Doing your own taxes might seem like an easy enough thing to pull off. You just get your W-2 form, put in the numbers and you are good to go. However, there can be more to doing your taxes than just simple math, and even that can be hard to do for some people. While it might not be fun to have to pay someone to do your taxes, it can save you a lot of headaches down the line.
You Could Get The Numbers Wrong
Doing your own taxes means inputting your own information. If you have a W-2 and you are using software, this should be no problem. However, if you are self-employed, or are doing taxes by filling out a form by hand, it can get a little tricky. Instead of knowing that you have made 5,294 dollars during the year, you guess and just say 5,000 dollars. The IRS is not going to like that you have under reported income.
Even if you do get the numbers wrong, but correct it, you can still find yourself in trouble. The IRS tends to audit returns more if there are a lot of eraser marks, or if the numbers look fudged. If you have to do it yourself, at least use software to do so.
You Might Miss A Deduction
A taxpayer doing their own taxes might not realize that the new computer software used for marketing your business is actually a deduction, or that part of your home utility bills can be deducted if you run your business in your home. Not knowing all the deductions that are available to you can leave you owing more to the IRS and that can hurt even more in the down economy
Conversely, the taxpayer who is going it alone might give a deduction that is not legal. A new grandfather clock placed in your office isn’t necessarily a deduction. Driving to a convention in Miami with your family is only partially deductible. Knowing what is a deduction and what is not can get you into trouble come tax time.
Poor Record Keeping Can Kill Your Chances
Having someone do your taxes could salvage a decent return if you don’t do well keeping your own records. A tax professional can clue you in to good software that can organize all your invoices and bills that are relevant to your taxes. Also, a professional might know where to go to get another W-2 form, or how to get another copy of a 1099.
If you have a professional doing your taxes, that person can go through your records and pick out the relevant expenses and income that should go on your return. Getting an audit can be easier to deal with knowing that some professionals will have some sort of audit defense service where they will go in front of the IRS with you for a fee.
Doing your taxes on your own should be a relatively easy venture. However, making even a minor mistake can wind up with you getting an audit of some sort. Missing a deduction, or not claiming all of your income due to poor record keeping, or thinking you could pull one on the IRS, can be even worse. If in doubt, go to a professional for advice.
Miles Walker blogs about car insurance quotes over at CarInsuranceComparison.Org. He recently looked at Arizona car insurance.
- Seven Great Ways to Get an IRS Audit. (2008taxes.org)
- Tax Tips For Those Selling Their Homes (2011taxes.org)