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Do-It-Yourself Taxes: Not for the Faint of Heart

Oct. 3, 2013
Income Taxes, Personal Taxes, Taxes
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This article is part of a 5-part series on tax preparation methods. To learn more about your tax filing options, check out Why You’re Filing Your Taxes Wrong.

Once the hallmark of personal financial responsibility, preparing one’s taxes by hand has largely gone the way of horse-drawn buggies and VHS tapes.  According to Experian, under 10 percent of people filed their taxes by hand in 2012. That’s not to say there’s no merit to doing things the old fashioned way, but it’s certainly not the norm. Even so, it’s the only option for preparing your taxes that is always free, which can be a welcome reprieve when you’re calculating just how much of your paycheck the taxman is walking away with.

The Good

If you read tax code for fun, love the smell of pencil shavings and hum along to the click of calculator buttons, then the do-it-yourself approach may seem appealing.  It’s the cheapest option (who can argue with free?), and there’s a certain mystique to hammering out tax calculations on your own.  The real benefit of doing your own taxes is that it gives you the greatest control over the process – you get to work through every detail and understand exactly how the IRS will be assessing your return.

The Bad

That said, there are a number of downsides that make this option less than ideal for most. First is the possibility of mathematical error.  Unlike tax software (which automatically checks for inconsistencies) or a professional with years of training and experience, you may not immediately catch small errors that will be red flags for the IRS and may trigger an audit.

Another issue is that a lack of familiarity with exemptions, deductions and credits can lead you to either over- or under-estimate how much tax you should be paying.  Neither option is ideal and can end up costing you in the long run.  Plus, with many tax programs (like TaxAct) offering free federal return filing, it’s hard to justify not using software to at least double-check your handiwork.

 Pro-tip: Most paid tax preparation software won’t charge you for the service until you actually submit the return for filing.  If you’re looking for a quick and easy way to double-check your hand-calculated return, consider walking through tax software and comparing the final result to your calculations. While the exact number is likely to vary, it can provide a good “sanity check” to make sure you’re in the right ballpark, and you won’t have to pay anything.

 

To learn more about your tax filing options, check out the other guides in this series:

Why You’re Filing Your Taxes Wrong

Tax Software: The Down and Dirty

Independent Tax Professionals: The Real Deal

Big-Box Preparers: Buyer Beware

 

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