Online tax preparation services offer many Americans a convenient, inexpensive, quick means of filing their incoming taxes, but they are not a perfect and/or always appropriate method. There are still many situations and circumstances when using a trained tax professional—whether it’s a CPA or enrolled agent—is the best solution to one’s tax reporting needs. Although in many cases filing taxes online through a preparation service is a perfectly viable method of filing, there can be various pitfalls encountered along the way. Check out our list of pitfalls below.
8 Downsides of Preparing Taxes Online
- Computer Proficiency Is Required
Although many of the online and/or software-based tax preparation services attempt to make their systems as user-friendly as possible, there is still a considerable amount of computer proficiency needed in order to use them without too many headaches. There are software updates to download, forms to save and print, errors to check and returns to upload; if those steps aren’t executed properly, you’ll have a difficult time completing and filing your return. There’s also the potential for computer failures and glitches, which may derail the process entirely.
- There May Be Unexpected Fees
Sure, the IRS may allow you to e-file your taxes for free (based upon income levels), but that’s the only guaranteed no-cost portion of the process. There will be software license fees if you decide to use a tax software package like TurboTax, as well as additional fees for each state in which you must file. Other tax services may charge a fee for use of their websites as well, and that doesn’t include any help or guidance. In the long run, it may be less expensive and more effective to pay a fee to a traditional tax preparer, and then let them handle your taxes instead, eliminating the worry on your end.
- Filing Taxes Online Can Be Complicated
Just because tax preparation can be done online or with software, doesn’t necessarily make it easy. In many cases the input fields in the online tax process almost exactly mirror the paper forms traditionally sent to the IRS, and have not been simplified for the lay user. Essentially what that means is, if you’re not comfortable navigating the tax process on paper, you’re not likely to be much better equipped to make sense of it on your computer.
- You May Miss Some Key Deductions
There are myriad tax deductions and credits available to taxpayers that can have a huge impact on how much you owe the IRS each year. When you file your own taxes online, it’s up to you to sort through those options and decide which deductions you qualify for; if you hire a tax preparer they will guide you through that process, instead. Recent studies estimate 20% of taxpayers leave an average of $450 in the government’s hands through unused deductions—for a total of $3.345 billion in unclaimed refunds—so hiring tax help may actually save you money in the long run.
- There Are Security Concerns
Another potential risk of electronic tax filing is the opportunity it creates for hackers to steal this sensitive financial information amid the process of sending it to the federal and state governments handling your return. Therefore, it is essential to ensure you are working over a secure connection at your home and office, and not a public place and/or over guest WiFi.
- You Will Be Under Greater Scrutiny
For paper returns, the IRS only expends to manpower to input about half of the information into its system, then it stores away the paper copies in a warehouse for six years. Filing your returns electronically, on the other hand, enables the IRS to instantly pore over every detail of your past returns forever, potentially discovering (and penalizing you for) mistakes you may have made.
- It’s Time Intensive
Filing your taxes yourself using software and/or online prep services may also cost you significantly more time than if you’d hired a professional tax preparer. You’ll need to obtain and organize all the various financial documents required for the return, including all the receipts needed for deductions, which can be a major time drain, for sure.
- There’s Little to No Help
Should you run into a snag while completing your taxes online, in many cases there is minimal support available to answer questions and help you finish, especially if the problem concerns taxes themselves, and not the tech behind the system. Making a mistake because you didn’t understand the rules can cost you in the future due to audits, penalties and interest charges; this is the kind of oversight you can rely upon to guide you through your return when you choose to work with a tax professional, instead.
Robert Hall & Associates is a leading tax preparer and consultant serving Glendale, Burbank, Pasadena and the Greater Los Angeles area. Ready to maximize your returns? Find out how much money you are missing out on thanks to generic tax software! Give us a call at (818) 242-4888 or fill out our contact form for a free consultation.
Interested in learning what sets Robert Hall & Associates apart from CPA firms? Learn the difference between Enrolled Agents and CPAs.
Need assistance in preparing your income taxes? Find out the top advantages of using an Enrolled Agent over a CPA.