Humans are largely creatures of habit, but this tax season many taxpayers may shake up their tax-preparation routines. Thanks to a host of new rules that, depending on whom you ask, have simplified the tax code or made it more complicated, you may be wondering whether this is the year to ditch the tax software and hire a human tax preparer, or ditch the tax pro and file your return yourself.
Why tax software might be simpler
One reason some may abandon their tax pro this year is that the standard deduction has nearly doubled to $12,000 for single filers, $18,000 for heads of household and $24,000 for joint filers. According to the IRS’ own predictions, many longtime itemizers may save money by switching to the standard deduction this year. That could vastly simplify the tax prep process, making the DIY route more palatable.
New technology from many tax software providers could make that switch easier, too — especially for people looking for a human touch during the process. Many tax prep packages now offer on-demand access to human CPAs and enrolled agents via video, voice or chat.
Why a tax pro might be the way to go
People who live and work in the same state, whose source of income is as an employee at one job and who otherwise have simple tax situations may still be fine using tax software, according to Chris Whalen, a certified public accountant in Red Bank, New Jersey. But for many taxpayers used to doing their own taxes, this could be the year to pull the plug on software and hire a human tax preparer.
DIYers who are heavy itemizers might think about calling a tax pro this year, too. New caps on deductions for state and local taxes, plus the elimination of what the IRS called “miscellaneous itemized deductions” have left many taxpayers looking for advice on how to save elsewhere — advice that might not be available from software, Whalen notes.
Self-employed people may want to hire a human as well.
“This is definitely a year, if you’ve done it yourself, to definitely take a meeting with a professional,” he says.
New rules about deducting some types of business income mean many freelancers, independent contractors and other self-employed people might want to think about stepping away from the DIY software, says Marianela Collado, a certified financial planner at Tobias Financial Advisors in Plantation, Florida.
“This is where it got really complex,” she says of the tax law changes. Many taxpayers may need a professional to help them understand whether they qualify and help them calculate the deduction.
“It contains all sorts of restrictions on income levels, types of business and if-then-that calculations. In short, business owners should not attempt to do their own tax returns,” she says.
“Professional tax preparers who have an eye towards planning are able to offer tax-minimization opportunities that you might otherwise not understand and miss if you are doing it yourself,” she adds.