There are always a handful of people that I run into this time of year who like to brag about the fact that they do their own taxes. Always have, they say — and always will.
The Cost of Financial and Tax-Related Mistakes
It’s all of those things above that can lead to less money in your pocket (not to mention a whole lot more stress and a lot less free time to enjoy things I assume you’d rather do than your own taxes). Any errors that you make on your tax return are likely to be far more expensive than any fees you’ll pay to a CPA.
The challenge with any tax-related mistake is that things tend to compound over time. Say you miss something on your tax return this year and pay less in taxes than you actually owed. If you get audited down the road, the IRS isn’t going to just shrug it off as “oh well, everyone makes mistakes.” You’re going to owe what you didn’t pay — with interest and penalties, too. According to the IRS, interest accrues on any unpaid tax from the due date until full payment is made, and late-payment penalties can add up to a maximum of 25% of the amount owed.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Making big mistakes that cost serious money or opportunities simply aren’t worth it. Not when it’s your hard-earned money on the line.
Who Needs a CPA – and Who Can Get Away with DIY
In general, most people will benefit from using a CPA. Even if your financial situation is relatively straightforward, you’ll save time and energy by getting help from a professional. You’ll also get added peace of mind that someone who lives and breathes taxes reviewed your situation. This makes mistakes less likely than if you did your taxes on your own, and also increases the likelihood that you’ll take advantage of every opportunity you can to reduce your tax bill.
All this being said, not everyone needs a CPA. Here’s a good general rule of thumb to use to help you determine if you can DIY: Do you have one source of income via a W2 from a single employer? Then you can probably get away with doing your own taxes. But the moment your financial situation gets any more complicated than that — say you earn 1099 income (even if it’s on the side of your full-time job and you don’t consider yourself “self-employed”) or you have enough deductions that you think it makes sense to itemize — it’s a good idea to find a CPA who can help you.
At the very least, you’ll save yourself time and stress, and any fee you pay to free up more time while reducing your stress is probably going to be well worth the cost.
-
Average 401(k) Match: Do You Work for a Generous Company?Here is the average 401(k) match and the top 20 companies as measured by their match policies. A generous 401(k) match provides a more secure retirement.
-
Should You Start a 'Trump Account' for Your Child?"Trump Accounts" for kids is part of the One Big, Beautiful Bill that was just signed. Look at if it's worth it for your children.
-
I'm a Financial Strategist: This Is the Investment Trap That Keeps Smart Investors on the SidelinesForget FOMO. FOGI — Fear of Getting In — is the feeling you need to learn how to manage so you don't miss out on future investment gains.
-
Can You Be a Good Parent to an Only Child When You're Also a Business Owner?Author and social psychologist Susan Newman offers advice to business-owner parents on how to raise a well-adjusted single child by avoiding overcompensation and encouraging chores.
-
How Advisers Can Steer Their Clients Through Market Storms (and Strengthen Their Relationships)Financial advisers need to be strategic when they communicate with clients during market volatility. The goal is to not only reassure them but to also help them avoid rash decisions, deepen your relationship with them and build lasting trust.
-
The Hidden Costs of Caregiving: Crisis Goes Well Beyond Financial IssuesMany caregivers are drained emotionally as well as financially, leading to depression, burnout and depleted retirement prospects. What's to be done?
-
Cash Balance Plans: An Expert Guide to the High Earner's Secret Weapon for RetirementCash balance plans offer business owners and high-income professionals a powerful way to significantly boost retirement savings and reduce taxes.
-
Five Things You Can Learn From Jimmy Buffett's Estate DisputeThe dispute over Jimmy Buffett's estate highlights crucial lessons for the rest of us on trust creation, including the importance of co-trustee selection, proactive communication and options for conflict resolution.
-
I'm a Financial Adviser: For True Diversification, Think Beyond the Basic Stock-Bond PortfolioAmid rising uncertainty and inflation, effective portfolio diversification needs to extend beyond just stocks and bonds to truly manage risk.
-
I'm a Retirement Psychologist: Money Won't Buy You Happiness in Your Life After WorkWhile financial security is crucial for retirement, the true 'retirement crisis' is often an emotional, psychological and social one. You need a plan beyond just money that includes purpose, structure and social connection.
