Americans may feel more empowered this year to do their own taxes with TikTok, Google, ChatGPT and other AI tools to turn to when they have questions.
But is that a good idea?
Like almost any tax issue, it’s complicated. Deciding to do your own taxes depends on how messy your finances are, how much you hate the complicated paperwork, and whether you’ve had a recent life change.
Typically, do-it-yourself taxpayersare young and have few assets. An IRS study showed 53% of all taxpayers in 2021 used a paid tax professional,but Gen Z was significantly less likely to than any other age group. Thirty-three percent of people 18 to 24 used a tax professional compared with more than 50% in every other age group.
Middle-income earners with income between $75,000 and $90,000 were most likely (59%) to turn to a tax pro, the IRS said.
There are pros and cons to going it alone, relying on tax software, the Internet, social media and AI or enlisting professional help.
We’ll unpack them here to help you make an informed decision. After all, a wrong decision could cost you money or, worse,invite an audit.
Be in the know:Are you ready to file your taxes? Here's everything you need to know to file taxes in 2023.
When’s a good time to DIY?
Doing your taxes may be the way to go if you have a limited number of income sources, say a W-2, bank accounts, and some 1099s, and you plan to take the standard deduction, a specific dollar amount that reduces your amount of taxable income.
You can save yourselfmoney and should be able tocomplete your tax returnfairly quickly using basic tax software or the free forms found on the IRS website.
If your taxable income falls beneath certain thresholds, if you have a disability if your English is limited, or you are elderly, you may qualify for one of the IRS’ free filing programs.
You can check the IRS website to see if you qualify.
The standard deduction this year is $13,850 for single filers and married couples filing separately;$20,800 for head-of-householdfilers;and $27,700 for married couples filing jointly.
If your deductions exceed those amounts, you should probably itemize themto reduce your taxes.
Usually, the move to itemized deductions comes after a major life change, said Mark Steber, chief tax information officer at tax preparer Jackson Hewitt.
Preparation:Tax return season 2023: What to know before filing your taxes
Early birds:File your taxes early for a chance to double your refund money with Jackson Hewitt
For example, “if you bought a home, you had one of the premier life changes that will fundamentally change your taxes,” Steber said.
Itemizing deductions takes more time and requires more paperwork, but it doesn’t necessarily mean you need a professional.
If your list of deductions is straightforward and you’re organized, it’s doable for the average taxpayer. If you get stumped, you can always ask basic questions and definitions using ChatGPT or other AI tools and web searches for guidance as long as you double-check the answers in several places.
You can also look up answers on the IRS website or call the IRS, but be prepared for potentially long wait times.
Just be careful of looking for tax tips on social media like TikTok and Reddit. Sometimes answers are incomplete or misinformed. A report commissioned by cryptocurrency company Paxful in 2021 found one in sevenvideos from TikTok finance influencers is misleading, and only one in ten influencers is transparent about their qualifications.
If all of this sounds tedious, time consuming and makes you uncomfortable, consider calling in a pro, accountants say.
"It's a balance of cost versus time," said Mark Jaeger, vice president of Tax Operations attax software company TaxAct.
Also, a tax pro can ensure you maximize your benefits. Remember, if you miss a credit or deduction when you do your taxes, no one will correct you, Steber said.
"If you leave it off, it stays off," Steber warned. "People think the IRS will review and correct it, but that's only half true. The IRS will only correct it if you leave income off but not if you leave tax benefits off."
Whendoes it make sense to hire a tax pro?
Anytime your taxes are complicated.
Hiring a pro is a prudent choice after a major life changelike gettingmarried or divorced, having a baby, buying or sellinga home or business, experiencing a major health issue, or retiring. Paying atax professional is also wise if you now receiveincome from many different sources, have investment losses you need help dealing with, received an inheritance, or settled an estate.
Any one of these can lead to more deductions or credits for you, tax preparers say.
Better start:IRS tax backlog smaller leading into 2023 tax season than it was in 2022
Focus on these dates:Tax season 2023 officially started: Here are key deadlines to keep in mind
And because tax laws change all the time and amount to more than 2,652 pages (or well over 1 million words compared with the King James Bible's 788,280 words or War and Peace’s 560,000 words, according to independent tax policy nonprofit Tax Foundation), knowing all those laws can make anyone’s head spin.
Tax accountants, tax lawyers and tax preparers are paid to know these lawsandhelp you navigate them to minimize your taxes.
Where you stand:What are the 2022 US federal tax brackets? What are the new 2023 tax brackets? Answers here
Cutting your tax bill:3 legal ways to lower your taxes: Max out your IRA, put money in a HSA, buy a home
If I decideto hire a tax pro, how do I choose one?
Choosing the right tax professional is vital. They know your most personal financial details and you need to trust that they'll accurately file your income tax return. Ultimately, you’re responsible for your tax return, regardless of who prepares it.
The IRS offers some tips to find a reputable pro:
- Check the preparer's qualifications.Thesearchable and sortable IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications helps taxpayers find a tax return preparer with specific qualifications.
- Check the preparer's history. Taxpayers can ask the local Better Business Bureau about the preparer, including disciplinary actions and license status. Other organizations to check for specifictypes of preparers include the State Board of Accountancy for any certified public accountant, the State Bar Association for tax attorneys and the IRS’ enrolled agent status page.
- Ask about service fees. Avoid preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition.
- Make sure the preparer is available to you, even after the tax deadline.
- Provide records and receipts. Good preparers will ask to see a taxpayer's records and receipts and ask questions to figure out things like the total income, tax deductions and credits.
- Never sign a blank return. Tax preparers should never ask you to sign a blank tax form.
- Review before signing. Ask questions if something isn’t clear. You should feel comfortable with the accuracy ofyour return before signing it.
- Review refund details. Confirm the routing and bank account number on the completed return for a direct deposit or details related to a refund if it’s in another form.
- Ensure the preparer signs the return and includes theirPreparer Tax Identification Number.The filed returns are required by law to be signed by preparersand have their ID number. The taxpayer's copy of the return is not required to have the ID number on it.
Medora Lee is a money, marketsand personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.comand subscribe to our freeDaily Money newsletterfor personal finance tips and business news every Monday through Friday morning.
