Can You Do Your Own Taxes? - Our Guide
Tax season can be a stressful time for anyone, which is why so many people hire professionals to crunch the numbers for them. However, there are a few souls who choose to brave tax policies and tax return forms on their own.
Doing your taxes comes with its own sets of challenges, which is why it’s crucial to know when you can DIY and when you should avail of a professional’s services. Minimize the hassle and ensure that every number is filled in perfectly by only doing your own taxes if you meet the following conditions:
1. Your tax situation is relatively simple
If you’re a working individual with an average income and standard deductions, you can easily do your taxes yourself as the numbers will be relatively simple. This includes your mortgage interest, property taxes, and contributions as well as other major numbers. There’s no reason to invest in a bookkeeper or accountant if your fees are straightforward. It’s best to tackle the numbers yourself too, as it can save you hundreds of dollars in the end.
2. You have solid, rudimentary knowledge on income taxes
If you have confidence in your skills and are well-equipped with rudimentary knowledge on income taxes, preparing your taxes should be a cinch! This applies to individuals who have no large-scale business to handle, as pushing your limits in various tax situations will do you no favours. To that end, be sure to stick with that you know and stay within your comfort zone. Trying to file your own taxes when your financial situation is more complex than the depth of your knowledge can lead to costly consequences, so tread carefully!
3. Your income is fairly low
A low income means that your chances of facing an ATO audit will be reduced. Therefore, you should be able to DIY your taxes without too many issues.
When is the Right Time to Hire an Accountant?
Income tax preparations require time, dedicated attention, and expertise. Some circumstances make it possible to handle the numbers yourself, but doing so without much experience can set you up for an income tax nightmare. If you find yourself in any of the following situations, opt out of the DIY option and look for a professional:
1. Your tax situation is complicated
Any tax situation can be complicated, but you will know for sure if you encounter tax issues that are beyond your ability. Tax preparations can become gruelling in cases that involve large capital transactions for investment real estate, significant investments into partnerships, net operating losses, and more.
When you’re thrust into these situations, it’s best to invest in a professional accountant to handle your taxes. Skimping out and opting to go the DIY route to save money will only lead to trouble later on. Be mindful of your situation and recognize when you are unable to keep up with the circumstances.
2. You ran into an unusual tax situation
You may be an employee with a low income and a reasonably common tax situation. If you suddenly find yourself in an unusual tax situation, however, it’s best to call on an accountant.
Studying the situation yourself can make matters worse for you. If you happen to run into a complication such as a Roth IRA conversion, an early pension distribution, or inheritance of assets, don’t hesitate to seek the expertise of a financial pro.
3. You have a high income
The higher your income, the bigger your risk for an ATO audit. This is particularly true after your income hits $100,000 per year. Despite having a straightforward tax situation, it’s in your best interest to hire an accountant to give you peace of mind as they have the expertise to represent you in the event of an audit.
Meanwhile, freelances must employ the services of an accountant whether or not they have a high income.
Various tax preparation tools can automate the process, allowing you to handle taxes easier than it ever was decades ago. Gone are the days where you have to spread your sheets and whip out your calculator for hours on end. Now, there are applications you can use that can streamline tax preparations for you.
With that in mind, certain situations enable you to DIY your taxes. However, the circumstances are limited as the rest requires the help of an accountant. Tax preparations are often complicated and time-consuming, so it’s best to avoid costly errors with the assistance of a professional.
If you’re looking for a tax accountant on the Gold Coast, get in touch with us today! We’re happy to help.