In an attempt to save money or finally understand your finances, you might think that it’s a good idea to prepare your own taxes. But when you make the leap, you didn’t anticipate all the IRS jargon, confusing tax rules, and their recent changes to take you for a loop.

If you find yourself getting overwhelmed by preparing and filing your own tax returns, you may want to consider hiring a tax preparer.

What is a tax preparer?

A tax preparer is a qualified professional who is familiar with the tax laws, procedures, and practices of filing taxes. They typically charge a fee for their services. The fee varies and depends on how simple or complex your tax situation is.

Tax preparers prepare your taxes according to the guidelines issued by the Internal Revenue Service (IRS.) These guidelines can be complex and can change from year to year for certain situations.

If you’re confused by these tax guidelines and how they should apply to your personal financial situation, hiring a tax preparer could be a huge help.

Who needs a tax preparer?

You should consider hiring a tax preparer if:

  • You’re short on time
  • You’re overwhelmed with the thought of preparing their own taxes
  • You feel like you don’t understand the tax implications of your financial activities
  • You have a complicated tax situation

In addition, the following groups of people should seriously consider hiring a tax preparer:

Self-employed folks & business owners

These could include small business owners, consultants, and freelancers—all of which may have to pay self-employment taxes. Salaried people who engaged in side-hustling may have to pay self-employment taxes in addition to the taxes they pay on their salaried income.

But it’s not all about employment taxes. If you are self-employed, you can take advantage of many deductions and write-offs as well. If you’re not sure how all this works, get a tax preparer.

Those buying or selling their home

Buying or selling a home can introduce a slew of tax issues like capital gains (or losses) and even deductions related to certain expenses related to homeownership.

If you’re nervous about handling this situation for tax purposes, you should engage the help of a competent tax preparer who is familiar with the tax effects of real estate transactions.

Those preparing a sale of stocks, business holding, or other large assets

The sale or exchange of stocks, securities, bonds, or any other investments is classified as a capital asset transaction. The phrases capital assets and capital gains tax scare a lot of people, but they’re not that bad. Capital transactions are actually taxed at a lower rate than your ordinary income, but handling capital transactions does get tricky.

The tax basis of these assets is determined by a long list of rules. Taxpayers must also declare capital assets on a separate form. Many people know that you can deduct up to $3,000 in capital losses from your income, but what many do not know is that some limitations to this deduction apply when it’s taken as the result of trading securities.

The bottom line? If you need to report capital asset transactions on your tax return, hire a professional tax preparer or accountant.

Those who provide financial support for someone

If you support someone financially, nine times out of ten, that person counts as a dependent and you can claim them on your taxes.

The exception? If you support a friend or a relative that isn’t your direct descendant, you might not be able to claim them. This is basically the government’s way of preventing freeloading.

For example, if a friend of yours has a job, but still needs extra financial assistance that you provide, there is a good chance you won’t be able to claim them on your taxes. If you’re uncertain, check with a professional preparer or accountant.

Where can you find a tax preparer?

Referrals

Ask your family and friends for referrals to trusted, proven tax preparers. Some independent preparers may even offer discounts for referrals through family and friends.

Local listings

You can easily find tax preparers in your area through local listings on GoogleYelp, or Facebook. They usually have ratings and reviews which can help you decide if they are a good fit for your needs.

National franchises

National franchises like H&R Block and Jackson Hewitt have offices across the country and open up more during tax season. Check their websites to find an office near you.

There are different kinds of tax professionals who specialize in different kinds of tax issues. Most of them are qualified enough to deal with simpler tax returns while others have undergone rigorous training to handle more complicated tax situations.

Either way, you’ll want to work with someone who might be more familiar with special tax treatment that could apply to your unique circumstances.

Enrolled agents

Enrolled agents must pass a comprehensive three-part test that focuses on business laws and representation issues. Although enrolled agents have unlimited practice rights, they can handle a range of tax issues—especially for businesses.

Certified Public Accountants (CPAs)

CPA is a tax professional that has studied accounting at the university level and has passed the CPA exam. They are licensed by a state board and must undergo continuing education to maintain their CPA credentials.

Many CPAs specialize in tax planning and preparation.

Tax attorneys

Tax attorneys will have earned a law degree and passed the state bar exam. For most people, working with a tax attorney would be overkill. Attorneys can look into the legal implications of complex tax issues, so they can be helpful if you find yourself in need of tax planning, preparation, or even remediation.

No matter who you need to help you with your taxes, your tax preparer must have an IRS issued Preparer Tax Identification Number or PTIN for short. Only the tax professionals with a PTIN can legally prepare your taxes for compensation and represent you while dealing with the IRS.

If you won’t be working with an EA, CPA or tax attorney, you’ve still got more options with many of the national franchises that offer tax preparation. These tax preparation services can be economical and convenient due to having many locations across the country. Another plus is that the offices are fully-staffed during peak season and can offer services to consumers in a timely manner.

Prepare your own taxes with tax software

If you’ve decided that hiring a tax preparer isn’t for you, there are tax apps that can guide you through the filing process. TurboTaxLiberty TaxTaxActH&R Block, and E-File are known to be very reliable and accurate for those who self-prepare.

Typically, these online platforms are very secure and updated according to recent tax law changes. Plus, you can choose a free or trial version to test out before purchasing or upgrading for additional features.

Here’s a table that shows the major differences between these companies.

 
TurboTax
Credit Karma Tax
Liberty Tax Online
H&R Block
TaxAct
E-File
Free Version?
For simple tax returns
Yes
Not offered
For simple tax returns
For simple tax returns
For simple tax returns
Other Plans
Deluxe: $40
Premier: $70
Self-employed: $90
N/A
Basic: $44.95
Deluxe: $44.95
Premium: $44.95

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Deluxe: $29.99
Premium: $49.99
Self-Employed: $79.99
Deluxe: $35
Premier+: $50
Self-Emloyed+: $80
Basic: Free
Deluxe: $24.95
Premium: $34.95
Import Return from Competitor
Yes, by PDF
Yes, from H&R Block TurboTax, and TaxAct
Yes
Yes
Yes, from TurboTax & H&R Block
N/A
Customer Support
24/7 Live Support
24/7 Live Chat Support
Chat & email
Live chat & phone support
Email or phone
Email
Business Features
QuickBooks interface
Create W2s & 1099s
Separate plan to prepare business returns for partnerships
File employer tax returns
N/A
Create W2 & 1099 forms
File employer tax returns
Prepare Forms 1065 (Partnerships)
1120 (C Corps)
1120S (S Corps)
N/A
Refund Tracking
Yes
No
Yes
Yes
Yes
N/A
Audit Assistance
Free Guidance + Premium Representation ($49.99)
Assistance and representation through a third-party provider
Assistance only
no direct representation
Free in-person audit support
Assistance only
no direct representation
Direct representation at no extra charge
Learn More
Learn more about TurboTax
Learn more about Credit Karma Tax

Learn more about Liberty Tax Online

Learn more about H&R Block

Learn more about TaxAct

Learn more about E-File

Special Liberty Tax promotion  – Get ANY of 3 great products for one low price!!

  • Basic Package:  $44.95
    • A simple tax situation, such as single or married with no dependents. Millions of taxpayers qualify.
  • Deluxe Package:  $44.95
    • Lifestyles that are a bit more complicated. You know – kids, investments, child care, college, homeownership.
  • PREMIUM Package:  $44.95
    • Self-employed, such as a freelancer or contractor, or those who have other less common forms of income.

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Summary

If you’re at all concerned about preparing your taxes, chances are you could benefit from a tax preparer. But, if you have a simple return, consider filing your taxes yourself.

Read more

  • TurboTax Review
  • How To File Income Taxes: A Guide For Filing Your 2018 Taxes