Who Can DIY Their Taxes and Who Should Use a Pro

There are always a handful of people that I run into this time of year who like to brag about the fact that they do their own taxes. Always have, they say — and always will.

How to Save $1 Million in Less Than 40 Years with a Roth

It’s all of those things above that can lead to less money in your pocket (not to mention a whole lot more stress and a lot less free time to enjoy things I assume you’d rather do than your own taxes). Any errors that you make on your tax return are likely to be far more expensive than any fees you’ll pay to a CPA.

The challenge with any tax-related mistake is that things tend to compound over time. Say you miss something on your tax return this year and pay less in taxes than you actually owed. If you get audited down the road, the IRS isn’t going to just shrug it off as “oh well, everyone makes mistakes.” You’re going to owe what you didn’t pay — with interest and penalties, too. According to the IRS, interest accrues on any unpaid tax from the due date until full payment is made, and late-payment penalties can add up to a maximum of 25% of the amount owed.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Making big mistakes that cost serious money or opportunities simply aren’t worth it. Not when it’s your hard-earned money on the line.

Who Needs a CPA – and Who Can Get Away with DIY

In general, most people will benefit from using a CPA. Even if your financial situation is relatively straightforward, you’ll save time and energy by getting help from a professional. You’ll also get added peace of mind that someone who lives and breathes taxes reviewed your situation. This makes mistakes less likely than if you did your taxes on your own, and also increases the likelihood that you’ll take advantage of every opportunity you can to reduce your tax bill.

All this being said, not everyone needs a CPA. Here’s a good general rule of thumb to use to help you determine if you can DIY: Do you have one source of income via a W2 from a single employer? Then you can probably get away with doing your own taxes. But the moment your financial situation gets any more complicated than that — say you earn 1099 income (even if it’s on the side of your full-time job and you don’t consider yourself “self-employed”) or you have enough deductions that you think it makes sense to itemize — it’s a good idea to find a CPA who can help you.

At the very least, you’ll save yourself time and stress, and any fee you pay to free up more time while reducing your stress is probably going to be well worth the cost.

How to Find the Perfect Balance Between Spending and Saving

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

TOPICS

Eric Roberge, CFP®, is the founder of Beyond Your Hammock, a financial planning firm working in Boston, Massachusetts and virtually across the country. BYH specializes in helping professionals in their 30s and 40s use their money as a tool to enjoy life today while planning responsibly for tomorrow.

Eric has been named one of Investopedia's Top 100 most influential financial advisers since 2017 and is a member of Investment News' 40 Under 40 class of 2016 and Think Advisor's Luminaries class of 2021.