For many people, the idea of filing taxes may feel, well, pretty taxing. That could explain why more than half of electronic individual returns were filed by tax pros in the past 2 years, according to the IRS. But there's lots to consider before you decide how to file your taxes. Here are some options for tax filing, plus some details to help you choose what may make sense for your personal situation.
How to file taxes if you DIY
1. IRS Free File
If your adjusted gross income1 is $73,000 or less, you could file a free electronic federal return with IRS Free File. Software from third-party tax preparation companies guides you through the process. If you make more than that, you can still file a free federal return with Free File Fillable Forms (online versions of the paper forms), but you won't have access to the guidance. If you need more help and make less than $60,000, you could try the IRS's Volunteer Income Tax Assistance program. The preparer doing your federal return might also do your state return for no charge. More than 20 states also offer a version of Free File.
Cost: Free for federal and states with a Free File program (for a list of states, see page 19 of this Free File report). Check with your state's department of revenue, finance, or taxation if they offer free filing options.
Pro: Did we mention this is free?
Cons: You might not be eligible for some of these services. And the Free File Fillable Forms require some know-how.
2. Paper forms
No matter your earnings, you could print out forms from IRS.gov (or call to receive them by mail), fill them out on paper, and mail them to the IRS, with payment if you owe taxes.
Cost: Printing and mailing the forms. Consider sending by certified mail with return receipt service so you have proof it was received by the IRS.
Pro: Low cost.
Cons: You've got to know what you're doing to make sure you're correctly filling out the forms—and fully taking advantage of credits and deductions you may be eligible to claim. Plus, getting a refund, if you're due one, probably will take longer if you file by mail instead of digitally.
3. Tax software
These online programs guide you through how to file taxes with prompts. Anyone with internet access could file this way.
Cost: $0 all the way up to hundreds. These can be free for basic federal returns. Some options even offer free simple state returns (otherwise, it could be another $15 to $50). But generally, there are additional fees for the following:
- More complicated details, such as itemized deductions—including real estate taxes and student loan and mortgage interest—and non-W-2 income, such as from rentals, investments, or self-employment. These run from about $20 to $170.
- Additional services, such as access to a tax pro or help if you get audited. Add anywhere from $8 to $360 depending on the level of support for these.
Pros: It's convenient, might be free for simple returns, and could be less expensive than having a preparer file your taxes.
Cons: Prices go up with add-ons, such as live tax support, which may be somewhat limited as it pertains to complicated tax matters. And you have to buy the software again every year.
One more con for all DIY options: The IRS says a nonbusiness taxpayer spends an average of 9 hours on their taxes. Beyond filling out the forms, there's reading (and re-reading) all the rules and recordkeeping, which add up.
Still, if you have a simple return and know your way around the Form 1040, then DIY might make sense. What counts as "simple"? "Someone with a vanilla situation [for the tax year] could probably prepare their own taxes," says Jordon Rosen, CPA, and past Chair of the Tax Committee of the Delaware State Chamber of Commerce. "Maybe they have a W-2 and some interest income, take the standard deduction, or itemize straightforward deductions like real estate taxes and mortgage interest, and file in only one state."
Who might consider looking to a pro instead? Anyone with situations that go beyond the basics, including:
- You file in more than one state because, for example, you live in one and work in another.
- You are self-employed.
- You experience a major life event, such as getting married; losing a spouse; claiming an adult dependent, such as a parent; buying or selling real estate; or starting a business. (But not new children: Rosen thinks claiming the Child Tax Credit and Child and Dependent Care Credit is straightforward enough for any taxpayer to do on their own).
- You're a beneficiary of a trust or estate or a partner in a business.
Besides knowing the tax law, a tax pro really knows how to file taxes—as in, they can help find deductions and credits you're entitled to. "If you don't know the questions to ask, you may make a mistake or leave money on the table," Rosen says.
Talking to a professional can also be useful before a life change, so they can tell you what kinds of records to keep for tax time. Another time a pro can help: Sometimes, owing a lot of taxes can result in an underpayment penalty. A tax pro can help you decide if you need to increase your tax withholding throughout the year (by filling out a new Form W-4) or pay quarterly estimated taxes for future years. On the flip side, if you're due a large refund, say $2,500 for an individual or $5,000 for a couple, a pro can run projections, so you keep more of your money during the year and avoid giving the government an interest-free loan for the following year.
How to file taxes with a preparer
Now, your professional options. Major tax prep service chains may offer all of these types of preparers. Costs vary widely depending on tax return complexity, location, preparer's experience, fee structure, and more, but we've included some ballpark prices.
1. Certified public accountant (CPA)
It can take years for someone to become a CPA, between undergraduate study, training, and passing a rigorous professional certification exam. They are licensed by state boards of accountancy and must take continuing professional education (CPE) and ethics courses. Some specialize in tax prep and planning, and they can represent clients before the IRS in audits, payment and collection matters, and appeals.
Cost: It's a big range. Think: a few hundred to over a thousand dollars. Chalk it up to the many kinds of CPAs out there, from sole practitioners to those in small businesses and big firms, and the complexity of the returns they're filing. In certain cases, they may be able to find deductions and credits that make steep fees worth it.
Pros: Expertise, plus the convenience of not having to file taxes yourself. Because of their wide-ranging knowledge, they can advise on other financial matters, and you might choose to develop an ongoing relationship with one, especially for businesses that need someone who can read financial statements.
Con: May be expensive.
2. Enrolled agent (EA)
Licensed by the IRS, EAs earn this designation after passing a comprehensive exam or having at least 5 years' experience working in certain roles at the IRS. As the holder of a federal credential, an EA can practice in any state. EAs also must fulfill CPE requirements and can represent clients to the IRS.
Cost: Typically a few hundred dollars. A National Society of Accountants survey in which almost half of respondents were EAs found that the average fee for a nonitemized 1040 was $220 and $323 for an itemized 1040.2
Pros: Expertise focused on taxation and first-hand knowledge if they worked at the IRS. If you need representation for audits or appeals in multiple states, an EA can handle that vs. a CPA who is licensed only in a specific state.
Con: They tend to be well-versed only in tax matters, so they may not be as helpful for broader financial guidance.
3. Tax attorney
Tax attorneys have law degrees, passed the bar, and are licensed by the state or state bar. According to Stanley Kaminski, a tax attorney and CPA that is of counsel to law firm Duane Morris and past chair of the Illinois State Bar Association's State and Local Tax Section Council, "If litigation or a challenge is expected, a tax attorney may be a better bet to prepare the return," he says. Preparing trust, estate, and gift tax returns are other examples of when working with a tax attorney could make sense.
Cost: $200 to $1,000 per hour, with more experienced attorneys generally charging on the higher end of the range.
Pros: They may have expertise in tax litigation and can represent you in Tax Court or federal district courts. Note that going to court isn't common for the vast majority of taxpayers. (And some states allow CPAs to represent a taxpayer in pre-court proceedings.) There's also attorney-client privilege, meaning communication between you and your attorney remains confidential.
Con: See cost.
4. Annual Filing Season Program participant (AFSP)
If this type of noncredentialed tax preparer takes a certain amount of continuing education courses, including a refresher course in a given tax year, the IRS can add them to its public Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This list also includes CPAs, EAs, and tax attorneys.
Cost: Generally less expensive than the above 3 types.
Pro: Usually one of the more affordable options if you need a preparer.
Cons: Expertise on trust, estate, and gift tax returns varies so make sure they are familiar with preparing them if you have those types of returns. Representation rights are more limited than those of the previous 3 types.3
5. Undesignated preparer tax identification number (PTIN) holders
Anyone charging for tax prep services needs an IRS-issued preparer tax identification number (PTIN), which they include on returns they prepare. This type of preparer might prep taxes as a seasonal side gig. They do not have credentials, are not required to take CPE courses, and cannot represent clients to the IRS.
Cost: Typically less expensive than the first 3 types.
Pro: Again, the cost if you need a preparer is relatively low.
Cons: Same cons as with AFSP participants, plus, some may be available only during tax season. If you go with any preparer who only operates during tax season, the IRS suggests making sure you can contact them outside of the season in case questions or issues arise. Also, levels of expertise can vary. The IRS recommends asking about their education and training.
Prepping for pro help
According to Jennifer Van Elzen, director of member relations and analytics at the National Association of Tax Professionals, the most common way pros charge is a base fee, plus costs depending on complexity, followed by a flat fee per form/schedule, then a set dollar amount by the hour. The 2021 national average cost for pro help was $213 for individual federal and one state return, she added. Business owners can deduct tax preparation fees as a business expense, but individual filers can't anymore.
Before you commit to working with a tax pro, make sure their expertise is relevant to your personal situation. Some CPAs might not know the minutiae of tax code or tax attorneys might not know accounting, for example. Van Elzen also suggests asking a prospective preparer how they keep up with the ever-evolving tax code—for example, do they take continuing education classes or belong to a tax association.
Another tip: Don't wait until March to find a pro because they may already be booked up so close to Tax Day in April. "The earlier the better," she advises. And you could even meet the pro before tax time to see if they're a good fit for your situation. It would be good to have your tax prep appointment as early as February. Employers must send W-2s to employees and 1099-NEC forms to contractors by January 31.
Ultimately, going pro or going it alone comes down to whether you have the expertise, time, and drive to handle your exact needs. As Rosen says, "If I have the sniffles, I can manage on my own. If I have a gash in my leg, I'm not going to stitch myself up."