Tax Prep 101: Should You DIY or Hire a Pro?

Still trying to figure out the best way to handle your tax prep for 2014? You still have about a month until the deadline, but it's time to get serious about taking care of this financial task.

Many people wonder what the best route is: should you DIY or hire a pro to file your taxes? To gain some insight into this decision and get tips and advice, we turned to XYPN member Brian Wright and his wife, Kitrina Wright. Brian is a CFP® and Kitrina is a CPA. Together they run financial planning firm UniteWright.

UniteWright is a fee-only financial planning and coaching firm for young couples. As a couple working together themselves, Brian and Kitrina understand the challenges couples face when starting out. From merging bank accounts, to budgeting, paying down debt or saving for a large purchase, they know the stresses money decisions can bring into a relationship -- and they want to help other couples find financial success together.

We asked Brian and Kitrina about filing your taxes on your own versus hiring a pro to help you understand what the best option may be for you and your situation.

XYPN: When does it make sense to DIY your taxes? When does it make sense to hire professional help with your taxes?

BW & KW: First, you should ask yourself, do you WANT to file your taxes? Many of our clients are quite capable of doing their own taxes. Their taxes aren’t overly complicated but they tell us they would rather have us do it because they simply don’t want to mess with it. So there is certainly the convenience and hassle factor to consider.

If your tax situation isn’t overly complicated -- for example, if you only have W2s and do not itemize -- you can easily prepare your taxes using DIY software such as TurboTax. 

XYPN: Are there times when you absolutely should not go the DIY route with your taxes?

BW & KW: No. Anybody can do their own taxes, regardless of complexity. Understand, though, the more complex your taxes are, the more you will need to:

• Research the tax code
• Devote time and energy to the prep

XYPN: Are there any common circumstances that indicate that you really need to invest in professional help?

BW & KW: Business owners are a group that can benefit from getting professional help. Business owners are busy running their businesses. They don’t have the time to devote to prepare their taxes because time is money.

The time devoted to sitting down and preparing their own taxes is time they could be generating business. Because of this, the vast majority of our clients are business owners. 

Also, if you have a lot of real estate transactions (maybe you flip homes, or have multiple rental properties), these are all activities that add complexity to the return. The more complex your tax and financial situation, the more appropriate hiring a pro is. 

How about a bit of a random example: are you a day trader? Day traders, as a profession, have to deal with very complicated tax rules. In fact, navigating the tax waters for day traders is so complicated, there are CPA firms who specialize in working solely with this group of professionals… as well as CPA firms who avoid working with day traders altogether. If you are a day trader, be prepared to go hunting. You’ll want to call around and find out which CPA firms work with day traders.

XYPN: What should you look for when hiring a pro to prepare your taxes?

BW & KW: Find out who all will be working on your tax return. Does the tax preparer have a staff?

Is the tax preparer a CPA? An Enrolled Agent? Some dude who sat through 8 hours of corporate training and now knows how to type numbers into software?

There are a lot of people calling themselves tax preparers out there. You want yours to be qualified.

Ask them how long they’ve been in the industry. Ask them how many returns they did last year that mirrors your tax situation.

Make sure their “tax stance” aligns with yours. If you want to be very aggressive with your write-offs, make sure your tax preparer is on board with that.

XYPN: What can everyone do, regardless if they're going the DIY route or hiring a pro, to prepare to file their taxes this year?

BW & KW: Get a folder. Whenever you receive a tax document, put it in the folder. Then throughout the year, when you make a donation to a charity and get a receipt (i.e., go to Goodwill), throw it in the folder.

If you do work with a professional, ask them if they can provide you with a tax organizer. Most CPAs have tax organizers they give to clients every year. It's a checklist of tax documents you should bring to your preparer. Tax Organizers are a fantastic tool to help keep you, well, organized.