This post is part of the TaxAct #DIYtaxes blog tour which empowers you to take ownership of your finances by doing your own taxes. TaxAct provides the tools and guidance to help you confidently file your taxes easy and fast. Do your own taxes today at TaxAct.com. You got this.
I was 23 years old and living 1,400 miles from home. I thought my taxes were too complex to do on my own, so I went to the “professionals”. I asked for a quote before we got started – the estimate came to $250. Yikes! Pretty steep! But, with a full-time job and capital gains, I didn’t necessarily know how to file on my own.
We sat down and started the session. This is when my jaw dropped.
The next 15 minutes went something like this:
- He looked at his computer and had to fill in some blank lines
- Phone number
- I answered, he typed in my response and hit enter
- The next screen was labeled, “W2” and asked for:
- the company EIN
- my earnings
- federal taxes paid
- I handed him the W2 and he entered the numbers from the appropriate lines
- He hit enter, and we did the same thing with my capital gains
- *Enter…then a few miscellaneous questions about interest paid.
- *Enter…and we were done. The computer reported that I should receive $600 back from the government
I sat down with this guy for 15 minutes. He clearly knew nothing about accounting, but he was able to follow the simple instructions from his software program…. HECK, I COULD DO THIS FROM HOME! And probably save myself a ton of money!
When the next year rolled around, that’s exactly what I did. Instead of watching that old guy read from his computer screen and turn to me for a response, I just read the instructions for myself. Sooo easy, and it saved me over $200!
6 Reasons For a DIY Tax Season
Have you always had your taxes done by a professional? Too scared to tackle them on your own? Each year, more and more people are firing their accountants and are filing their taxes from home. They are doing their own taxes for the following reasons:
It only makes sense that the tax professionals would charge more to do the work for you than what it would cost to do yourself. It’s not much different than a plumber or electrician coming to your house and charging you for parts AND labor. If you were to do it yourself, you would only pay for parts.
The same is true of taxes. If you go to a firm to get your taxes filed by a professional, you’re essentially paying them an hourly rate for their time and a small portion for their software expenses. If you were to tackle the taxes yourself, you’d only have to pay for the software. And, with better and better software each year, this decision is becoming a no-brainer for many.
2) It’s Not As Complex As It Used to Be
When I was a kid earning my first real paycheck, I remember my Dad doing my taxes for me. Since my income was so simple, he needed only two sheets of paper:
- my W2, and
- a 1040EZ tax form
Beyond that though, it seemed kind of complex. “Fill in the amount from box C, add lines 15-18, subtract line 19… etc”. I could have probably followed the steps, but I didn’t understand it, which is why I was glad he was doing it and not me.
Today, all the adding and subtracting is built into the software. All you have to do is enter what’s asked of you and the software does the rest.
3) You’re Running Out of Time
Accountants often book themselves out a full year in advance and have only a few slots open toward the end of the tax season. At the time of this posting, you have approximately 12 days left to file your taxes. If you try to book a time with a professional firm, they’ll likely turn you down. If you try to get them done at a walk-in service, you might be waiting for a couple of hours. If your taxes are fairly simple, then it might be best to just tackle them yourself. After all…you’re running out of time.
4) It’s Will Make You Smarter
How much tax money did you get back from the government last year?
I bet you knew a pretty exact figure the moment I posed the question. But, what if I asked you how much you paid in? Any idea? And which number is more important?
Let’s say I was a toll collector and you wanted to cross my bridge. I’d let you cross if you agreed to one of these two options:
- You give me $20, and I give you $8 back, or
- You give me $10, and I give you $1 back
Which would you choose? If you were any good at math, you’d choose option #2 because you’d only pay me a $9 toll instead of a $12 toll. When it comes to taxes, most people choose option #1.
They pay way too much money to the government paycheck after paycheck, month after month, and then they never attempt to figure out where they should put their money to reduce their tax liability. BUT, they’re getting a “big chunk of money back” so they never question anything.
If you really want to know the true story about your taxes, file them yourself and keep track of how much you’re paying in to the government each year. It will be an eye-opening experience for sure.
The majority of Americans have only two income sources – one from each spouse – that’s it. If no big life change happened this year (ie. no divorce, no new births, no lawsuits, etc.), then your taxes should follow the exact same course as they did the year before. Even if you had a professional file your taxes last year, you should still have all the detailed paperwork. Uncertain of the answer to one of the questions? Haul out those old tax forms and see what the answer was last year! This isn’t grade school, you’re allowed to look at the answers on this one!
Don’t make your taxes more difficult than they are. If the income is simple and your life events are simple, chances are you could file yourself quite easily.
6) Tax Software is Very Good These Days
Tax software is making life easy for millions of tax filers these days. Each and every year, they’re making updates with the changing tax codes and are making it easier for you to get a refund. Even if your taxes are becoming complex, the software is getting better at simplifying it. Each year, there are fewer and fewer reasons to take your taxes to a professional.
Beating the tax deadline doesn’t have to be stressful. With TaxAct, everything you need to confidently prepare and e-file your taxes is right at your fingertips. You got this. File your simple federal and state return FREE today with TaxAct.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.