When it comes to taxes, there are two kinds of people: do-it-yourselfers who prefer to know not only how much they're paying, but why and those who would just as soon have their taxes done by a pro. The former want to know what they could have done differently, while the latter either don't have the time and inclination to roll up their sleeves to do their taxes or their taxes are too complex and they want to be sure it's done right.
The Pros and Cons of Accounting Software
The choice is a personal one, but today's tax software is easier to use and more affordable than ever. Most of the popular software is designed for people who know little or nothing about accounting. Instead of overwhelming you with tax forms, they typically ask simple questions, like an interviewer would. Most connect to the Internet and allow you to complete and submit your tax returns to the IRS from the comfort of your own home. Some are even based “in the cloud,” meaning you access them directly through your Web browser, with no software to buy or install.
As long as your financial records are fairly well organized, it shouldn't take long to input the information into the software. There's no need to worry about complex IRS formulas—they're preprogrammed into the software. All the tedious calculations are done for you. Most software packages also include helpful prompts to uncover any deductions you may have overlooked.
There are a few drawbacks to using tax software, however. In some cases, the more sophisticated programs can take time to learn and may require frequent manual updates, which can take valuable time away from your priorities. Also, computer programs can't give you the personalized guidance of a tax professional. They're designed to work for the majority of people; they're not a custom solution.
Professional Accounting Services: More Than Just Tax Planning
For more personalized tax information and suggestions, professional accounting services offer a complete range of tax and accounting solutions. They allow you to communicate one-on-one with a tax professional about the specifics of your situation. If you develop an ongoing relationship with your accounting service provider, you can get the answers you need quickly, without having to explain the particulars or wade through incomprehensible IRS documents or websites. An accountant can analyze your finances to provide you with a custom-fit plan. They can also use your unique information to minimize your tax liability by maximizing your deductions, allowing you to keep more of what you make. Whether you're an employee or a business owner, accountants typically know the ins and outs of all tax structures.
Accounting services offer more than just tax planning and preparation. They may help you manage your finances and save money so you can enjoy a more fulfilling life. Accountants and CPAs actually enjoy crunching numbers, researching the tax code, and doing complex calculations.
On the other side of the coin, accounting services are not always affordable investments for lower to middle-income earners. Hourly fees can be substantial. Plus, local accountants might prefer in-person meetings with their clients, which is not always convenient for people.
The decision whether to use an accounting service or software is determined by your needs. Both options have pros and cons, so you should revisit your decision every few years or whenever your financial picture changes substantially.
1-800Accountant provides tax planning and preparation, bookkeeping and payroll services to individuals and small businesses in all 50 states. LegalZoom offers affordable access to tax professionals through 1-800Accountant, in its business and personal legal plans.