Source: Amy Hageman, 785-532-4484, hagemana@k-state.edu
News release prepared by: Stephanie Murray, 785-532-2535
Thursday, March 8, 2012
Tax tip: Tax software can be good option for many, including college students
MANHATTAN -- Taxes are at the top of many Americans' to-do lists at this time of year. This can bring up an important decision: Should you hire a professional to prepare your taxes or use one of the many available brands of tax software to do it yourself?
Amy Hageman, an assistant professor of accounting in Kansas State University's College of Business Administration, said that while it can be tempting to hire a professional to ensure nothing is overlooked in your tax documents, the average person is often better off opting for the do-it-yourself software.
"If your return is relatively uncomplicated, using the software is generally cheaper and often just as likely to be accurate," Hageman said. "Many taxpayers with an adjusted gross income under $57,000 are eligible to use Free File software, available online, and e-file their tax returns for free."
The Free File tax software is available at the Internal Revenue Service website, http://www.irs.gov . The site offers a list of the companies offering the software and a survey to help taxpayers choose which one will work best for them.
Hageman said college students typically have tax returns that are uncomplicated enough that using software is the best option. However, international students are sometimes an exception to this rule. Their tax returns are often more complicated, and they may need to hire a professional to ensure that all of their documents are handled properly, she said.
Many people who don't need to have their taxes professionally prepared often do so anyway because of worries about accuracy. Hageman said that a thorough understanding of the questions the tax software asks is key to ensuring that your figures are accurate.
She also recommends checking the information on the tax software packaging carefully before buying it.
"A lot of tax software programs advertise a 100-percent accuracy guarantee," she said. "But if you look at the fine print, that is actually only a guarantee that the software's math calculations will be accurate, so people really need to make sure they understand what they're being asked to avoid inaccuracies."
In some situations, however, a taxpayer is probably better off having a professional prepare their taxes, Hageman said, including:
* If you have self-employment income or own a small business. "Some great software packages are available that can help walk you through the appropriate tax treatment, but if your business is fairly complicated -- such as using property that you are depreciating -- or if you don't feel comfortable with the tax rules for your situation, it would probably be better to use a professional," she said.
* If you have farm income. "The rules for the tax treatment of farm income can be fairly complicated, and I've heard some people who say that some commercial tax software isn't well suited for this," Hageman said.
* You have investments. "This is a matter of degree," Hageman said. "If you have a sale or two from a mutual fund during a year, the tax treatment is very straightforward. But if you have sold more complicated investments, such as exercising stock options or selling land that you are holding for investment purposes, the tax rules surrounding the treatment can also be more complicated."
In the end, Hageman said it really comes down to each taxpayer's own comfort level on whether to hire a professional or do it themselves.
