This is the first year the Tax Cuts and Jobs Act will affect taxpayers’ returns, but the new tax law doesn’t mean they need to run to their nearest accountant.
There’s a fine line between filing your own taxes and seeking a professional’s help. The wrong move could lead to an inaccurate return, a call from the Internal Revenue Service[1] and extra fees. With so many changes this year — the TCJA was considered the largest overhaul of tax law in more than 30 years — taxpayers must be extra cautious.
TCJA introduced lower individual rates, doubled standard deductions, eliminated personal and dependent exemptions, increased the child-tax credit and limited state and local tax and mortgage-interest deductions, to name a few changes[2].
The law stressed out many Americans last year, even though it was not incorporated into their 2018-filed returns. More than three-quarters (77%) of workers were confused[3] by the TCJA, according to a TaxAudit survey of 2,500 people, who said they did not know if it would benefit them.
Whether it will is yet to be determined, considering 21% of taxpayers are expected to be underwithheld[4] (and therefore owe the government more money) because of the changes.
See: Failure to pay your taxes on time could result in painful penalties — 4 ways to avoid that[5]
So where's the line between professional help and do-it-yourself?
Going to a professional for what could be a simple return would mean spending hundreds of dollars when you can do it for free [6]online or a minimum fee of $40 on TurboTax[7]. The National Society of Accountants says the average cost is $176[8], but can run as high as $688 or more[9], depending on the complexity of your accounts.
Mark Jaeger, director of tax development at tax software company TaxAct, advises asking yourself three questions:
• How much time do you have?
• How much will it will cost?
• And what is your level of comfort?
There’s no real definition of a simple tax return, because a “simple tax situation” looks different for everyone, he said. “I go off that level of comfort,” he said.
Don’t miss: The shocking things Americans don’t know about filing their taxes[10]
When should you do it yourself and hire someone?
This year, the Internal Revenue Service shortened[11] Form 1040, where individuals report their income. The tax form is now a double-sided postcard: The front includes basic information, like name and Social Security Number, and the back reports income.
Some taxpayers may need to fill out additional paperwork, including a Schedule 2 for alternative minimum tax and Schedule 3, for nonrefundable credits (like those for...