The need to pay professional accountants hundreds of dollars an hour has been replaced with a convenient option that costs a fraction of the price in the form of do-it-yourself accounting software programs.
People all over the world use DIY accounting software to take advantage of the ease of filing taxes at their own convenience. Some consumers take advantage of free platforms with no income limits or restrictions, such as SimpleTax.
But is a DIY accounting software the best option for everyone?
Taxes Are A Fact Of Life
People all over the world usually pay taxes via deductions on their regular paychecks. Once a year the majority of people need to file a tax return with the government, even if they weren’t employed. The process consists of declaring to the government any additional income (such as rental property or dividends) to determine what if any additional taxes are required.
But at the same time, the person filing the taxes will determine their eligibility for a refund if they overpaid or if they are entitled to special programs. For example, a government could incentivize people to use public transportation or pursue education programs and higher learning by offering a refund on their taxes.
Armed with all of your personal financial information from the past year, your options for filing for taxes are two-fold. You can either pay a professional accountant hundreds of dollars or more to handle your taxes. Instead, you can file it yourself for a small fraction of the cost.
For many, this is a very straightforward decision.
Taxes Made Easy
The DIY accounting software will ask you a series of simple and straightforward questions and all you have to do is type in the answer.
Questions vary by countries and region and may include how much income did you earn, how much did you spend on union or other work membership dues, how much did you spend on medical expenses, how many children live in your household.
The questions will likely change each year as governments introduce or remove tax policies based on changing or evolving needs.
There is nothing complicated to the process and the vast majority of people will complete the process in 30 minutes or less.
Built To Save You Money
The concept of spending less money on DIY accounting software is thrown out the window unless it actually saves you money compared to the alternative. Consider this is an example:
You pay $40 to file taxes through one of the many online DIY accounting software and it is determined you are entitled to a tax refund of $440. Net benefit is $400.
But what if an accountant that charges $500 to file taxes on your behalf is able to secure a refund of $1,000? In this case, the net benefit is superior at $500.
Only a fool would stick with the first option.
So to keep up with the level of service professional accountants offer, DIY accounting software programs are built with smart features in mind. A typical software should be counted on to analyze personal information and generate tax-saving ideas and strategies.
The software will typically run hundreds, if not thousands of calculations based on many options to generate a set of recommendations. For example, it could suggest the proper use of tax credits for married couples or if someone should use previous tax credits this year or save it for future use.
When To Hire An Accountant
There are many reasons why someone would want to pay a professional accountant to handle their taxes. Perhaps they don’t have any spare time to sit in front of their computer and the additional cost is a worthwhile expense.
For others, they feel that anything that has to with personal finance should be handled by a professional that can answer questions. The vast majority of accountants will be happy to talk with their clients throughout the year. For example, a married couple could decide to buy a property with an attached rental unit and may want to understand the tax implications in advance.
But for others, using online DIY accounting software may not be a feasible option in the first place. Some countries may restrict how new immigrants or those on work visas file for taxes. For example, Canada’s government mandates that newcomers must print and mail their income tax their first year of filing.
People with a complex financial profile are more likely to opt for the services of a professional accountant. Those with rental income or business interests in foreign currencies come to mind.
DIY accounting software can easily handle multiple income streams but each person should be able to understand when their situation requires personal attention to detail that only a human can offer.
Individuals who are in their later years of life and need to start thinking about how to preserve assets upon their passing may want to avoid using DIY software. Instead, they should be working with accountants and perhaps even tax lawyers.
Bottom Line: Great Option For Most People
DIY tax software is exactly that — software. It is designed by code and lacks the ability to think like a trained accountant with decades of experience. This is more of an acceptable tradeoff for the vast majority of people that have very simple requirements.
There will always be a need for accountants and the industry certainly isn’t disappearing anytime soon. But in 2020 there is not much of a need for accountants to serve ordinary people with basic needs.