Why Aren't You Doing Your Own Taxes?

More than half the taxpayers in this country pay to have someone else prepare their return.

That shouldn't be.

Frankly, we all should do our own taxes at least occasionally. Only by doing them can we really understand how even seemingly small changes in the tax code can have dramatic results ... and how sometimes the big newsmaking changes won't affect us at all.

"Doing your own taxes forces you to read and get a sense of how your tax liability is calculated," says Martin Nissenbaum, national director of personal income tax planning at Ernst & Young. "If you understand how it works, you can minimize your liability, plus you'll have a better understanding of how the tax system works."

And that doesn't even address the fact that tax preparation can be very expensive -- and because the average refund is less than $2,000, paying anywhere from $100 to $500 to file isn't very cost-effective.

Do It Yourself

Most taxpayers can easily complete their return using readily available tax software. The two most popular are TurboTax and TaxCut. Both use a Q&A format to ensure that you take advantage of any tax breaks you're eligible for. Both can be bought on disc or used on the Web, and they offer an array of services and information for less than the cost of going to the major chains.

"If you're a midlevel taxpayer, earning $100,000 in income and the complexity of your return consists primarily of wages, dividends, itemized deductions and investments, you can do your own taxes," Nissenbaum says. "There's a lot of good information out there. Virtually everyone should be able to come up with a decent return."

You can make it easier on yourself by approaching the process methodically through a few simple steps. First, find all your records. That means receipts, bills and any documentation needed to back up deductions or other claims, as well as last year's return. While this may sound onerous, you'll have to do this even if you have your return prepared professionally.