Should You Hire a Professional for Year-End Tax Planning?

A few years ago, I convinced myself I needed to hire a tax professional. I don't like preparing my taxes, and I figured I was acting like an adult by handing my paperwork and receipts to someone in a suit.

Even though I'm self-employed, my taxes aren't complicated. My wife was also self-employed on a very part-time basis during that period, so we had to pay the tax preparer twice for self-employed tax preparation.

The result was sticker shock. We paid more than $700 for some very basic tax preparation services that I could have done myself in just a few hours.

There are times, though, when hiring someone to do your taxes is certainly worth the cost. So, let's take a quick look at why you may or may not want to hire a professional tax preparer this year.

When you should consider hiring a tax professional

While I didn't feel that the cost of hiring a professional was worth it for me, there are plenty of times that it could be. Here are a just few times when you should consider hiring a professional.

• You're self-employed or employ other people.
• You have multiple income streams in addition to your regular job.
• You have a lot of investment income.
• You work in multiple states.
• You hate preparing your taxes.

These are pretty general topics, but they cover a lot of different ideas. For example, if you have a business and have lots of expenses, then it may be best to hire a professional to make sure you're getting all the tax credits and deductions you deserve. Additionally, if your income is more complicated than just one W-2 or you rely on multiple investment income streams, hiring a professional may give you some peace of mind.

Additionally, if your taxes are complicated or unconventional in any way, you may want to hire someone to do it for you. For example, if you bought and sold a lot of cryptocurrency, it might be a good idea to hire a tax professional to help you navigate filing your return.

Of course, if you just hate doing your taxes and have some money to spare, there's nothing wrong with outsourcing the job.

When you should consider doing your taxes

The flip side to all of the above is that it's never been easier to do your taxes, thanks to all of the available tax preparation software out there. Here are a few reasons you may want to tackle your taxes yourself.

• You want to save money.
• Your taxes are simple.
• You have straightforward income sources.
• You have extra time to spare.

About 50% of Americans prepare their own taxes using software, so you're in good company if you go it alone. And one of the reasons many people may choose to do so is because of cost.

The average cost to prepare a 1040 tax return was $213 in 2021, but jumped to $248 this year. And the average business return went from $519 just two years ago to $604 now, according to data from the National Association of Tax Professionals.

The good news is that tax prep software is easy to use, and some software is even free. You can choose from a variety of programs -- including TurboTax, TaxAct, and H&R Block -- to find the best one for your needs.

If you hire a tax professional

If you end up hiring a tax professional, make sure to find one who has the right qualifications and experience. You can even check some tax professionals' credentials through the IRS's website.

The IRS recommends you find out about a tax preparer's history and how much they charge. The agency also says never to sign a blank tax return and to review all details of your return before it's submitted.

And, of course, going to any reputable or well-known tax preparation company will save you the trouble of vetting a tax professional on your own. Just remember to bring your checkbook.