Why You Should Stop Doing Your Own Taxes (Especially if You’re Self-Employed)
Those Turbo Tax commercials where they say the word free twenty-one times in fifteen seconds might tempt you into doing your own taxes. Or you may have heard that doing your own taxes is as simple as changing the oil in your car, but that’s not exactly the case. While the engine in your vehicle may be complicated, it’s nowhere near as complex as the tax code.
Even if you enjoy these types of tasks, getting them wrong as a DIYer can be costly. A traditional W2 employee who doesn’t have a complicated tax situation, for example unmarried, with no dependents, doesn’t own any real estate, or does not earn income from investing, might be fine DIYing their taxes. But, if you’re self-employed, there are more than a few reasons, which we’ll explore in this article, to hire a professional to do your taxes.
Taxes Are Harder Than They Look
The tax code is encompasses two challenging subjects rolled into one: math and the law. To make matters more complex, the tax code changes every year. So certain things that applied to your tax situation last year might have changed this year. This is especially confusing if you are self-employed. Calculating your self-employment taxes requires you to to figure out what deductions you can and cannot qualify for, credits that you are owed, and more.
Even worse, you have to find and organize all the data and numbers that are needed and report it by filling out tax forms. Filing taxes on your own is a long and complicated process for most self-employed people, which is why it is usually best to hire an accountant.
Free Tax-Filing Software Isn’t Made for the Self-Employed
Free tax-filing software can be a great option if you’re a W2 employee with no tax complexities. But for the self-employed, free software isn’t designed for anyone who needs to file more than a form 1040.
Relying on software that isn’t the right fit can result in inaccurate filings. Professionals who know you and understand your tax situation will help prevent mistakes that occur when you try to follow the prompts of tax software that isn’t designed to handle your situation. There are plenty of examples where using software and AI continue to fall short, like when Waze insists you make a left turn across six lanes of traffic at rush hour or when Google maps gives you directions that are fine, but definitely not the best route. For now, humans are still better at doing certain jobs.
Small Errors Can Be Extremely Expensive
Tax software or the old-fashioned paper forms and a trusty calculator aren’t very helpful when the numbers you use aren’t accurate.
Finding and entering the right tax information isn’t as simple as it may seem. This part of the process requires critical thinking skills and reading comprehension, which are made more challenging because of the specialized vocabulary used by the IRS.
Unfortunately, if you take the DIY approach to your taxes, mistakes aren’t just possible; they are likely. Even a small mistake can cost you big, which is why it’s not worth taking the chance.
You Can’t Remember When You Last Filed
This happens – to more people than you may think. However, the fear of filing now is no excuse not to do it. Neither is being confused about what you owe or back taxes.
While you can attempt to get caught up by using different software solutions, it’s worth paying someone who knows what they’re doing to help you. If you need help understanding your options for a large tax bill, a professional will know what type of payment plan options are available to you and will work to negotiate with the IRS on your behalf.
Not filing your taxes is one of the worst things you can do. Even if there’s no way you can pay what you owe, you should still file your returns and pay as much as you can – always file.
Gain Peace of Mind
When you file your taxes and use the services of a professional, you get an invaluable benefit – peace of mind that it was done properly. Professionals will ensure all the numbers are accurate and handle the calculations for you. Also, you don’t have to worry about getting unwanted letters from the IRS.
Finding the Right Tax Professional for Your Situation
As you can see, there are more than a few benefits offered by hiring a tax professional to help you with your taxes, especially if you are self-employed. However, it’s also important to find the right professional for the job.
Take some time to research the options in your local area and find an accountant with experience helping other self-employed individuals. When you find the right person, you can develop a relationship with them, which will make it easier to handle your taxes year after year. It will also take some of the stress out of tax time each year.