Should you do your Own Tax Returns?

Tax Man

I’ve had a few people lately ask me if they should do their own tax returns or take them to a professional. As a certified IRS volunteer tax preparer (VITA), I’ll provide you with my opinion and some items to consider.

First off, if you have a complex return such as owning a LLC type business and needing to produce a form 1065 and a K-1 for the business and then do your own 1040, you should probably seek professional help. If you just own a sole proprietary business and file with a Schedule C, you might want to be adventurous.  Otherwise keep reading below.

The case for doing your own return is based on the fact that all tax preparers today use software to prepare taxes. The software used by a professional is almost identical to the software you might use as a DIY-er. In the IRS VITA program we started using TaxSlayerPro this season, they signed a 3 years agreement with the IRS. For the last several years we used TaxWise. At home I’ve used Intuit TurboTax for many years. These software products can be operated in a Q&A mode or a more direct entry mode. Many of these software programs will automatically import your W-2 information and your brokerage 1099-R’s. This further simplifies the process. The software does routine analysis, looking for missed entries, or outright errors. The software has help screens, sometime on-line chat and you can always Google for reliable answers to many tax questions.

The biggest case for DIY is the ability to understand how all the pieces of a tax form effects your taxes due and therefore how you might plan to pay less taxes or none at all. Most of the people I do taxes for just bring in all the forms, hand them over and have no understanding of how the calculations work. If you are retired, and live off a pension and Social Security, fine … not much you can do to affect your return. However, parents with kids in college, stock market investments, HSA accounts, mortgage interest etc, this is a different story. In our case before we even start a tax return the client fills out a detailed questionnaire. We are also trained to look over all their materials and ask questions that might affect their filing. At the end of every tax return I do for a client I take the time to explain every entry on their 1040, I ask if they have any questions. However, for the most part, the client just doesn’t want to know more that their return is being filed and they will get a direct deposit.

If you are in your 50’s or 60’s and planning for retirement, tax planning can have a huge impact on your future income and retirement plan. Over the last 10 years as I got real serious about retirement planning (I just turned 69) I spent a good deal of time structuring an overall plan to pay the minimum tax required. As things changed in my life I updated my strategy, the results have been very financially rewarding. Tax and investing strategy have allowed me to pay no taxes for several years and thank you Obama Care, actually get back a substantial refund each year. My overall retirement plans, in my case postponing my Social Security until I’m 70 (next year!!!), have worked out very well. I have a pretty good investment strategy, highly tax efficient, a fixed income designed IRA that will provide ample funds when I start my MRD also next year. In addition I have my tax plan already done for the next 3 years (based on 2016 rates). This is part of my SWAN strategy, Sleep Well At Night, enjoy my life during the day!

Understanding even basic concepts like Tax Brackets, Deductions vs. Credits, Qualified Dividends vs. Ordinary Dividends and Ordinary Income can make a big difference to you and your loved ones.

I can tell you that if you do your own taxes for the first time, you’ll learn an awful lot. Your goal is to get the same results as a professional preparer, save a lot of money and get educated.

Good luck getting your taxes filed!

2016 Market Performers – My Fixed Income Portfolio

Each year as part of my year-end evaluation of my different portfolios I study the Periodic Table of Performance. This table is most helpful in my Fixed Income IRA portfolio that I will use to cover my income “Gap” when I start taking Social Security next year at age 70. To learn more about calculating your “Gap”, just click here.

In this Fixed income portfolio I’m looking to balance dividends vs. risk, my current portfolio generates 7.81% average returns.

Here is the Periodic Table of Performance provided by Alerian:


The table is comprised of the following benchmarks:

  • MLPs are represented by the total return version of the Alerian MLP Index (ticker AMZX)
  • Utilities: S&P 500 Utilities Index (a composite of utility stocks in the S&P 500) 
  • Commodities: S&P 500 Total Return World Commodity Index
  • Bonds: Barclays US Aggregate Total Return Bond Index
  • REITs: Real Estate 50 Index (a supplemental benchmark to the FTSE NARIET US Real Estate Index Series)
  • Non-US: MSCI Daily Total Return EAFE Index

My IRA Fixed Income portfolio has the following sector allocations:


Over the last several months I have made a few adjustments to my long-term holdings.

I’ll publish an updated list of my holdings in a future post.