This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How to Choose Between Tax Software and Accountant

NEW YORK (TheStreet) -- With tax day just around the corner, millions of Americans are gathering their documents and deciding whether to use an online tax filing service or certified public accountant. There's no definitive rule on which method of tax filing is best -- but our experts can weigh in on which option is best for you.

If you file online ...

The pros:

Filing your taxes online is usually pretty cheap, says Kay Bell, tax expert for Bankrate.com.

"In this day and age we are always looking for bargains, and Tax Slayer, TurboTax and Tax Act are all three very affordable, and they do a great job walking you through the process," she says.

If your filing is fairly straightforward -- if you are a single person with few investments -- a simple online filing may be right for you. Young people, for example, may have only their income from one job and student loan interest to deduct -- a very simple return.

"Those straightforward returns are the bread and butter of online tax services. If you're comfortable using a computer and doing your taxes without any help from a professional, then it's a good option," she says.

If you're thinking of filing online, ask yourself if your personal situation has changed a lot from the previous year. If you haven't gotten married, had a child, bought a house or cashed in investments, an online service can be perfect for you.

Folks filing online can expect to spend around $50 for a federal filing. They also have the benefit of checking out IRS.gov for answers, says Trae Bodge, senior editor for coupon site RetailMeNot.

"There is information on which forms you should use, links to track your refund, links to see what deductions you might qualify for and, if you can't pay what you owe right away, links to make payment plan arrangements. There is also support available and instructional videos via Twitter, Tumblr or YouTube," Bodge explains.

The cons:

If you don't have a professional looking over your shoulder, you could miss something. A tax professional will know when and where you might have made a mistake, and they will go in and fix it, Bell says.

"There's always a danger that you have missed something, that you might have screwed something up. You may think that your return is basic, but if you got married or bought a home, then suddenly you have a joint filing for the first time and mortgage interest to think about," she says.

Most online filings offer a simple "down and dirty" checklist for what you need to file, Bell says. Sometimes, this may not be enough. For example, if you had a child and your medical expenses were more than 10% of your total income, you can deduct those expenses. Tax software probably won't catch that, but a tax professional would.

"If you make a mistake on your return, it could really cost you -- you might have to come back with tax money you don't have, as well as any interest or penalties associated with missing that in the first place," she explains.

If you use an accountant ...

The pros:

If there's a problem with your return, your tax professional can argue for you with the IRS. Attorneys, CPAs and enrolled agents have the authority to be your legal agent, and they can take care of any issues that may arise.

"Tax laws change all the time," says Brad Pine, wealth adviser and president of Bradford Pine Wealth Group in Garden City, N.Y. "To make sure you get your return done right, I am a firm believer in having a professional do it."

If you hire someone to do your taxes, often what they can save you by finding just one missing deduction or mistake can save you more than what you're paying them, Pine says.

"All of a sudden you find that they're saving you well above what they're charging you. The other thing to consider is that your time is valuable. By hiring someone, you're saving several hours that you would have spent working on this," he says.

Even if your tax return is simple, don't discount going to a tax professional, Bell suggests.

"It never hurts to have a good relationship with a professional. As your life gets more complicated and you buy a house, have children, get inheritance from a family member, it's great to have a bond with someone who can see those changes coming and know how they are going to impact you."

The cons:

People may be hesitant to spend the money on a tax professional if funds are already tight, and this is an understandable concern, Pine says.

"If you have a simple return and you see that you're going to spend $150 to $200 on a CPA, it can seem like a lot of money," he says. "If you don't have any questions about your return, then filing online is going to look a lot more appealing."

Taxpayers looking to hire a professional can expect to spend an average of $261 this year for an itemized Form 1040 with Schedule A and a state tax return, according to the National Society of Accountants.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs