Both have pros and cons, and the right choice for you will depend on your needs. This article explains the differences between tax preparer vs. software and helps you decide the best option.
According to Zippia, there are more than 56,384 tax preparers currently employed in the US. On the other hands, there are 32 tax preparation software developers in the United States as at 2022.
Comparing Tax Software Vs. Professional Tax Preparer
Tax preparation software is a computer program that guides users through entering their tax information and filing their taxes electronically. On the other hand, tax preparers are professionals who assist with preparing and filing taxes.
Comparing tax software vs tax preparer in terms of accuracy, and convenience
Tax preparation software, such as TurboTax or H&R Block, is generally cheaper than hiring a tax expert. The cost of the software can range from free for simple returns to several hundred dollars for more complex returns. On the other hand, the cost of hiring a professional can range from several hundred to several thousand dollars, depending on the complexity of the taxes and the location of the preparer.
In terms of accuracy, tax preparation software is generally accurate and reliable as long as the user enters the information correctly. However, a professional tax preparer may be able to identify deductions or credits that the software may not, so there is a trade-off between cost and accuracy.
In terms of convenience, tax preparation software allows you to prepare your taxes from the comfort of your home, anytime. You can also save and return to your return as needed. Hiring a professional tax preparer typically requires an appointment, and you will provide them with all your tax documents.
On the trade-off between cost and accuracy when using tax preparer vs. software.
When using tax preparation software, the trade-off between cost and accuracy is that the software may not be able to identify all of the deductions and credits that a professional tax preparer would be able to.
This is because the software is limited to the information programmed into it. However, a professional tax preparer has the knowledge and expertise to identify deductions and credits that may not be immediately obvious.
For example, a professional tax preparer may be able to identify deductions for business expenses, rental property income, or charitable donations that the software may not prompt you to include.
Hiring a professional tax preparer can also provide peace of mind that your return has been prepared correctly, as the IRS authorized them to represent you in case of an audit.
However, it’s worth noting that if your tax situation is straightforward, using tax preparation software can be a cost-effective and accurate way to prepare your return. You can also double-check your return with a professional tax preparer if you want extra assurance.
Tips For Selecting The Best Option For Your Specific Needs
When selecting the best option between tax software and a tax preparer for your specific needs, there are a few things to consider:
- Consider your tax situation: If you have a simple tax situation, such as only receiving W-2 income and taking the standard deduction, tax preparation software may be the best option for you. However, if you have a more complex tax situation, such as owning a business or rental property, hiring a professional tax preparer may be the best option.
- Compare the cost: Try to compare the cost of using tax preparation software to hiring a professional tax preparer. Remember that a professional may be higher but may be able to identify deductions and credits that you would not have known about otherwise.
- Check for certifications: If you decide to hire a professional tax preparer, there are things to consider. Ensure they are a Certified Public Accountant (CPA), an Enrolled Agent (EA), or an Annual Filing Season Program (AFSP) participant.
- Look for reviews: Search for reviews of the tax preparation software or professional tax preparer you are considering to get an idea of the level of service and expertise they provide.
- Think about the convenience: Your convenience should be crucial. Consider whether you prefer to prepare your taxes from home or at the office, at your convenience, or if you prefer to have someone do it for you.
The Types Of Taxpayers Who May Benefit From Each Option
Several types of taxpayers may benefit from using tax preparation software or hiring a tax preparer. They include:
- Tax preparation software may be beneficial for individuals with simple tax situations, such as those who are single, have no dependents, and have only one source of income. It includes students and single or married individuals with only one job and no other income streams.
- Professional tax preparers may benefit individuals with more complex tax situations, such as those who own a business, have multiple sources of income, have rental properties, or have significant investments.
- Tax preparers may also benefit taxpayers who have had a significant life change, such as marriage, divorce, a new child, or the death of a spouse or family member.
- Taxation experts may also benefit taxpayers who have received an IRS notice, have been audited, or have a history of filing taxes incorrectly.
- Tax preparers may also be beneficial for taxpayers who are not comfortable with technology or don’t want to spend the time and effort to learn how to use tax preparation software.
Conclusion: Tax Preparer vs Software
When choosing between tax preparer vs software, there are a few key factors to consider. Tax software is generally more affordable, with many free options or at a low cost. It’s also convenient since you can complete your taxes anywhere and anytime. In addition, a lot of tax preparation software is user-friendly and provides step-by-step instructions to guide you through the procedure.
On the other hand, hiring a tax preparer may be the better option if your taxes are more complex. Tax preparers are trained professionals who are experts in tax law and can help you take advantage of deductions and credits that you may not be aware of. They can also help you navigate any questions or issues during the tax-filing process. Furthermore, hiring a tax preparer near me can provide peace of mind and assurance that your taxes are handled correctly.