It's not what you know that's important here. It's what you don't know . . . or, more to the point, what you think you know and really don't.
If you have a simple return, you might consider e-filing or using a simple tax program. But remember, you're not hiring a tax pro just to put numbers in boxes. Any monkey can do that.
To help you decide whether to do your own taxes, I offer three questions that can help you frame the issue.
Before we get any deeper into this, a disclosure: I have two law degrees, and I had been licensed by the New Jersey Board of Certified Public Accountants. I make a lot of money as a tax preparer. I have a vested interest.
Jeff Schnepper
3 questions to ask yourself
1. Are you prepared to give your taxes your time?
In 2011, the Internal Revenue Service estimated that the average taxpayer needed 23 hours to do his or her 2010 tax return -- 32 hours if a Schedule C for business or a Schedule E for rental properties was filed.
Filing online through the IRS website, or through a tax program such as TaxCut or TurboTax, can save you a lot of time filling out the forms. But you still must organize all the materials.
And that assumes you have a fairly simple return with a limited number of deductions. It also assumes you have a good idea of what the records you'll need to do your taxes.
2. Are you prepared to put up cash to hire a preparer?
Getting someone to do your taxes can cost $50 to $100 at the low end -- assuming a simple return -- or up to several thousand dollars for a complicated return. The average for an itemized return is more than $200.
One consideration: Any fee you pay may be deductible on your next year's return if you itemize. Tax preparation fees qualify as miscellaneous deductions, the sum of which must be more than 2% of your adjusted gross income before you can claim a deduction.
Taxpayers spend more than 7.6 billion hours and more than $193 billion each year complying with the Tax Code - and that's just to figure out what we owe.
3. Are you prepared to deal with the complexity of the federal code?
Because the tax code is so complicated, more than 60% of Americans have professionals do their tax returns. Tax law has had major changes in 45 of the past 48 years. Last April, IRS Commissioner Douglas Shulman reported that there had been about 3,500 tax law changes since 2000.
A growing number of individuals are filing electronically. Tax preparers who filed 100 or more returns in 2011 were required to file electronically. And the e-file threshold has dropped to only 11 returns in 2012.
