Is it worth it to do your own taxes?
I have a lot of clients who used to do their own taxes. I don’t mind. It’s always fun to talk with folks who have an interest in my field, where they are professional tax folks or are simply interested in knowing a little bit about how taxes work.
However, I think that tax-prep software does a disservice to people, especially freelancers and folks who own their own businesses. I’m not talking about how it prepares the forms. (Although, I have seen people mis-interpret questions and then get a love letter from the IRS.)My husband commented this morning that one of the people he follows on Twitter said they had spent 4 hours preparing their taxes. Now let’s get to my favorite part: math. This guy is a freelancer, he bills out at $90/hour. That means the 4 hours he spent preparing his taxes equals $360 of his time. Since he is a freelancer, he needs the business version of the tax software, which costs $50. Right now, his taxes just cost him $410 in lost revenue from the time he spent and in tax software. Then there’s the little things like: how long did it take him to go get the software? Did he research which software he was going to use? How long did that take?
So let’s say he brought them to a preparer. A normal return will take me 1-3 hours, depending on the complexity of the return. Most CPAs and EAs are comparable in prep time. So, basic return, with a business starts at $250 for me. Time-wise, I saved him 4 hours. Money-wise, I saved him $160.
Granted, if you’re not that busy, then I haven’t saved you anything…