Should You Hire An Accountant To Help With Your Taxes?

Tax day this year falls on Tuesday, April 17 — two whole days later than usual!

If you're running down the wire to file, remember that you essentially have two options: hire a CPA or file on your own using an at-home tax preparation service like TurboTax or H&R Block.

Some people may often decide to hire an accountant out of fear of filing incorrectly and getting audited, but the IRS rarely asks for an in-depth scouring of people's taxes. TurboTax says says that "of the nearly 141 million individual returns filed for fiscal year 2011, 1.1% were audited."

Others worry they're not maximizing deductions filing on their own, while some might feel that their finances are just too complicated for DIY taxes.

Still, if you have some fears about how managing this task on your own will shake out (but aren't totally convinced you want to spend the money hiring someone else), here are a few things to consider.

Even though a truly thorough personal audit is unlikely for the average person, there are some things to be careful about. Rushing through your taxes and omitting important information can increase your risk of being audited, as can failing to report taxable income, claiming too many deductions, or even excessive rounding.

Aside from making mistakes, you may also be overlooking ways to get more money back on your returns without an expert to guide you.

"When we move up the ladder and people start having investments, and getting capital gains and money off of those investments, or maybe have self-employed income, you're looking at filing a Schedule C — as well as an A and a B," says Jim Barnash, a CFP financial advisor with SGL Financial. "It's not that you couldn't do that on your own, but you might miss opportunities where you leave money on the table and the IRS does not tap you on the shoulder and say, 'Oops, by the way, you missed that one.'"

So, at least initially, some self-employed workers and those with more intricate finances may find it worth it to pay to have someone file their returns.

Sandra Block, a senior editor at Kiplinger's Personal Finance, says the average cost to pay someone to prepare and federal and state returns (with no itemized deductions) is $176, per the National Society of Accountants. Nonetheless, costs can vary very widely by region and level of tax intricacy.

You may be tempted to shell out whatever you can get if you make a last-minute appointment with a CPA, just know that filing closer to the deadline could increase the cost.

Barnash, who is located in the Chicago area, says that many shops will do a simple 1040EZ or 1040A for $89. Many will pitch you on their other services, from investment management or insurance, in person, but know that tax planning — as opposed to simple tax preparation — will pump up the cost.

"Most CPAs or accountants are in the $125-$150 range depending on their clientele. When you start getting into the 1040s with a Schedule A, B, and maybe a C, you get in the $300 to $400 range," he adds. Add in married partners, self employment, or property that you have rental income on, and you have multiple forms to file — and can enter the $400, $500 range pretty quickly.

"Some firms charge higher prices during their busiest days, like the weeks just after W-2 forms are mailed out and just before the April tax filing deadline [and] you may be able to obtain a lower price quote during a less hectic time of the tax season," The Balance explains. If possible, try not to leave things too late.

When it comes to filing on your own, there are several free and low-cost options. Block name-checks TurboTax, H&R Block, and TaxAct as giving options for free federal tax prep programs (for people with simple returns), and says that IRS Free File is also an option.

"Someone who itemizes on her tax returns but claims commonly-used deductions, such as mortgage interest and charitable contributions, can still do her own tax return, as long as she's organized and has the correct documents," she adds. "If she'd rather pay someone, the average fee for an itemized 1040 plus state tax return is $273."

Block recommends that people who are self-employed, own rental property, or have a lot of income from investments hire a tax professional.

"While you can buy tax preparation software for these situations, an experienced tax preparer (CPA or enrolled agent) can make sure you claim all of the deductions you're entitled to and avoid errors that could trigger an audit."

She says to look for an enrolled agent or certified public accountant (AICPA, the Association of International Certified Professional Accountants, may be a good place to start), and to "avoid anyone who promises he'll get you a big refund or doesn't have experience in these areas."

Barnash adds that people who are concerned about their deductions changing as a result of the new tax legislation might want to speak with someone in person for a consultation, as this is the last year certain deductions can be itemized.

"Up until 2018, a lot of people — think nurses, firemen, policemen, city municipal workers — had jobs where [things like] uniforms, special shoes, even bullets were deductible, non-reimbursed employee expenses. Those are going away [after the 2017 tax season]," he explains. "I've had some people ask me, 'Well, what if I created my own LLC and run it through that business?' But there really has to be a business motive and revenue in order to create a business entity that you can take deductions for."

On the other hand, real estate agents or people who have already been working as sole proprietors may have luck, he notes. In those cases, it may pay off to think about incorporating in order to increase their ability to deduct items — but to know for sure, an in-person conversation might be best.