Ever thought of doing your own taxes but were too afraid to try?
The majority of Americans pay to have their taxes done professionally, according to IRS stats. Many have developed a phobia of the tax-filing process.
Nearly 70% of Americans fear some part of the tax-filing process, a Nerd Wallet/Harris Poll survey found. And that number rises to 80% among millennials, who, by virtue of age, often have the least complicated financial situations.
But the good news is that doing your own taxes may not be anywhere nearly as complicated -- or as risky -- as you might fear. Nor has it ever been easier to take the DIY route.
The newly minted Tax Cuts and Jobs Act of 2017 is expected to substantially reduce the number of people who have to file itemized returns, which are typically more time consuming and complicated.
"For many individuals, the recent changes in the tax law beginning in 2018 will certainly make their overall tax reporting simpler," said James Guarino, a tax partner at MFA in Tewksbury, Mass. "These individuals will likely not need professional assistance."
Still, whether you are a good candidate to take the DIY route all depends on the complexity of your financial situation.
If you work directly for an employer -- as opposed to being a freelancer -- and rent, you may very well be able to do your taxes on the 1040EZ form. This, as its name suggests, is truly easy.
The whole return is on a single page and leads you through the different sections until you reach the end and find out how much you owe or will get for a refund.
Paying attention here, millennials?
You can use the EZ form if you are single or married without children and filing jointly, and earning less than $100,000 a year. All you need is your W-2 from your employer or employers, if you work more than one job.
"If a taxpayer only has wages W-2 for income, a DIY approach is probably fine," said Sallie Mullins Thompson, a New York-based financial planner and certified public accountant. "I do recommend using Turbo Tax or similar software to avoid math errors."
Have student loan interest you want to deduct? No worries, you can use 1040A, which is also relatively easy, taking 40% to 50% of the time to fill out than the standard 1040 itemized return, said Ted Yoos, a certified financial planner and head of Cornerstone Financial Management in Burlington, Mass.
Still, whether you rent or own is another big factor in how much work you can expect to have to put into your return -- and whether it makes sense to go the DIY route or hire a tax preparer to do the dirty work.
If you own a house and are paying a mortgage, the rule of thumb has long been that you will need to itemize so that you can claim the mortgage interest deduction.
But that has changed dramatically with new federal tax bill, which has doubled the standard exemption to $12,000 for individuals and to $24,000 for those filing jointly.
If you live in the Midwest, South and other parts of the country where home prices are close to or below the national median, the standard deduction may be worth more than the mortgage interest deduction and the deduction for local and state taxes, now capped at $10,000. That, in turn, would eliminate the need to file a more complex, itemized return.
The number of people filling out itemized returns is expected to plunge by more than half, to 19 million from 46 million previously, due to the new tax law, according to the Tax Policy Center.
The exception is the more costly West Coast and the Northeast, where the combination of lofty home prices, big mortgages and high local and state taxes mean that for many people, filing an itemized return will still make sense, said George Gagliardi, a certified financial planner at Coromandel Wealth Management, in Lexington, MA.
"As a Massachusetts resident, anyone here who owns a house and has taxable income and has a mortgage, and has sufficient charitable donations, is highly likely to be itemizing," he said.
However, in order to do your own taxes, you will first have to get over any fear you might have of the process.
In particular, many people worry they will trigger an audit -- or worse -- if they mess something up, Yoos of Cornerstone Management said.
"There is a real fear among a certain portion of the population that if they make an error on their tax return, the IRS is going to come and seize their bank account or make their life very miserable," Yoos said.
If you make a mistake on your return, chances are slim to none IRS agents will show up on your doorstep, he noted.
"If you make a mistake ... the IRS is going to calculate your return as they think it should be calculated and they will send you the bill for the additional amount of tax with any penalty or interest."
"They will be happy to cash your check and go away if you pay," Yoos added.
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