Taxes
When it comes to preparing taxes, should you file them yourself or hire a professional? Anyone can file a federal tax return online for free or purchase easy-to-use tax preparation software. If your return is fairly straightforward, you may want to tackle your own taxes. Before making that call, ask yourself these questions:
- Do I understand my tax situation? Do you know your filing status? Do you know which tax credits and deductions you’re eligible for? Do you understand IRS rules, regulations and lingo? If you’re uncomfortable navigating these questions alone, consider hiring a pro.
- Do I have the time and knowledge to do it right? Filing tax returns takes time. Do you have the patience to complete the forms yourself? What will you do if you encounter something you don’t understand? When hiring a tax professional, you’re not only paying for their time - you’re paying for their knowledge, too. A pro can quickly identify deductions (or obligations) you might miss. If you decide to prepare your own returns, educate yourself before starting your forms and bookmark the IRS website, IRS.gov, as a resource.
- Are my taxes complicated? If you started a business last year, had a child, enrolled yourself or a child in college, bought or sold a house or experienced any other major financial event, you may want to consider seeking help from a tax professional. Conversely, if your financial situation is simpler or comparable to last year, preparing your own taxes might be the right fit for you this year.
If you decide to hire an accountant or other tax preparer, talk to friends and family members for recommendations. Before you select a certified public accountant (CPA), the Oklahoma Society of CPAs (OSCPA) recommends you consider the following questions:
- Does the individual hold an active CPA license?
- Are your needs compatible with the CPA's specialty, personality and communication style?
- Does the CPA have the experience you need?
- How active is he or she in professional organizations?
In addition to providing helpful tax information, the OSCPA also offers a "Find a CPA" link where you can find a local CPA and receive a free 30 minute consultation.
If you’re not sure you can afford help, find a Volunteer Income Tax Assistance (VITA) site. VITA sites offer free tax preparation and assistance for low- to moderate-income people and the elderly, and there are many convenient locations throughout the state.
::Expecting a Refund?::
A large lump sum of money sounds amazing, but it's best to adjust your withholdings so only what's necessary is withheld from your paycheck. Getting a large refund means you're giving the government an interest-free loan. Revise your withholdings by completing a new W-4 form with your employer so you’re only having the necessary deductions taken out. This will give you more money to work with on a monthly basis.
If you do find yourself expecting a big return, consider:
- Building your emergency fund. The No. 1 budget buster for most families is not being prepared for an emergency. Aim to stash at least $1,000 and work your way up to setting aside three to six months’ worth of living expenses.
- Reducing your debt. If you already have a healthy emergency fund, work on reducing debt. The debt snowball is an excellent tool for quickly paying down debt.
- Saving for a big purchase. Instead of relying on credit to get the bigger things on your wish list, practice patience and save up the cash. If you pay with cash, you won’t have to worry about making monthly payments or paying interest on your purchase.
- Saving for the future. Retirement may seem far away, but it will be here before you know it. Consider using your refund to kick-start a retirement account so you can truly enjoy your golden years. If you feel comfortable with the amount in your retirement accounts, consider starting a 529 College Savings Plan for your children or grandchildren.
