Every tax season, millions of taxpayers must make a very important decision: to file their taxes online or in person. Choosing one option over the other can cost significantly more or cause you to get a smaller refund; either outcome means less money in your pocket. If you’re still deciding to file your taxes online or in person this tax season, our tips can help you decide which option is best for your tax situation.
When to File Your Taxes Online
Most people are better off filing their taxes online without the help of an accountant.
Here are three reasons why:
- You can usually file a non-itemized return for free
- Filing an itemized return, Schedule C, or Schedule D is still much cheaper online than in-person
- File from the comfort of your home
Turbo Tax Absolute Zero vs Filing In Person
Approximately 3/4 of American households file a non-itemized federal tax return. Unless you sold stock investments, earned rental property income, or are self-employed and need to file a Schedule C, you’ll most likely qualify for the Turbo Tax Absolute Zero Plan that lets you file your federal and state tax return for free.
According to a CBS News report, the average non-itemized federal and state tax return costs $159 for in-person tax prep. Although some national tax prep firms like H&R Block start at $92 to file a federal and state return in-person, this is is $92 more expensive than submitting the same information for free online.
Because you’re not itemizing, your tax refund amount will be the same if you file online with TurboTax or hire a tax accountant to prepare your tax return. Assuming either service gives your a return of $2,860–the average federal tax refund–the entire amount is deposited into your account by filing online with the AbsoluteZero plan. But, if you file in person or use an online tax prep software that charges a fee, you’ll have to subtract the tax prep fees from your refund.
Since you’re going to most likely get the same refund amount anyways, take the time to file with free tax prep software. Even if you’ve never filed your own taxes, it’s easier than you expect and the programs do an excellent job of walking you through the process to ensure no income or deduction is forgotten.
Filing An Itemized Return or Additional Schedule vs In Person
If you have a more complex return that requires you to pay a small fee, you may still be money ahead by doing it yourself.
Filing a more complex return online can cost:
- Itemized return: $59.99 federal plus $39.99 state
- Rental or Investment Income (Schedule D or E): $79.99 federal plus $39.99 state
- Self-employed (Schedule C): $119.99 federal plus $39.99 state
If you need to file a federal and state tax return, you’ll pay between $100 and $160 depending on the additional forms required.
This compares to $273 with in-person tax prep for an itemized return and $447 if you’re self-employed. Both of these figures are for a federal and state tax return. These are the average prices so you can pay more or less depending on which accountant you use and your local cost of living.
If you don’t trust your handiwork, you can have a TurboTax CPA or EA review your return for any potential errors or overlooked deduction for $179.99 for your federal return. This is most advantageous if you have self-employed income and can claim industry-specific deductions. Unless you enjoy a true in-person experience, this option is cheaper than driving to your local accountant where you might get similar refund results.
Advantages of Filing Your Taxes Online
Most people will be better off filing your taxes online for these reasons:
- Can potentially file for free!
- Usually get the same refund amount as filing in-person for most returns
- Many accountants use the same software that TurboTax or H&R Block use
Disadvantages of Filing Your Taxes Online
- Full audit protection benefits and assistance aren’t always included in the base filing fee
- Online tax programs might overlook certain areas in complex tax situations
If you’re concerned about being audited, compare the online tax prep software’s audit protection policy to your local accountant. If you get audited, having local support can be well worth the additional cost.
When It’s Better To File Your Taxes In-Person
You should file your taxes in-person when:
- Are self-employed and have a complex tax situation
- Need additional audit support
- Prefer in-person human interaction
Self-employed business owners will benefit the most from filing in-person and using a local accountant familiar with small business tax law. You’ll want to avoid in-person services like Jackson Hewitt or Liberty Tax because they usually don’t provide the same level of service as a CPA-licensed accountant.
If you have basic self-employment income with basic deductions, you’ll be perfectly fine with filing your own taxes. But, it can be a different story when you need to factor in depreciating assets, payroll, submitting sales tax, and paying your local and state business taxes. Online tax prep programs offer many of these same tools, but if you’re not familiar with the federal and state tax codes you can potentially get into trouble by claiming inapplicable deductions that can raise a red flag.
It’s the job of tax accountants to know the tax code, so it can be well worth your money to pay your tax professional to file your taxes so you can focus your energy (and time) on running your business. Although it costs, more to file in-person, in-person accountants can help you get a bigger refund–or smaller tax liability–by claiming deductions that online programs miss. As long as you can save more than it costs to file in-person, you’re money ahead.
Full Audit Support
Another benefit of filing in person is your accountant is more likely to include full audit support if the IRS has questions about your tax return. Since they prepared your return, they might be the ones talking to the IRS agent or they will represent you in a meeting. Online services might not offer these same benefits, or they charge an additional fee if they do.
Getting audited isn’t an issue if you have a simple, non-itemized return. Your odds of getting audited are more likely if you own a business with complex deductions or you’re a high-income earner with uncommon income streams or deductions too.
Whether you file your taxes online or in person, use our tax prep checklist to make sure you have all the required documents!
Advantages of Filing Your Taxes In Person
- More likely to get full audit protection benefits
- Self-employed filers with complex deductions can save money despite the higher tax prep fee
- In-person support for tax questions
Disadvantages of Filing In-Person
- Usually get same refund amount for simple returns
- Almost always costs more than filing online
Filing your taxes online is more beneficial for most people. If you’ve never tried it, most online programs make the process extremely easy. You could say it’s more pleasant than visiting the dentist.
But if you have a complex tax situation, filing in-person is usually better; particularly for the self-employed.
How do you usually file your taxes? Online or In Person?