File your taxes.

Photo: Lifesize/David Sacks/Thinkstock

In this rough economy, Americans are trying to save every dollar they can. We spend upward of $11 billion each year on tax preparation. Six in 10 taxpayers hire someone to help them fill out the forms and calculate what they owe, while millions more rely on computer programs like TurboTax, H&R Block and TaxACT. Is paying a tax professional throwing your money away?

Who should hire a professional
A professional filing taxes.

Photo: BananStock/Thinkstock

Is paying a tax professional throwing your money away?
Not necessarily. I'm a huge believer in having your taxes done professionally—especially if your income exceeds $50,000 a year. In my experience, the savings you realize from a professionally done return will more than cover their fee. In fact, the savings are usually somewhere between five and 10 times your investment. So if you spend $500 having your tax return done, you will more than likely shave $2,500 to $5,000 off your tax bill. The investment return is relatively high. Plus, you can write off the expense! Most people come out ahead when they hire someone to do their taxes professionally.

Hire a professional if:
  • You earn more than $57,000 a year
  • You are self-employed
  • You bought or sold a home recently
  • You trade frequently
  • You own multiple properties
Who should consider doing their own taxes
File your taxes online.

Photo: Comstock/Thinkstock

Who should do their own taxes?
If you're a wage earner with run-of-the-mill deductions like mortgage interest, property taxes and childcare or educational expenses, there's no reason you can't do your taxes yourself. You can do your taxes completely on your own for free at or use a tax preparation software that costs anywhere from $20 to $50. There are dozens of programs and online tax-prep services to pick from, but your best bet is to stick with one of the three best-sellers: TurboTax, TaxCut and TaxACT. Regardless of which brand you choose, don't pay full price. Surf the Web and check ads in the Sunday paper for the best deals.

Consider doing your own taxes if:
  • You get a W-2 from your employer
  • You are not taking itemized deductions
  • You have only a few bank accounts
  • You don't own real estate
  • You don't trade frequently
The biggest mistake people make when filing their taxes
Itemized deductions to keep track of.

Photo: Polka Dot/Thinkstock

The single biggest mistake people make is not itemizing their deductions. The government estimates that the average American leaves $400 to 500 on the table by not itemizing.

Records to keep all year:
  • Healthcare expenses
  • Interest on mortgage payments
  • Business expenses
  • Home improvements
  • Record of all investment trades
  • Charitable donations
Download Chapter 1 of Bach's book Start Over, Finish Rich