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I have been writing a book on taxes to try and explain, simplify, clarify to my family, clients, friends and anyone who would listen how basic taxes work. The current drafted title of my book is called “Taxes in Plain English” but more on that later. You may be breathing a sigh of relief since the Internal Revenue Service (IRS) has moved the tax filing deadline from April 15, 2021 to May 17, 2021. But since the process involves lots of decisions, how about we get started with some of these questions.

Who Should Prepare My Taxes?  

In a recently conducted survey, more than 50 percent of respondents indicated that they were going to self-prepare their taxes,  with another 30 percent indicating that they were going to hire a tax professional. Therefore, one of your initial decisions is whether you are going to self prepare your return or not.

Factors to Consider

If you relocated during the 2020 tax year you might want to consider getting a professional to prepare your taxes and not self prepare them. Why? If for any reason you have lived in more than one jurisdiction, generally you may owe  taxes in one state and get a refund in another. You don’t want to mess things up if you don’t know what you’re doing.

Also, you may have worked in more than one state and therefore run into complex issues. For example, some states have what is called the “convenience rule”. This rule states that an individual may be taxed by a state where their office is located even if they didn’t live or work in those states- if they telework for reasons of their own convenience rather than because of employer’s requirements. How will their rules play out because of Covid-19? Nobody knows at the moment! The point is, if you have relocated or lived at more than one address during the last year, consider hiring a professional to prepare your taxes.

Furthermore, you may want to retain the services of a professional if you are self employed, run a business, or have real estate investments. There may be expenses, deductions and even credits you may overlook in preparing these returns yourself. Additionally, and more importantly, these types of returns are more likely to get audited by the IRS in particular self employed returns. Is that not reason enough for you to hire professional help? And since we are talking about hiring a professional, review their credentials as part of your due diligence. If the person is an Enrolled Agent with the IRS, they have taken lots of exams and are in good standing with the IRS. If the person is an accountant licensed CPA, you can verify their license with your states’ CPA society or licensing board.  

How to Do It

Assuming you are going to self-prepare your tax return, you’re certainly not going to sit down with pen and paper and work it out. You are going to use some kind of tax software to help you prepare the return. So, the next decision is which software should you use? 

Even before considering which tax software to use check out whether or not you qualify for free tax preparation through the Internal Revenue Service. If your adjusted gross income, which could also be your income, is $72,000 or less, you may be able to have your tax return prepared for free through the Internal Revenue Service.

With so many tax software programs out there, some are more costly than others and features are different. For example, Turbo Tax may be costly, but it provides excellent navigation systems, imports 1099s and W-2s and other good support. I am not recommending this software over others, but with so many choices you need to consider the cost, how much support does the software provide; does the software comes with professional help and how much does professional help cost; is the software amenable to gig workers and does the software support multiple state returns. Not easy decisions to make when facing a May 17, 2021 deadline.

So, let me finish the story I started in the beginning about writing a book on taxes. Well, I’m still writing the book, but you should know I’ve only completed the first chapter after two years. It seems like each time I complete a section on breaking down some basic concept or internal revenue code or case in “ plan English”,  some new twist, code, section or interpretation is added. Will there ever come a day when you can file your tax return on a post card? Probably not! Will there ever come a day when you know what you can and cannot deduct? Probably not! Will there ever come a day when you can only use addition and subtraction to compute your taxes? No! Never going to happen! It’s complicated.