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There may be a million ways to skin a cat, but there are only three ways to prepare your tax return:
If you’re wondering about the best way to prepare your taxes, ask yourself four questions.
1. How complicated is my tax situation?
Sort of complicated: Many people have to fill out supplemental forms and schedules on top of the Form 1040. In that case, tax software is usually the best way to prepare your taxes if the alternative is doing things by hand. It can help handle the workload.
Complicated: Those that involve businesses, extensive itemizing or big life changes such as a divorce, for example — may require human guidance. Some high-end versions of tax software offer good, human tax-pro help on demand, but the best way to prepare your taxes may be to hire an in-person tax pro instead.
2. How much time do I have?
In general, block out a solid day or two on your calendar. On average, taxpayers spend 11 hours filling out their 1040s (tack on more time for the state filing), according to the IRS. Taxpayers that don't have businesses to account for average about seven hours, the IRS says. If you had a side gig or ran a business, you'll need more time — 19 hours on average, according to the IRS.
3. How much do I want to spend?
By hand: Preparing a paper return by hand is basically free (except for postage and, of course, your time).
Basic software: Expect to spend $20 to $50, plus extra for state return preparation and e-filing (if you're using a desktop version of software).
Free options: Many software providers offer free online tax preparation options, but they usually work only with simpler tax situations.
Another free option: The IRS's Free File program will match you with free, name-brand software if you have adjusted gross income below $73,000.
4. How involved do I want to be?
Control freaks, tax code nerds and people with simple tax returns are often the only people who like the thought of doing the calculations and filling out forms by hand.
For those who don’t need to see exactly how the sausage is made but definitely want to be in the factory, software is usually the best way to prepare your taxes.
For just-make-it-go-away types who’d rather get a root canal without anesthesia than prepare a tax return, hiring a tax pro is huge.
Remember one thing, however: In the eyes of the IRS, the accuracy of your tax return is ultimately your responsibility. You can outsource the work, but you can’t outsource the liability — no matter which method you choose.
Best ways to prepare taxes: 4 key factors
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