Taxes: To DIY or not to DIY?

Tax form with pencil pointing to "Amount you owe"

Tess Vigeland: So you know you have to do them. You know that. Now the question is how? Do it yourself with pencil and paper like our first caller? Sit down at your computer with H&R Block or TaxAct software? The IRS reports the number of returns filed with home computers is up almost 6 percent over last year. Or, of course...you could pay someone else to do all the scut work.

Marketplace's Bob Moon finds the whole question inTAXicating.


Bob Moon: There's a good chance you're doubting yourself, no matter which tax preparation method you choose.

Kit Yarrow: Turns out that there's one thing the brain hates even more than doing taxes, and that's not knowing how to do something.

Kit Yarrow is a behavioral psychologist at San Francisco's Golden Gate University. She wasn't surprised that I always end up with nagging doubts about my taxes: Is the software I've been "cheaping out" with for years missing a big deduction? Ironically, a colleague of mine wonders if she's just wasting money on her accountant.

Hopefully by the end of this story, you'll find some peace of mind. But let me warn you right up front, there's really no one-size-fits-all answer.

Case in point: Chip Bolcik, who lives here in the L.A. area. He makes his living voicing commercials like this one:

Chip Bolcik, in a TurboTax ad Real people just like you choose TurboTax to do the job.

He may have pitched TurboTax, but it turns out Chip pays somebody else to do his taxes. He works many different jobs, so his return is tricky. But we asked him to sit down at his computer and just try to do his taxes online.

Bolcik: When you're doing tax stuff, you should always have cookies or some other comfort food nearby to help you. That's my personal rule. I'm nervous. I am not a business guy. Anything where I've got to do paperwork, I'm like, "Huh."

What really worries Chip is answering something the wrong way.

Bolcik: Will this cause me to be audited? I don't ever want to have to talk to the IRS. Not that I don't love you, IRS.

A couple of screens into the questions from TurboTax, though, he seems to be doing OK.

Bolcik: Oh that's good, that's really good. I didn't know how that was going to work.

But pretty quickly, he gets frustrated with all the questions, which he finds either confusing, or just irrelevant.

Bolcik: This person passed away before fi... How could I pass away if I'm filling out the return?

Before long, the program asks if he runs his own business. And answering "yes" triggers a series of pitches to buy a more expensive version.

Bolcik: Uh-oh. Did I say yes that I had a business? Oh I guess I did. I don't think any of this really applies on my personal.

Chip's inclination is to call his accountants.

Bolcik: I send everything to them, and then I wait while they do their voodoo, and then it comes back to me, and it's just so much easier. Yes, it's much more expensive, but my time is certainly worth something.

It's not just that Chip prefers to save his time. As our psychologist Kit Yarrow points out, he avoids the headaches.

Yarrow: It's sort of like time spent in hell, versus having somebody do your taxes for you.

Bolcik: This is just, you know, agonizing for me. Like I would never pull my own tooth.

A full hour-and-a-half later, he's just a few screens in -- but he's had enough.

Bolcik: There ought to be a way to hit "escape," and get out of this line of questioning. Now I'm feeling like I don't want to do this.

And Chip is soon back at his accountant's office, with a confession.

Bolcik: Neal, I have sworn off TurboTax.

Neal Marks: Chip, you're welcome to my office anytime.

Marks and Bolcik laugh

Most Americans do pay somebody else to figure their taxes -- around 84 million, compared to 34 million the IRS estimates use software help.

The commercials promise you can't go wrong with TurboTax.

TurboTax ad: It gets me right to my maximum refund.

But that "maximum refund" guarantee can be a gamble, since you'll end up paying your accountant or a preparer like H&R Block to find out for sure.

What we can tell you is this: TurboTax's Julie Miller is right when she argues that doing it yourself can be cheaper, at least upfront.

Julie Miller: You know, on average about $50 for TurboTax versus $200 or more at one of these national storefronts. That's a pretty good trade-off.

Miller concedes the program may not be right for everybody. If you've got a complex return with lots of investments and different income sources, for example, or if you're one who needs a live human being to answer questions.

Chip's accountant, Neal Marks, says his rates start around $200 for basic returns. And he's there to answer questions from clients, and represent them before the IRS if they're audited.

Marks: I'd rather be with somebody who had my back, as opposed to a program that doesn't talk to me.

So what to do? You could try comparing both ways -- the online sites offer free trials. But even then, psychologist Kit Yarrow says she wouldn't expect anyone to stay convinced.

Yarrow: Frankly, my guess is, the next year they're going to worry that because their circumstances changed a little bit, they didn't do it right that year either.

Ah, the brain's a funny thing. Take Chip Bolcik, who told his accountant he'd sworn off TurboTax. He told me he might try plugging in the numbers from his completed return to give the program another try.

Bolcik: ...And just see if I can maybe next year make it a little bit cheaper to do taxes. I might do that.

It really comes down to this: The choice that best suits you has to be yours to make.

Yarrow: It's actually a question of just getting to the point where you understand that you aren't going to understand. And let it go -- you have to let it go.

In Los Angeles, I'm Bob Moon for Marketplace Money.


Vigeland: If you're looking for some last minute tax tips with a week or so to go. Check out Chris Farrell's post on our Makin' Money blog.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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