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Are you a tax do-it-yourselfer?

March 01, 2012

| MoneyRates.com Senior Financial Analyst, CFA

Recently, MoneyRates.com, in conjunction with GetRichSlowly.org and MSN Money, conducted a poll asking people how they prepare their tax returns. The results suggest that MoneyRates.com readers may take a more independent approach than the broader population.

The poll was connected to an extensive GetRichSlowly.org study of tax preparation options and their costs. Overall, the results found that 49 percent of respondents pay someone to do their tax returns, while a similar number, 48 percent, handle the returns themselves, either by hand or with the help of tax software. However, isolating the results from MoneyRates.com and GetRichSlowly.org tells a slightly different story.

Combined, 66 percent of the respondents to these two sites reported preparing their own tax returns, compared to the 49 percent from the overall poll. This means that far fewer respondents to MSN Money prepare their own tax returns.

Why the difference? It's hard to say for sure, but discussing some of the possible reasons helps illustrate what goes into the decision of preparing your own return or paying a professional to do it. Here are three possibilities:

  1. The MoneyRates/GetRichSlowly audiences may be more do-it-yourself oriented. All three of the websites are related to personal finance, but MoneyRates.com and GetRichSlowly.org have more emphasis on do-it-yourself content. In the case of MoneyRates.com, it may be where to find the best CD rates, what trends are affecting savings accounts, or how to avoid checking account fees. With GetRichSlowly.org, you are likely to find practical advice on changing your spending habits and building savings over time. Either way, this hands-on approach may be reflected in the way visitors to these sites tackle their taxes.
  2. MSN Money audience members may have more complex tax situations. On the other hand, MSN Money carries more coverage of global financial markets, and people with investments of that nature may have more complex tax situations. That might explain why these poll respondents were less likely to do their own taxes.
  3. The MoneyRates/GetRichSlowly audience may be keeping a close eye on what affects their taxes. If you put the above two theories together, a third possibility emerges: The audience for MoneyRates.com and GetRichSlowly.org may be more likely to handle their own investments, while the MSN Money audience might be more likely to employ financial advisors. The link between this and tax preparation is that when managing investments, it is useful to know what drives tax liability, and handling your own tax returns will give you an in-depth feel for this. Not that tax considerations should drive your investment approach -- after all, better to pay the tax on a large gain than to have no gain at all -- but they should inform that approach.

The contrast in the results is interesting, but no matter how you approach your taxes, the important thing is to get them right. The article on GetRichSlowly.org has some tips and information that can help you decide which approach is right for you.

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