most popular options available today:
- TurboTax. With 33 million users, TurboTax is the biggest DIY tax option on the market. For your personal taxes, TurboTax can handle just about anything you throw at it. If you are comfortable with the idea of doing your own taxes and feel confident on the computer, TurboTax is arguably the best option, but it is not the cheapest. The basic version is free for Federal and $29.99 per state. The most advanced version for self-employed individuals costs $114.99 for Federal and $29.99 per state. On a personal note, I used TurboTax for my family’s personal taxes this year and had an overall easy and positive experience.
- H&R Block. The second most popular DIY tax option is H&R Block. In terms of the refund you receive, H&R Block and TurboTax are very similar. The biggest difference comes in how you use the product and the support you receive. H&R Block was created by a company with more than 12,000 retail locations. If you finish your taxes and need extra support, or even worse get audited, H&R Block is available as a resource with physical offices and human tax experts who can offer whatever help you need for an extra fee. H&R Block offers a free edition where Federal tax filing is free and states cost $29.99 each. The online deluxe version costs $79.99 plus $29.99 per state. I used H&R Block online for my 2014 and 2015 taxes. I found the user interface is not quite as easy as TurboTax, but if you want the ability to get more help with your taxes, H&R Block is the best choice.
- CreditKarma Tax. CreditKarma made its name as a great option to get your credit score and credit report for free. In 2016, the company expanded to offer a completely free online tax filing option. The reviews are mostly positive and the program is available for most people in most states. Aside from a pencil and paper, you won’t find a better deal for tax preparation. It doesn’t get cheaper than free!
What it is like to do your own taxes
Having done my own taxes the last three years, I have learned a few tips and tricks along the way. This section will provide a little more insight in what it’s like to do your own taxes with online or desktop software. In general, online is the best option because your data lives in the cloud. You can access it anytime from any computer with internet access as long as you have your login information handy.
Doing your taxes is not that difficult depending on the complexity of your taxes. The online programs mentioned above do a great job of walking you through what you need to do to complete your taxes. The prompts along the way tell you where to find the information to enter. If you have a form that you can’t figure out where to enter, just type it into the help section and you will get a quick answer.
The biggest secret to a stress free DIY tax filing is organization. Before you even start with the tax prep software, gather and organize all of your tax forms and relevant receipts in once place. That way, when you are doing your taxes, you can quickly access everything you need an know you didn’t forget or miss anything.
Try before you buy and commit
One of the best aspects of most tax programs is that you can try them out for free. The three biggest online tax prep services all let you complete and view your tax return without paying and only charge when you file. If you only have a W-2 and nothing else, you may even be able to use a program like this for free. But that is not your only free tax preparation option.
With no commitment, you can try doing your taxes yourself online. If you have trouble or don’t like the result, the only cost was a little bit of your time. Until you click the button to pay and then file, you can always change your mind without spending a penny.
If you know basic math, can read, and know how to use a computer, there are few reasons you would need to hire an accountant to do your taxes. Thanks to the ease, low cost of online tax prep software, you can safely try DIY taxes without worry. You have nothing to lose but could save a ton of money on tax prep fees. That’s a big financial win that could keep saving you money for many years to come.