After the first of every year, we head into the dreaded tax season. The time to gather documents for tax preparation. Documents and notices pertaining to our income and associated accounts start to filter into our mailboxes – email inbox or physical mailbox.
In anticipation of the yearly event, creating a folder to store all these documents in the same place is essential for ease of access for tax preparation. For those with filing systems setup to work for you, this is a no-brainer. When a required document arrives in your mailbox, it goes right into the folder.
For those that have gone paperless, the concept is the same. Create a digital file to store incoming electronic documents for ease of access. The naming convention should mimic the paper files in your filing system for consistency.
Over the past several years, I have been easing into the digital storage concept, by storing important documents on a flash drive that I keep in a fireproof safe in my home. On a related note, digital files need to be backed up regularly. This can be done virtually through the cloud, or backed up to an external hard drive via your computer. It’s not a bad idea to consider multiple types of backup solutions.
Now that you have a storage solution for your tax documents, will you prepare them yourself, or hire an accountant? There are pros & cons to each option, either doing them yourself, or hiring an accountant.
Everyone’s situation and abilities are different, and you need to make the decision based on your comfort level. Some pros & cons for each option are listed below to help you determine which way to go to prepare and file your income tax returns.
Tax Preparation Options
- Save money on tax preparation fees.
- Work on them at home, on your schedule, after you receive all the required documents. The sooner you file, the sooner you will get a refund.
- Many libraries and post offices offer paper tax forms and instructions for manual preparation. Forms and instructions can also be downloaded from the IRS website.
- There are many online tax filing services that guide you through the process by asking questions.
- The IRS has a lot of information on their website to answer your questions. Online services also have assistance with questions.
- Understanding the instructions to fill out the forms. When you have questions, getting your questions answered by the IRS in a timely manner, either by phone or online may be challenging.
- Paper forms & instructions – computer issues with downloading documents; libraries and post offices run out of documents.
- Not understanding the ever-changing income tax laws to get all the deductions applicable to your situation.
- Tax preparation is stressful!
- Making a mistake which delays your refund, or results in a lower refund.
Hire an accountant
- Less stress, and peace of mind not worrying that you did everything correctly.
- Make an appointment, show up with your documents and they complete and file your returns at that time.
- Getting your tax returns prepared in less time than it would take for you to do them. This means getting your refund quicker.
- An accountant has the knowledge of the ever-changing income tax laws and will apply all the deductions applicable to your situation.
- More costly than if you do them yourself.
- Getting an appointment with an accountant during tax season can be challenging.
- Finding an accountant that you can trust.
- An accountant can make mistakes.