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Using Tax Prep Software vs. Hiring a Professional – Which Should You Do?

A generation ago, most U.S. taxpayers either outsourced tax prep to trained human preparers or manually completed their own taxes using paper forms provided by the IRS. Human experts and the IRS itself were also far and away the most reliable sources of tax prep information available to most filers. The former charged for their guidance. The latter continues to overwhelm laypeople with mountains of forms and publications.

Today, there’s a third way. Many – if not most – contemporary taxpayers complete and file their own tax returns using online tax prep software. Reputable tax prep software providers have extensive customer support departments, and many offer support or actual preparation services from human professionals. But most tax prep do-it-yourselfers make it through the entire process without interacting with a human being. And they like it that way.

There’s still plenty of room for human tax preparation professionals, though. Hybrid outfits like H&R Block combine in-person prep and robust digital DIY packages to appeal to the broadest possible swathe of the taxpaying public. They pair thousands of local tax preparation offices across the United States with multiple online and desktop-based packages and plans. For taxpayers who choose to work with hybrid tax prep providers, neither an aversion to DIY preparation nor a wariness of human assistance qualifies as a deal breaker.

Still, most taxpayers prefer one method over the other, even when they choose to work with providers that offer both. If you’re new to tax preparation or you’re wondering whether your longtime tax prep routine remains the best fit for your tax situation, it’s worth a few minutes of your time to review each method’s advantages and suitability.

Advantages of Using Tax Prep Software

DIY tax prep software has a lot going for it. Most of the selling points have three things in common: convenience, flexibility, and affordability.

1. Usually Less Expensive

DIY tax prep software is almost always less expensive than working with a human preparer. According to the 2018 National Association of Tax Professionals fee study, professional tax preparers’ average charge per individual return was $216.31. That’s significantly more than H&R Block’s highest-priced software plan – which includes substantial assistance from credentialed human professionals – and several times more than basic plans suitable for filers with uncomplicated tax situations.

2. Only Pay for What You Need

With DIY tax prep software, you only pay for what you need. Most tax prep providers offer several packages: free or very low-cost plans suitable for the most straightforward tax situations, one or more midrange plans for filers itemizing deductions or claiming certain tax credits, and one or more higher-priced plans for filers with significant income from equity investments, rental property, or business activities.

Some professionals offer a la carte pricing for certain credits and schedules. But many set ballpark fees based on expected preparation time. That means filers with less complex returns can end up paying substantially more than they should – and subsidizing filers with more complex situations in the process.

3. No In-Person Appointment

Outside planned maintenance periods, which usually happen in the dead of night, and rare interludes of unexpected downtime, tax prep software is always there when you need it.

By contrast, many human tax prep providers – especially smaller, independently owned outfits – require clients to schedule in-person appointments. Larger outfits may offer walk-in slots, which are a convenient innovation but a time commitment nonetheless.

4. No Human Interaction Required

DIY tax prep is a natural fit for taxpayers more interested in interacting with algorithms than people. Most who file with software can complete the process without ever speaking or live-chatting with a human support staffer or professional preparer – though full-service online tax prep programs typically have both on call to address problems software alone can’t overcome.

5. Clutch at the Last Minute

Online tax prep software is ideal for taxpayers apt to wait until the last minute to prepare and file their returns. It’s available right up until the July 15 filing deadline – or the Oct. 15 deadline for those who filed an extension. Independently operated tax prep shops often book up weeks in advance, leaving those who don’t get on the schedule early in the season in the lurch.

Online tax prep software is fast too. As soon as you complete your return, you can e-file it without waiting days or weeks for an overbooked human preparer to get your paper return ready to drop in the mail – or confirm they’ve e-filed it on your behalf.

6. Extensive Help Resources

The best tax prep software programs don’t ask filers to fly blind. They offer extensive free help resources for DIYers willing to search for solutions to tax code ambiguities or technical snafus. These resources are all the more useful in the wake of the implementation of the Tax Cuts and Jobs Act of 2017, the most significant tax code overhaul since the 1980s.

7. No Charge for Expert Consultations

Full-service online tax prep platforms’ highest-priced plans frequently offer unlimited access to human experts – enrolled agents or certified public accountants – for no additional fee. Offered by H&R Block as well as other tax prep programs, this perk isn’t yet universal. But it’s becoming more common, and it stands in sharp relief to smaller professional outfits’ standard practice of charging by the hour or visit for each consultation.

When so much information is available for free – or at no additional charge as part of a paid plan – it’s simply not worth paying an expert for in-person or remote advice on one or two minor questions about your taxes.

8. Accuracy & Maximum Refund Guarantees

All reputable DIY tax prep platforms guarantee the accuracy of their calculations, often promising to pay any additional tax due plus any penalties and interest – and, in some cases, an additional sum to make things right – to filers affected by erroneous calculations. Many also offer maximum-refund or minimum-tax-owed guarantees, promising filers they won’t pay a dime more than they should under the current tax code.

Although it’s common for human preparers to redress preparation errors – for instance, by filing amended returns at no extra charge – they’re more likely to make such promises on a case-by-case basis and may not do so without being asked.


Advantages of Hiring a Tax Professional

Tax prep software doesn’t always offer the best value. Working with a human professional is often a better fit for busy filers with very complicated tax situations.

1. Potentially Shorter Prep Time

It can be a lot of work throughout the tax year to ensure you have every document, receipt, and number needed to file your return. The burden is greater if your tax situation is complicated, which often requires many unpaid hours devoted to building and maintaining spreadsheets.

When you work with a human tax professional, you can provide the materials your preparer needs to complete your return in less time than completing the return yourself – particularly when there’s lots of material involved and your preparer can receive secure file uploads rather than paper documents you must deliver in person. As an independent professional with a fairly complicated tax situation, I typically set aside an entire day to prepare my own taxes. While I’m willing to make that sacrifice, someone even busier than I am or who feels their time is significantly more valuable can benefit from professional assistance.

2. Situation-Specific Expert Advice on Demand

Reputable DIY tax prep platforms have extensive help resources and, in many cases, tax experts readily available to chat with filers. But they aren’t always equipped to deliver granular, situation-specific advice on demand, particularly for filers with novel or extremely complex tax situations. The heads-up prompts or suggestions that appear within prep suites don’t always fully capture the nuance of a particular issue, and even if the answers are in the knowledge base, they don’t always jump out for filers without the luxury of time.

In some cases, professional preparers are better able to quickly and efficiently deliver expert advice specific to your situation – say, the most tax-efficient way to depreciate business equipment or the exact amount of additional withholding to request to avoid paying estimated taxes next year.

3. A Steady Hand at the Till

Professional tax preparers spend three months out of the year doing little else but eating, sleeping, and completing tax returns. Because they live and breathe data entry, it’s fair to surmise they’re less likely to make and more likely to catch a fat-finger mistake than a novice.

Man Doing Taxes Online Professional Office


When to Choose Tax Prep Software

As long as they have the time to do so, the vast majority of taxpayers can prepare their own taxes using best-in-class tax prep software. Several circumstances can make the DIY route the right choice for you.

1. You’re Comfortable Doing Your Own Research

Leading DIY tax prep platforms have most, if not all, of the tax answers you’re likely to need. But it’s also essential you have time to look for the answers. If you do, the case for DIY tax prep is strong.

2. You’re on a Tight Budget

DIY tax prep software platforms require far less labor per taxpayer than offices staffed by human professionals. And because they’re almost entirely automated, they can serve far more filers. So it’s no surprise DIY tax prep is invariably less costly than professional services. If you’re on a tight budget, the choice is clear.

3. Your Tax Situation Isn’t Especially Complicated

If your tax situation is uncomplicated – say, your primary source of income is a salary from W-2 employment, you take the standard deduction, and you have no investments – you don’t need to pay a professional tax preparer, period. You can complete your own tax return on your lunch break.

4. Your Income Is Modest

Taxpayers with modest incomes are more likely to have straightforward tax situations, making the choice even clearer. If your income comes in below the income threshold for the IRS’s Free File program, you can file your taxes with more than a dozen online providers at no charge.

5. You Don’t Have Time for Another Appointment

Amid everything else going on in your life, it’s tempting to put off chores like tax preparation. If you’re wary of committing to a tax prep appointment you have to schedule months in advance, or you’re not sure you can even find an hour to walk into a tax preparer’s office and sit down with a professional, fear not. A DIY tax prep solution is there when you need it, whether that’s in early February or at 11pm on July 15.

And because all online tax prep software allows you to save your work as you go, there’s no obligation to complete your entire return in one sitting. That’s great news for overscheduled filers for whom free daytime hours are few and far between.

6. You Want an Accuracy Guarantee

Accuracy guarantees aren’t unheard-of in the world of hands-on tax preparation. But they’re the industry standard in the DIY tax prep space. If you want an accuracy guarantee you don’t have to pry out of your human preparer, DIY is right for you.


When to Choose a Professional Preparer

Professional prep may provide better value for busy filers with myriad income streams or unusual circumstances that test the limits of DIY software. There are many circumstances in which using tax prep software can put you in over your head.

1. Your Situation Is Complex or Unusual

DIY tax prep certainly becomes more onerous as complexity increases. If you expect to encounter multiple situations requiring expert input – deductions or credits you’re not sure you qualify for, equipment or property depreciation, drawn-out qualified plan contribution calculations – then a human professional is the right choice.

2. You Have Many Sources of Income

Small business owners and freelancers number in the millions, so they can’t really call their tax situations “unusual.” But any one of those millions can attest to the drudgery of tallying every last invoice, 1099-MISC, or K-1.

Retail investors, especially day traders who execute dozens of equity trades per week, have it rough too. When time is money, it’s sensible to outsource time-consuming, mind-numbing data entry to someone who actually gets paid to do it.

3. You Don’t Have Time to Do Your Own Taxes

Even if your situation isn’t complicated or unusual, you only have so much time. And you can probably think of a dozen recurring obligations that take precedence over income tax preparation. In that case, you don’t need an excuse to outsource tax prep to a human professional.

4. You Prefer to Sit Down With Your Preparer

DIY tax prep is typically ideal for those who don’t expect to have many questions about their tax situations – and don’t mind interacting with static help resources or remote tax professionals if they do. But it’s cold comfort for taxpayers who prefer to sit face-to-face with someone they trust.

Just as you don’t need an excuse to outsource tax prep when you can’t afford to do it yourself, you don’t need to justify your preference for working closely with a human professional as long as you’re willing to pay a bit more.


Final Word

Whether to use a DIY tax prep solution or a human professional is an important question. But it’s ultimately one of personal preference. High-quality tax preparation software like you’ll get from H&R Block is more than capable of handling the vast majority of tax situations, including complicated and novel ones, even if it’s not the most expedient for taxpayers with truly extensive needs. And yet, millions of taxpayers happily pay more to sit down with human tax preparers each year. Perhaps you’re one of them.

Do you use DIY tax prep software to do your own taxes, or do you prefer to work with a human professional? Why?

Brian Martucci
Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

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