Apparently, Americans missed out on $1 billion last year by filing their own tax returns. Perhaps you've seen the commercials featuring a dramatic warship or football stadium representations of just how much cold, hard cash we squandered by taking our financial fate into our own hands. However, before these fear-mongering ads cause you to run headlong into the open arms of the nearest tax professional, let's discuss why it still makes sense to file your taxes yourself.
Warren Buffett certainly isn't rocking tax season with online software, but there are plenty of reasons why many of us probably should.
"The average American, unfortunately, doesn't have much in the way of investments," says Erin Al Essa, a freelance writer and former tax accountant. "These people whose applicable tax information is limited to W-2 wages, a few 1099s, and basic deductions are typically better off doing their own taxes."
For taxpayers who have complicated investments or who own a business, Al Essa does recommend getting your taxes done by a professional.
1. Basic Taxes Are Simple to Do with Software
Gone are the days of picking up paper tax forms at the post office and diligently scrutinizing all the instructions to make sure you're not committing tax evasion. Technology has made the average taxpayer's financial dealings with Uncle Sam simple, thanks to software like TurboTax, TaxACT, FreeTaxUSA, and H&R Block (HRB). And, all of those, plus many other commercial software options, are available free if you go through the IRS website -- if your income wasn't too high.
"Taxes are simply the story of a person's year, a story no one knows better than they do," says TurboTax CPA Lisa Lewis. "And with TurboTax, people don't need any tax knowledge or expertise to do their own taxes and get them done right."
TurboTax and similar software walk you through the process of filing your taxes by asking simple questions such as, "Did you buy a house?" or "Did you have a baby?"
2. You Keep More of Your Hard-Earned Dollars in Your Pocket
According to a recent report from the National Society of Accountants, 2013 tax returns done by a tax professional cost an average of $261 for an itemized Form 1040 with a Schedule A and a state tax return.
"If you are one of the 60 million taxpayers with [a] simple tax situation," Lewis says, "you can prepare and e-file your taxes in as few as 10 minutes with TurboTax Federal Free Edition."
While the IRS says the average taxpayer filing a 1040EZ is likely to spend four hours on the process, using online software reduces the amount of time involved.
The majority of tax-preparation software providers offer free federal returns and often charge less than $40 for state returns, which means the average taxpayer could save upwards of $200 simply by filing her own taxes.
3. Tax Software Still Catches Your Eligible Tax Credits
To get the largest possible refund, taxpayers must capitalize on every tax credit and deduction they are eligible for. Some may be skeptical that tax preparation software will find them all, which sends them running off to an accountant.
Lewis says that regardless of your tax preparation method, you should still get the same refund.
"TurboTax is always up to date with current tax and health care laws," she says. Similar software will also ask some simple questions to determine if you're eligible for tax credits. But even if your software and your accountant can determine your eligibility, you should still be aware of those tax credits yourself.
Lewis recommends researching the tax credits related to your dependents and your education, such as the child tax credit of $1,000 or the American Opportunity Tax Credit if you, your spouse or a dependent are in college.
Throwing Money at the Problem
"Obviously," says Al Essa, "if you really hate prepping taxes, you can always hire someone, no matter how simple the return. It's a matter of priorities -- save the cash and spend the time, or spend the cash and save the time."
If filing your taxes with software will truly take you 10 minutes to an hour, perhaps it's worth pocketing the $200 or more you'll save by doing them without an accountant -- or at least seeing if you're eligible for free tax help.
Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She's also the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers.