Every year, individuals need to report their income, review applicable deductions and credits, and file their federal tax returns. Some people prefer preparing their returns using tax software, while others choose professional individual tax preparation to get help reviewing their financial information and filing requirements.
Both options can help you complete your tax return, but the experience and level of support can be different. Your income sources, family situation, investments, and comfort with tax rules all affect which option may work better.
This guide explains the difference between professional individual tax preparation and DIY tax filing so you can make an informed decision.
What Is Individual Tax Preparation?
Individual tax preparation is the process of preparing a personal income tax return using information about your income, expenses, deductions, credits, and filing status.
Professional personal tax preparation services involve working with a tax preparer who reviews your documents and helps prepare the required forms.
Depending on your circumstances, the process may include:
- Reviewing W-2 and 1099 income.
- Checking filing status and dependent information.
- Reviewing eligible deductions and tax credits.
- Preparing Form 1040 and applicable schedules.
- Checking tax calculations and withholding.
- Submitting the return electronically when eligible.
The exact services depend on the preparer's qualifications and the complexity of your tax situation.
What Is DIY Tax Filing?
DIY tax filing means preparing and submitting your own tax return, usually with the help of tax software.
Most platforms guide you through questions about your income, employment, dependents, expenses, and other financial details. The software uses your answers to calculate tax amounts and prepare the required forms.
DIY filing may be suitable if:
- You have a straightforward W-2 income situation.
- You understand the basic information required for your return.
- You are comfortable answering tax-related questions.
- You have limited deductions or additional schedules.
- You can review the completed return before submitting it.
However, software cannot independently verify every detail of your financial situation. You are responsible for entering complete and accurate information.
Individual Tax Preparation vs. DIY Tax Filing: Key Differences
The main difference is the amount of professional assistance involved.
| Comparison | DIY Tax Filing | Professional Individual Tax Preparation |
|---|---|---|
| Preparation | Completed by the taxpayer using software | Prepared with professional assistance |
| Data entry | Usually entered by the taxpayer | Information is collected and reviewed |
| Tax guidance | Software explanations and prompts | Opportunity to discuss tax questions |
| Complex situations | Depends on software features | Depends on preparer's experience and services |
| Cost | Software and package fees may apply | Professional preparation fees apply |
| Review | Taxpayer reviews their own entries | Preparer reviews information and return |
| Communication | Support options vary by platform | Direct communication may be available |
Neither option guarantees a larger refund or eliminates the possibility of errors. The best choice depends on your individual needs.
When Is DIY Tax Filing a Good Choice?
DIY filing may work well when your financial situation is relatively simple.
For example, you may feel comfortable using tax software if you:
- Receive wages from one employer.
- Have straightforward income records.
- Do not own a business.
- Have limited investment activity.
- Understand your filing status and dependents.
- Are comfortable reviewing tax forms before submission.
Some software platforms also support self-employment income, investment income, and other tax situations. However, check the platform's supported forms and features before choosing it.
When Is Professional Individual Tax Preparation Worth Considering?
Professional preparation may be useful when your tax return involves additional income sources, deductions, or reporting requirements.
Consider professional assistance if you:
Have multiple income sources: You may receive W-2 wages, freelance income, investment income, or retirement distributions.
Are self-employed: Business income and expenses may require additional schedules and careful recordkeeping.
Have investment or rental income: Different reporting requirements may apply to capital gains, dividends, interest, and rental activities.
Experience major life changes: Marriage, divorce, having a child, or changes in dependent status may affect your tax return.
Have multi-state income: Working or earning income in more than one state may create additional filing responsibilities.
Need help understanding tax rules: A preparer may explain which forms, deductions, and credits are relevant to your circumstances.
You can explore Mo Better Tax's individual tax services to learn about professional filing support.
What Should You Consider Before Choosing?
Before deciding between DIY filing and professional tax preparation, consider these five factors:
- Return complexity: How many income sources and tax forms do you have?
- Tax knowledge: Are you comfortable understanding the questions and rules involved?
- Time: Can you organize your documents and prepare your return yourself?
- Total cost: Compare software fees with the complete cost of professional assistance.
- Support: Would you benefit from discussing your tax situation with a preparer?
Also, check the qualifications of anyone you hire. Paid federal tax return preparers generally need a valid IRS Preparer Tax Identification Number (PTIN), subject to applicable exceptions.
For more information, visit the IRS guide to choosing a tax professional.
How Does Form 1040 Fit Into Individual Tax Preparation?
Form 1040 is the main federal individual income tax return used by most individual taxpayers. Whether you prepare your return yourself or work with a professional, Form 1040 is commonly part of the process.
Depending on your financial situation, you may also need supporting schedules for additional income, deductions, credits, or taxes.
You can learn more about this form in our guide to Form 1040 and who needs to file it.
Frequently Asked Questions
1. What is the difference between individual tax preparation and DIY tax filing?
Individual tax preparation can involve professional assistance with reviewing documents and preparing returns. DIY filing means preparing your own return using tax software and information you enter.
2. Is professional individual tax preparation worth it?
It may be useful if you have multiple income sources, business activities, investment income, or questions about deductions and filing requirements. Its value depends on your circumstances and the services provided.
3. Can I prepare my individual tax return without a professional?
Yes. You can use tax software or other IRS-supported filing options if you are comfortable preparing and reviewing your own return.
4. Who should consider personal tax preparation services?
Individuals with complicated income, self-employment activities, investment income, rental property, or multi-state filing requirements may benefit from professional assistance.
5. Does professional tax preparation guarantee a bigger refund?
No. A legitimate preparer cannot guarantee a specific refund. Your result depends on your income, withholding, payments, deductions, credits, and applicable tax rules.
6. What documents are needed for individual tax return preparation?
Common documents include W-2s, 1099s, investment statements, dependent information, eligible expense records, and estimated tax payment confirmations. Your exact requirements depend on your circumstances.
7. Can a professional prepare Form 1040 for me?
Yes. A professional tax preparer can help prepare Form 1040 and applicable schedules based on your financial information and the services they provide.
8. How do I choose between DIY filing and professional tax preparation?
Consider your return's complexity, tax knowledge, available time, budget, and need for guidance. Choose the option that best supports your filing requirements.