When you should hire a tax professional
If you are wondering whether you should do your own taxes or hire a tax professional, then you should examine the complexity of your tax situation. The most common areas that a professional preparer could/should assist is discussed below.
If you don’t have a lot of time to spend on tax preparation or your situation is complicated, hiring a tax professional is generally the way to go. But what exactly makes a tax return complex?. Here are a few scenarios that could make preparing your tax return a little tougher.
When you own a business, you don’t have an employer withholding taxes from your paycheck each month. You’re responsible for tracking income coming in and deductible expenses going out, as well as for making estimated tax payments every quarter.
If you don’t have a good understanding of estimated taxes, deductible expenses, depreciation, and accounting for inventory, you should probably hire a professional who does.
The various entity types – C Corporation, S-Corporation, Partnership, and LLC all have unique features to them and it is not advisable to try to self-file these returns.
You’ve had a big life event
Major life events such as getting married or divorced, having a child, moving out of state, starting a business, buying or selling a home or investment property, or receiving an inheritance can have a significant impact on your tax situation. These events can affect your filing status, the number or type of deductions and credits you can claim, and the forms you need to attach to your return. These are good times to seek out expert advice. Military members have a lot of these events and rental homes. They can benefit from professional services.
You own rental property
A tax return with rental income can get tricky. Special rules govern depreciating rental property and claiming losses from rental activities. A tax pro can help you claim your rightful deductions.
You have large investment accounts, or Crypto Currency transactions
Large investment accounts with a lot of trading activity can be overwhelming at tax time. These trades in an investment account has to be entered to show a profit or loss on each trade. A professional can assist in getting those transactions entered correctly.
Of course, the bitcoin/cryptocurrency is also an area that professionals can assist incorrectly accounting for it
You made mistakes on a prior-year return or are being audited
With today’s ultra-complicated tax rules, anyone can make a mistake on a return. If you notice the error before the IRS does, you can fix your mistake by filing an amended return using Form 1040-X.
However, the letters issued by the IRS sometimes leads to more confusion and uncertainty on how to fix an error on a prior year return. If it was a simple error, you might feel comfortable filing the amended return on your own using tax-filing software if you used said software to file your return initially and it has retained your information.
However, if the IRS caught your mistake and is charging you back taxes and penalties or selects your return for an audit, you might want to talk to a professional.
Your opportunities for saving on your taxes will depend on your situation and how complex it is. If your main tax concerns are your job’s income and the interest on a savings account, you probably don’t have many opportunities to save.
But if your situation is more complicated, working with a professional who has intimate knowledge of the tax code could result in serious savings.
A good tax pro can do more than beef up your bottom line. By building a relationship with your accountant, you can help your accountant get to know you and your unique situation. In turn, they can take charge of small tasks, such as prompting you to send in relevant documentation for a deduction or remind you to adjust your withholdings. Having an expert look out for you during tax season and beyond can give you priceless peace of mind.
I hope this helps give insight on how a professional can help you.