Whether you’re an individual taxpayer or an entrepreneur, you might be considering DIY tax preparation as a way to save money. In many cases, this is a mistake that can actually end up costing you more in the long run. Not only might you miss out on significant deductions and tax credits by using DIY tax software, but it can also increase the risk of errors that may lead to an audit. An experienced tax professional can ensure your return is accurate and develop a comprehensive strategy based on your financial circumstances to reduce your tax burden.
Here are several ways DIY tax preparation can cost you more in the long run:
You May Miss Out on Tax Deductions and Credits
DIY tax preparation platforms are limited and may overlook various tax deductions, especially in complex situations such as business ownership — or in connection with certain life events. This means you may miss out on opportunities for substantial savings. An experienced tax professional will know how to identify all possible deductions in your specific situation and apply the available credits to lower your tax bill. Tax software is only as good as the person using it.
Even Small Mistakes Can Result in Penalties and IRS Scrutiny
Using DIY tax preparation platforms can increase the risk of errors and mistakes on returns. The software cannot fully account for complex tax situations and may not understand the tax regulations. This can lead to inaccurate income reporting and incorrect deductions. Critically, if you underpay your taxes or fail to file them on time, you can face steep monetary penalties. Mistakes on your tax return can also raise red flags with the IRS — making an audit more likely.
DIY Tax Software Does Not Address Complex Financial Situations
DIY tax software may be suitable for some very basic tax situations — but it’s essential to understand that there are many factors that can complicate a return. For instance, starting a business, buying a home, getting married, having a child, or selling property can make tax filing much more complex. A tax professional can help you navigate the tax implications of your new circumstances and avoid pitfalls.
DIY tax software may not fully account for your tax situation if you:
- Own a business
- Have investments
- Have multiple streams of income
- Are self-employed
- Plan to itemize deductions
- Bought or sold property
- Received an inheritance
- Got married or divorced
- Are planning for retirement
Unlike DIY tax preparation software, a tax professional will know how to handle depreciation of assets, multi-state income, and capital gains taxes. Importantly, a knowledgeable tax advisor can ensure your return is optimized based on your specific financial circumstances.
A Do-It-Yourself Tax Platform Cannot Help You Strategize for the Future
DIY tax preparation software does not offer the year-round support and personalized attention a skillful tax professional can provide. Notably, a tax consultant doesn’t only file your tax returns once a year — they can serve as a trusted advisor to help you achieve your financial objectives. They can assist you with long-term tax planning, integrate tax planning into your business strategy, and identify ways to minimize your tax liabilities in the future.
Contact an Experienced Tax Professional
There are many risks when relying on DIY tax preparation platforms. It’s vital to work with a knowledgeable tax professional who can help ensure your returns are accurate and you don’t forgo potential tax savings. Based in Fairfield, Connecticut, Rolleri & Sheppard CPAs, LLP assists individuals and business owners with a wide range of tax matters, including tax planning and filing. Contact us online or call (203) 259-CPAS to schedule a consultation.
