Tax software: Is it the best way to go?
Some popular tax preparation software is relatively inexpensive, but what does using software to prepare your taxes really cost you? Missed deductions and tax credits, improper or overlooked tax elections, unnecessary penalties, and neglected long-term tax planning can be very expensive. Tax regulations and court rulings are now estimated to take up more than 336 feet of shelf space. Are you familiar with the rules and qualified to tackle your taxes by yourself?
It’s likely that your tax concerns will become more complicated as your investments grow, your family grows, and you grow older. Though many tax software producers claim that their products can prepare complex returns, you may want to think twice before relying on software for all of your tax and financial guidance.
Major milestones in your life, such as marriage, divorce, having a child, college, retirement, and inheritances, are all good reasons to consult with your tax advisor. Job changes can necessitate big financial and tax decisions, including rolling over your 401(k), exercising stock options, deferred compensation issues, moving, and perhaps even starting your own business. An established relationship with a tax professional who is familiar with your finances, your family, and your goals can prove to be invaluable.
Although software may help you make choices on your tax return that result in the lowest tax this year, you should consider the long-term effect of your choices in order to pay the lowest total tax over a number of years.
If you have been preparing your own returns, it’s a good idea to let a professional preparer review your returns at least every three years. That’s because you only have three years to amend a return to change any items of income, deductions, or credits that were reported in error or omitted on your original return.