Tax Hacks: Paying a Pro to Do Your Taxes? Read This First

Photo (cc) by StockMonkeys.com

According to the IRS, 60 percent of Americans use a paid professional to prepare their taxes. But April 15 is taxing enough without blowing big bucks on paid preparers who are either overkill or overpriced.

For many people, there’s no reason to pay at all.

Free tax preparation and filing

If you made $52,000 or less last year, it will cost you zip to sit across the desk from a live, human tax preparer. All you have to do is make an appointment at a Volunteer Income Tax Assistance (VITA) site. And even if you made more than 52K, if you’re willing to do varying degrees of the work yourself, you can still file free. For more details, see “5 Ways to Get Free Help With Tax Prep.”

Simple taxes? Simple solution: software

Two other options are to buy software and install it on your computer, or use an online-only preparation service. Of those two options, online generally offers more choices and lower prices.

For the vast majority of people, this is the right approach to taxes. Because while income taxes may seem exceedingly detailed and complicated to you, doing math and remembering a few thousand rules and variables is exactly what computers were invented to do. So if all you’ve got is a W-2, a couple of 1099s and a mortgage deduction, there’s no reason to give a tax preparation company $150. Go with online software and do it yourself.

Hit the software supermarket

There’s a ton of online tax prep companies to pick from. Best way to check out a bunch in one place? Head for the IRS Free File website.

As the name implies, this site is really for those qualifying for free filing, but the companies participating in that program also list their prices for paid online prep on the same site. There are dozens of companies listed on the Free File site, many with prices much lower than traditional sources like TurboTax.

But before you make a selection, be sure to check the prices not just on federal returns, but state as well. They vary widely.

Still insist on sitting down with a live human? At least get the right one. Watch the following video, then meet me on the other side.

Do you really need a pro?

When you decide against do-it-yourself software and walk into a paid preparer’s office, you may not be accomplishing much, other than creating a bigger bill. That’s because virtually every human tax preparer is also using software to prepare your return. You’re giving them your information, and they’re doing the same thing you could be doing: typing it into a software program that spits out a completed return.

In other words, in many cases paying a pro means paying someone from $50 to $500 an hour to do your typing for you.

So why go to a human preparer? There’s only one reason: Sometimes human beings can do things that software can’t. For example, by asking the right questions, they can ferret out deductions that software might have missed. Or by getting to know your situation, they might help you formulate a strategy to minimize future taxes, or answer other financial questions unrelated to taxes.

While most modern software does ask questions, provide answers and try to help with strategy, it will never be a match for an expert human brain. So don’t be penny-wise and pound-foolish. If a pro can really help you, buck up. But if you don’t need or don’t receive valuable personal advice, don’t pay for it. Use software and do your own typing.

How to find the right pro

If you’ve decided you need personal help, the way you hire a tax preparer is the same way you’d hire anyone, whether it’s a contractor, a lawyer, a mechanic or a doctor.

  • Ask your friends or co-workers for referrals. But the most useful will be those sharing a situation somewhat similar to yours.
  • Check out credentials. All paid tax return preparers are required to have a Preparer Tax Identification Number, but professional credentials aren’t required. They are, however, desirable. In declining order of cost, there’s tax attorney, then CPA, then enrolled agent. To learn more about what various designations mean, see the IRS guide, Understanding Tax Return Preparer Credentials.
  • Ask about experience. Credentials and education are nice, but experience is critical — especially experience in dealing with people in situations similar to yours.
  • Ask for referrals. Any professional in any field should be happy to provide them. Of course, only an idiotic professional would provide referrals that would bad-mouth them, so don’t put too much weight on this one.
  • Talk to several before you decide. This is easily the single most important thing before hiring any service professional. Only after talking to several people will the positive attributes you’re seeking surface in one of them.
  • Ask about continuing education. I’ve been a CPA for more than 30 years, and along the way have skated through many meaningless correspondence courses simply to keep my license active. So a preparer taking continuing ed is no guarantee they’re up to speed. But it’s better than nothing.
  • Ask about professional organizations they belong to. As with continuing ed, not the be-all and end-all, but belonging to professional organizations at least indicates they take an interest in their profession.
  • Make sure they’re around all year. You could need help with an audit in August.
  • Compare prices. If one pro charges more than another, what justifies the premium price? There’s no harm in asking.
  • See what the IRS suggests. Check out these brief, easy-to-read articles from Uncle Sam: “What Are the Red Flags? IRS Tips for Choosing a Tax Preparer” and “When, and How, Do I File a Complaint About a Tax Preparer?

Bottom line? If you’re going to pay a pro, ask as many questions as you can about strategies to minimize your taxes and get enough sensible, specific, actionable advice to offset the additional cost.

What’s your opinion when it comes to paying a pro or doing it yourself? Let me know below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Common Medical Expenses That Medicare Won’t Pay For
5 Common Medical Expenses That Medicare Won’t Pay For

Don’t let these health care costs catch you off guard in retirement.

10 Places Where Social Security Offers the Best Standard of Living
10 Places Where Social Security Offers the Best Standard of Living

These U.S. counties offer retirees a chance to stretch their benefit checks while enjoying their golden years.

8 Things You Can Buy for $1 or Less on Amazon
8 Things You Can Buy for $1 or Less on Amazon

They say you get what you pay for — but not always. Sometimes, you can uncover a good deal at a great price.

9 Hidden Ways to Get More Out of Amazon
9 Hidden Ways to Get More Out of Amazon

You don’t have to be a Prime member to take advantage of these little-known perks of shopping on Amazon.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?
Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?

Understanding survivors benefits rules is the key to getting the most from your benefit.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

These Are the 10 Worst Cars for Depreciation
These Are the 10 Worst Cars for Depreciation

Two types of vehicles are especially likely to see steep plunges in value.

Never Buy These 10 Things With Your Credit Card
Never Buy These 10 Things With Your Credit Card

Credit cards offer many conveniences and protections, but sometimes it’s simply smarter to keep the plastic tucked away.

13 Amazon Purchases That We Are Loving Right Now
13 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

10 Things I Always Buy at Trader Joe’s
10 Things I Always Buy at Trader Joe’s

From snacks to sweets to side dishes, stock your cart with these time-tested favorites on your next TJ’s run.

8 Surprising Household Items You Can Sell for Fast Cash
8 Surprising Household Items You Can Sell for Fast Cash

Sometimes, the humblest household items are worth the most money.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

There are easy high-paying majors available in the U.S. — and no bachelor’s degree is required. We’re here to help you find easy degrees that pay well.

Cut These 11 Expenses Now If You Hope to Retire Early
Cut These 11 Expenses Now If You Hope to Retire Early

Like the idea of financial independence? Part of the FIRE equation is cutting costs.

5 Ways Social Security Will Change in 2021
5 Ways Social Security Will Change in 2021

These adjustments will affect both workers and retirees in the new year.

Stop Buying These 19 Things Online
Stop Buying These 19 Things Online

The internet has changed how we shop. But for some things, you’re still better off buying the old-fashioned way.

Seniors With COVID-19 May Display This Unusual Symptom
Seniors With COVID-19 May Display This Unusual Symptom

Largely asymptomatic seniors may experience a symptom not commonly associated with the coronavirus.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Food Supply
7 Tips for Building an Emergency Food Supply

A pandemic or natural disaster could leave you reliant on your existing emergency food supply. Is your pantry well-prepared for emergencies? Knowing what to stock up on for emergencies can be a difficult task and we’re here to help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

8 Things You Should Buy at Restaurant Supply Stores
8 Things You Should Buy at Restaurant Supply Stores

You don’t have to be a chef or a restaurant owner to shop here.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.