Like any do it yourself project. You should take a look at your situation and decide what works best for you. If for instance you are someone who is busy who has a lot of different transactions that you produce during the year, perhaps you own asmall business or are a an executive, you should have a cpa do your taxes for you. If you are an individual who only has a 401 k an ira and a mutual fund and savings accounts you can easily do your taxes on your own or use a program like turbo tax.

In my situation, I worked part time during most of the year and have very little money so I can do 1040 ez and get through with my taxes within a half hour, but since I want to retrieve my money fast I will most likely e-file. I also live in californa, and as many people know californians will not be receiving their tax refunds in a timely fashion this year. So in that case I will certainly be filing those through snail mail.

Do what works for you.

I tried using FreeFile, but it kept telling me I missed a field, but there were no empty fields. I tried it twice, and even had someone else look it over. Tried turbo tax free edition... no problems whatsoever! thanks, turbotax, for not screwing me over (this time)

I thought turbotax cut you off from doing this. Something like 7 total returns and you had to buy the software again (like a time bomb).

I live overseas as well, and the truth is it's not difficult to note my FEI, deductions for living in an expensive city, and foreign taxes paid. --Hell, I was even able to get $10,000 back last year due to my situation (paid from the States but living in Europe).

Obviously everyone has to decide for themselves what they should do, but I don't consider my taxes to be complicated enough to need to pay someone to do them.

DC has a special filing status for people who file Married Filing Jointly on their federal return. It's called "Married Filing Separately on same return". Few know about it. It's a strange thing that no other state does. It might save you a lot of money.

DC also has a property tax credit even for renters (household income under $20k)

Also, books are almost always not included as qualifying expenses.

There are 3 ways to take education expenses. Two are non-refundable credits (Hope Credit/Lifetime Learning Credit); You can also take an Adjustment to Income. To find out which is best for you, you should compare your federal + state refund amounts. The adjustment to income will affect your state taxes. It's very hard to know in advance which will provide the best result for you.

Find more at the IRS site:
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To locate the nearest VITA site, call 1-800-829-1040

You may well be itemizing this year. The software can help you identify itemized deductions (mortgage interest, property tax, state income tax, charitable contributions, large medical bills, etc).

Also, the software will easily handle the Child Tax Credit (nonrefundable) and the Additional Child Tax Credit (refundable). These can be tricky and annoying if you are doing the return on paper.

Also, watch out for the new Homebuyer credit this year. It's listed as a $7,500 refundable credit, but it is actually a loan.

@dadelus: your guess on their hourly rate is about right... I work a different area of accounting (not taxes), and my hourly rate is a little over $350/hr.

@LeahReindeer: I also like TaxAct. So long as they don't get greedy, I'll use them. Since I live in NYC, I get the joy of filling out the New York State form, so it helps using the TaxAct Bundle (12.95 since I signed up by year-end, otherwise I believe it's 16.95 for the bundle). I have a relatively simple return, but it's good to have them do the grunt work.

@LeahReindeer:
I've been using TaxAct for ten years now...possibly for as long as they've been around. It's cheap, simple, and I'm used to the workflow. It also helps that they import the previous year's file to lower the data input tedium. Now I just have to wait another 3-4 weeks for all the financial institutions to get around to sending my 1099-XXX forms. Grr...

The thing that bothers me though, is that if you go to TurboTax via the irs.gov site (the **Freedom** Edition I believe?), even state filing is free (well, for certain states), however if you go straight to Turbo Tax and use their Free Edition, you have to pay for all states. Sounds like a ripoff to me. I was quite happy to find the difference last year, when I filed three states (home, college, internship).

However, the point I was trying to make is that tax revenues are going down across the country - nearly every city, state and county is dealing with the issue. As for it not being due to tax cheats, more and more people are asking what their taxes are paying for. Biggest story recently was about the two highest tax states (California and New York) losing residents because they're tired of paying the high taxes. People are cheating the tax man - whether by legal or illegal means, and the post about my town is just one example of many. I know many people who no longer pay sales tax and who are taking a stand and not filing a tax return this year.

As for the rest of my post - did you do any checking into tax revolts during the Great Depression? Obviously not, since they are well documented and struck much fear into the hearts of government officials.

The other two topics in my post that I touched on were UBS & tax frauds (which is highly publicized in many newspapers and is causing UBS to close down all those accounts, in addition to an arrest warrant being issued for a highly-placed UBS exec) and the amount of IRS agents (I don't know if you read any news on the internet, but another big story is how much companies routinely pay in taxes - not as much as they're supposed to - and how few the percentage is of people who are audited every year. I spoke to a friend recently who admitted to falsifying his tax return because he was 1099'd instead of W-2'd and he forgot to set aside money for taxes. He did it for YEARS - YEARS - and never once got caught.) - so, yeah, not complete nonsense.

I don't know who gives out the stars for star commenters, but they need to "divest" you of yours.

I'm also a huge fan of TaxAct - we have used it for several years now.

I am a CPA and I do not do my own.

Then again, I don't work in tax accounting and only know enough about tax to pass the CPA exam (which is a surprisingly small percentage of the exam).

@JiminyChristmas: See my below comment. I don't feel entitled to anything. Take a deep breath and try to calm down.

@Coles_Law: I can understand paying for their time but again considering the response came in less then half an hour that means that it took less then 30 minutes for:

1: My wife to hit send
2: The email to pass through the internets into the CPAs inbox
3: The CPA to read/respond (the only time that should be billable)
4: The email to pass through the internets back to my wife

So my best guess is it took the CPA at most 10-20 minutes to respond and then charge us $50. At that rate they should be charging between $150-$300/hour. Which is not how much they charge to actually do our taxes.

I'm not griping just because I was charged. I'm griping because of the amount and the lack of prior warning. I should have stated previously that this is the third year we have used them and this was the first instance that they have charged us to answer a question over email. So it appears to be a new policy that they have neglected to communicate to their clients.

@dadelus: Why exactly do you feel entitled to free professional services? Tax preparation would be one service. Answering separate tax or accounting questions would be another. Charging for their time and expertise is how they make their living. Unless you are paying them a retainer I would expect to get billed for any substantive call or email that takes more than 5 minutes.

From your comment it's not clear whether they worked on your matter for 10 minutes or 30. Split the difference and $50 for 20 minutes of CPA time sounds reasonable. That would only buy you about 15 minutes with a good tax attorney.

@dadelus: Well, it's just like consulting with a laywer-you pay for their time. However, there should have been some sort of warning on their website that they charge for that kind of thing.

All they did was enter numbers on a form.

Turbotax is my new best friend.

Also, when you try to do the free file thing, they always go and try to get you to select their pay service. They intentionally confuse you so that you'll end up having to pay, and you don't realize it until you've put all your info in. Turbotax tried to do that to me once. I was pissed, but I wasn't going to give them money for trying to trick me, so I went back and started over and got the free filing. Really pissed me off though. Also, I used Taxcut one year, and I think it's better about deductions and clearer on explaining things in the help section than turbotax.

Just the other day I read that the city I live in has reported decreased tax revenues of 24k

Uh, earth to tin-foil-hat guy: decreased tax revenues != (that's NOT EQUAL) more tax cheats, tax revenues are going down because real estate values and retail sales are going down.

I will either do it by hand or hire a tax attorney.

@Chowday: See some of the comments above about H&R Block: many of their employees are minimally trained seasonal staff. They won't necessarily do a better job than you would do on your own with tax-prep software.

@root4root: if you're a student you could go to irs.gov to find a free preparer (like turbotax online- you just need to reach it through the irs link), and it will ask you questions to find all those school deductions, too.

Isn't there something wrong with a tax system that requires you to use a computer to figure out what you owe?

I have the best of both worlds - my wife does the taxes! She took a course from H&R block and so knows enough to get us by.

One year I DID make a mistake, and THAT was a PITA because I had to file the error-correcting forms in both states and it was stressful and confusing. If I did that again and made a mistake, I'd probably take my mistake to a CPA and have him help me straighten it out, if only because the stress was making me make errors.

But it wasn't difficult and I'd definitely do the filing myself by hand again. And with the NY/NJ thing, there's going to be plenty of resources since thousands of people make your commute, like there was for me with IL/IN.

Seriously...who pays taxes? Why? The gov'ment will just take your taxes and give them to the robber barons that run the banks that loan the money back to you. Just keep your dough and cut out the gov'ment and banksters.

And if you think this is a new idea (not paying taxes) - well, you're out of touch with reality. Just the other day I read that the city I live in has reported decreased tax revenues of 24k...plus any major news site worth their snuff will tell you that tax revolt is the new big thing for 2009 (read up on the tax revolts from our last Great Depression.)

And if you think "but they'll catch me" - uh, sure. Just like they caught the billionaires hiding money in UBS's vault over in Switzerland. They have nowhere near the amount of IRS agents needed to deal with all the tax "cheats", "frauds" and other such names for people who are sick and tired of throwing their money to someone just because they say so.

@theblackdog: Thankfully it's not 5 states -- just 5 W-2's. A result of a lot of 2nd jobs and minor writing projects that I had to fill out tax paperwork for.

@KStrike155: Thanks. I think I'm going to try TurboTax as a first step -- at least for my federal taxes, which shouldn't be TOO difficult, I'm hoping.

I do have a conundrum with Delaware and PA, though: my Delaware state return wants me to file my PA-40 first, and my PA-40 wants me to file my Delaware return first. Seriously!?

And let's not even mention local. Nothing confuses me more than local tax responsibilities.

I'm not sure we're at a point of either complexity or income where we would PAY for this advice (we're also both lawyers with some tax experience, so we could in theory do this ourselves, but it'd be a time-consuming PITA), but there's DEFINITELY a lot of value in his advice that we don't get from software. (Or from a commercial preparer.)

Then I married into an accountant -- my father-in-law is a CPA -- and haven't done my taxes since. I actually kind-of miss having control over it, but he's kind-of a big deal tax guy and it's really important to him to do it for us to show his love, the same way my mother has to bake us large quantities of cookies.

I've actually got to get all that shit together this next week or so; we try to get him everything first week of February so he can get us out of the way before he's swamped.

@KStrike155:
A few years ago I was using TurboTax to file across multiple states. Two months in Iowa and ten months in Washington. Washington doesn't have income taxes. It kept butchering it up by applying all of my income for the entire year to Iowa and saying that I owed a huge penalty to Iowa on top of that.

I filed a couple of problem reports with them and never received an answer. Ended up printing the forms out and doing the Iowa taxes by hand. They've probably fixed it by now though, or it only happens if one of the states doesn't have an icome tax. Any how, after that year I never went back to Turbo Tax again.

@Party Boy: yes. Whatever you do, DO NOT go to H&R to get your taxes done. Total rip-off. They are like the best buy of tax returns, or maybe Sears. I used them once and paid more for their services in that year than I have spent on the CPA I use now in the past 5 years.

I went to H&R block last year and will this year as well, as our situation isn't as cut and dry as when I was in college - but this may be the last year. I need to learn all the details about the homeowner deductions, etc. It's expensive, but they know more about taxes than I do and find more deductions, and have their guarantee to protect you in the case of an audit.

All of that said, can you imagine what the founders of this country would say if they knew that over half of the people that live here are so confused by our tax system that they have to pay a professional to handle it for them?

You have potential exposure to the alternative minimum tax.

Actually, TurboTax handles this pretty well.

@HIV 2 Elway Resurrected:

I'm a middle to upper-middle class person, I made about $60k in 08, paid $0 in taxes except to the state of residence I had. I was out of the country for 332 (calander) days giving me a tax free status on all income, however I was smart enough to make several investments that earned money, as well as making a few charitable contributions, throw in a marage, and factor in I was still able to collect unemployment for 4 months and I'm not about to try to figure out my taxes by myself.

After complaints, Intuit changed their policies to allow you to do multiple returns with one copy of TurboTax.

I've used their product in the past, and I've been happy with it. And I only need to do one tax return anyway. So I'm not switching.

I'm still doing my taxes myself, with no software--I just have one W2 and some interest to report on my savings account. I can usually do my state, local, and city returns in about an hour.

With a house and marriage about to complicate my finances, I fully expect to hire a CPA next year.

My wife is a CPA and does taxes for high net worth individuals ($10-200MM). For one individual, his federal tax return last year was over 2000 pages. And, guess what, she uses a software program to do all the work.

There is absolutely no reason you don't do your own taxes. When you pay a professional, they're really not doing anything you can't do yourself. Granted, the tax codes (and the entire process system for that matter) is highly complicated, but a good tax software program takes care of everything for you.

@RandomHookup: My wife started her own business a couple years ago and since then we have used a local CPA firm.

That changed this year after my wife sent them an email with three questions and got a response from them in less then half an hour. Three days later we got an invoice for $50 explaining that it was for answering her email. Considering what they already charge us to do our taxes you would figure taking ten minutes to answer one email would be included.

@Party Boy: They do seasonal hiring, so last week in december they start posting ads looking for people they can train to do taxes. Most of the training is on how to input the W-2 into their systems and enusre they ask all the questions. Some of these poeple have been doing taxes for years and are really good but you do find a lot of others who only know data entry but received "training".

@Party Boy: Tell me about it, the last time I went to H&R Block I ended up walking their employee through their own software because they couldn't figure it out. You would figure that would have qualified me for some sort of discount, but their on duty manager didn't agree. I haven't gone back since.

Did taxes myself for years, except for one year when due to my ex-husband's business we hired an accountant. He taught me a lot of the little 'secrets' of tax returns, so after the divorce, I went back to doing my own.

Just last year tried TurboTax (thanks Costco coupon), which was pretty easy. I think for most people with a employee-type job, even a homeowner, self or computer software works fine. Certainly if I had more complex issues, like multiple source income, capital gains/losses, rental income/expenses, I'd use an accountant again. I'll be using Turbo tax again this year.

@Dan Grossberg:

Just a word of caution..... what kind of "pro" did you go to? I worked for the IRS when I was in undergrad, some so called "pro's" will "find" deductions that turbo tax and others don't but they end up twisting the truth and if you get an audit you will have to pay it all back.

I am not suggesting this person was doing anythnig like that, but this is true for a lot of those accountants that find decuctions.... you can get burned badly a few years later and it does happen. Make sure you fully understand those deductions.

I was in the same situation (and actually worked for three months in Vermont as well as a bonus tax treat) and found that if your tax situation is simple and you keep your W2s organized, doing two sets of state returns isn't much harder than doing one. Just a bit more time.

I figure that when I buy a house that's when I'll use a pro to help me figure it out because that's when things get more complex.

I am sure the small amount he costs is more then payed for by the extra refund he finds

I'd use Turbo Tax but I have no idea how to claim myself as a student. You can claim the money you paid towards school, but no matter how many different ways I try it I can't find full-time student status. For now I just have to get in good with my accountant friends.

The most important thing is to find someone who you trust. Also, you don't want a preparer who charges a percentage of your return- they might be more tempted to add in 'bogus' deductions in order to raise their fee. Your best bet is to get a word-of-mouth reccomended accountant who charges a flat fee and will back you up on any audit processes.

Whenever you have your taxes prepared, they look at all aspects of your financials. They will know how much you are paying in interest on your mortgage, student loans, etc. They know what you are invested in and what kind of return you are getting. If you are not too saavy in this area, they will be able to point out any red flags. If you're paying too high a percentage on your home, they can let you know that. Also- they do hundreds of returns, so they have a good idea of what is "normal". It is a great way to get a grasp on how your financial situation compares to others in your area / profession.

I've been going to the same preparer that my family has been using for the past 30 years. It is nice to form a good relationship, as I always have a contact whenever I have any business question in general. Not just during tax-time.

Add to that that this year I lived in two states (Virginia and New York) and worked in Maryland while living in Virginia, and I think it's worth the money suck to have someone else do the state returns.

I used to do my taxes myself, until my side business started becoming more successful and complex. Since I also have a full-time job and time is at a premium (and because I'm not as comfortable with things liked depreciation, etc), I now have an accountant file my taxes. I do, however, go through them myself before they're filed, so I have a final chance to catch things. I'd love to save the money I spend on her, but spending that money is actually a big relief, all things considered.

I'd do them myself if my situation changed and my income stream was more simple, but for some of us, it does make a lot of sense.

I wish I could still do my own income taxes, but once I bought a home that is also rental property and ended up with stock options and lots of complicated financial investments, it was beyond my patience and ability. The local CPA I use gives me a federal return that's about 50 pages thick (though if he used the actual forms instead of computer-generated, he could cut it down by half).

I'm amazed by the people who can't handle a simple 1040-EZ. We started doing tax returns in high school in civics class.

There are logical reasons for me to use a professional -- I have a lot of freelance income from multiple sources, etc. -- but honestly, the main reason I do it is that the process sets off major panic attacks for me. I have no idea why, but I would rather give a speech before a crowd of 1 million and then leap out of a plane with an untested parachute than face down tax day. But I can get it together enough to get my stuff to the professional, and then he does the scary scary tax form while I breathe into a paper bag. (Not literally, so far, but you never know.) On the one hand I am embarrassed by this, but on the other, I've never been unhappy with the preparer's efforts.

i got married in 08, started 2 businesses, so i definitely will be going back, at least for a few years until i get the hang of it myself. if anyone in jersey needs a good referral, lemme know!

Same here (filing married and jointly). Pencil, paper, and the 1040A booklet. It's really, really easy if your income is simple.

Once we buy a house, though, I think I'll have a professional do it because there are a lot of deductions you can take in that scenario.

I plan on going the not quite pen and paper nerd route, but almost. New this year at IRS.gov is online fillable forms. It's the convenience of e-file without using tax software and it costs exactly $0, no matter how much money you make.

This will be my first year hiring an accountant. I'll have 5 W-2's and multiple state tax returns to file. The joys of being a nomadic college grad. Dammit.

I think every middle to upper-middle class person should do their own taxes. If you go through the process you'll find deductions that you can take advantage of in subsequent years.