Question: I have always used a tax preparer to do my taxes, but I am wondering if I should perhaps do my own thing next year. What advice would you give me?

Greg’s answer: I have to be careful here, since I am in the tax preparation business, but I know that, as an enrolled agent with a great deal of experience, I add value. However, my opinion is that many individuals who historically pay a professional to prepare their federal and state returns could probably do it themselves.

The reality is that many persons are simply not interested in the hassle of tax preparation and are willing to pay a professional to prepare and file their return. I am thankful for them.

The reason that income tax return preparation is not that difficult now is that the available software is almost “idiot proof.” Now that statement presupposes that you are comfortable using your personal computer, and that your return is straightforward.

Remember that the available software, such as Turbo Tax or Tax Cut, will set you back between $60 to $90 (depending on the complexity of your return), assuming that you purchase both the federal and state modules.

E-filing both federal and state will raise your cost to something north of $100, but will accelerate the turnaround time until you get your refund. In 2013, if you e-filed early in the season, you could expect a direct deposit of your return within one week, and a minimum of four weeks for a paper return that is mailed in.

My suggestion is that if your income sources consist only of W-2 income, or only 1099-R’s and Social Security, and if you only claim the standard deduction (rather than itemizing your deductions); it probably makes no sense to pay someone else to prepare your return. In reality, in this scenario, if you have a good calculator and a couple of hours to spend one afternoon, you could very easily prepare your return the old fashioned way – manually and e-file your return using the IRS and the State of South Carolina web sites.

However, if you do itemize and your income sources are varied, it depends. If you get divorced in 2013, or sell your home, or incur moving expenses, or have enough income to generate AMT, you may want to go ahead and pay a competent preparer, such as a CPA or enrolled agent.

Question: My husband and I have a $250,000 whole life insurance policy on his life that we bought almost 25 years ago. The policy has almost $120,000 in cash value. We are thinking of cashing in the policy and investing the proceeds in our stock portfolio, since we think we can earn more interest than this policy generates. You agree?

Greg’s answer: Absolutely not, and here is why. When you surrender a cash value life insurance policy, if the cash value exceeds the sum of all net premiums that you have paid, the gain is taxed at ordinary income rates. That would be the case in your situation. However, cash value life insurance policies have two very interesting tax advantages: first of all, the cash value growth that occurs from year to year accumulates tax-deferred, and secondly, if you withdraw money from your policy in such a manner that allows the policy to remain in force until your husband’s death, those withdrawals are never taxed.

With that much cash value in the policy in question, and, since the policy is a dividend paying policy, you may use the dividends to pay the premium and still take these tax-free withdrawals every year. Then you can reinvest these non-taxed withdrawal amounts in your portfolio.

Now bear in mind that the death benefit will decrease gradually each year as these monies are withdrawn, but the insurance company will monitor these withdrawals for you to ensure that the policy will remain in force and that you will enjoy this very favorable tax goodie for many, many years. Finally, a tax-free death benefit will ultimately be paid to your beneficiary.

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Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience.