The Do It Yourself Approach Is Attractive to Many
An appliance suddenly breaks. The car makes a troubling sound. Money is running short. Enter the allure of the “Do It Yourself”, aka the DIY mindset. Why not? After all, the media around us make it look so easy. Prepare a four star meal in an hour. Go to a garage sale, and find a $5K antique. Lose 50 pounds exercising for 20 minutes a day.
Tax Preparation Is Not Just Another DIY Project
In today’s DIY world the key is to pick your DIY battles carefully. Maybe it’s better to talk to an expert about fixing that broken transmission versus trying to do it yourself. In similar fashion, when taxes get too complicated or too time consuming it makes sense to talk to an expert.
For simple tax scenarios, for example, a W-2 stub with a few minor deductions, the DIY approach makes perfect sense. Especially if you don’t mind spending the time in exchange for saving some money. But for larger households, business owners, and taxpayers in states with high income taxes, perhaps not so much.
Considering the Value of Time
If you have adequate time, the DIY approach may make sense. At the same time when considering the trade off of money versus time, the tax professional may have leverage over the competing DIY plan.
- The cost to have a professional prepare a tax return is not cost prohibitive. According to a study conducted by the National Society of Accountants, the average cost paid for a 1040 tax return (with the most common itemizations and credits) was $260. The average cost for a 1040 (itemized with schedule C) was $476. Considering that the tax savings for the latter case could be substantial, this puts the cost in perspective.
- The average time spent self-preparing beyond the most basic return is sizable. In a study by the IRS, the same return types mentioned previously take an average of 16 hours and 24 hours respectively.
- Tax Planning and Audit Support is largely absent for many DIY’ers. Perhaps tax planning is the greatest differentiator of “paid” versus DIY approaches. With credit and deduction rules changing, it is easy to miss tax saving actions, and while audits are rare these days, those that are audited, are often targeted due to simple DIY oversights.
What Does the Future Hold for the DIY Tax Prep Movement?
Only time will tell, but what is clear is there is still a place for DIY tax prep and accountants alike. The evolution of technology will continue to help make it easier for the DIY’er to do their returns, and at the same time the technology leveraged by the accountant, combined with their expertise, gives them a notable advantage.
In the end, there is never a one-size-fits-all solution. When you read that DIY tax website that offers services comparable to those of trained professionals, it’s important to understand what those comparable services are, and does it apply to you.
For an informative look at the pros and cons of the “Do-It-Yourself” tax approach, check out our latest infographic (click here or on the image below to instantly download the PDF version).