Many taxpayers do their own tax returns (DIY) by using an off- the-shelf or online tax software. If you expended more than a few hours on your taxes this year, it’s time to ask yourself whether it makes sense to outsource this task to an accountant. Ask yourself these questions. Do I enjoy preparing my own taxes? Will I have the time to gather documents and to prepare the tax returns? Am I preparing the tax returns correctly or am I overpaying my taxes? Do I know what will trigger an audit?
The following 5 items may be indications that it may be to your advantage to have an accountant.
1. You are earning more money. The more money you earn, the more likely your odds of being audited rises. If your income is under $200,000 then your likelihood of being audited is about .9%. But if your income is over $200,000 your odds are 3.7% and if your income over $1 million it increases to 12.5%. Wouldn’t you prefer to have an accountant already on your side if the IRS contacts you?
2. You own a business, are self-employed or have rental properties. Most business and rental properties and take an expense called depreciation on capital assets. Most people do not know what is a “capital asset” or the depreciation rules. A tax accountant will know how to handle capital assets and depreciation. I good tax accountant will assist you minimizing your taxes.
3. You anticipate selling of stocks or other capital assets. An accountant can help you plan do that the gain is taxed at a lower rate than your ordinary income and help you find other ways to minimize taxes like tax-loss harvesting.
4. You want to provide for your children’s or grandchildren’s future. Accountants can be instrumental to help choose which vehicles to use for tax deferred or tax-free savings, whether you are considering a 529 plan for college savings or forming a trust for your children and grandchildren.
5. You are too busy to do your own taxes. Having an accountant prepare your returns will allow you to accomplish your other tasks. You will still need to find time to get your forms and other information together.
Here are some advantages of hiring a tax accountant.
Human touch. Similar to a respectable family doctor that knows your medical history, you can cultivate a rapport with an accountant so that he or she understands your family financial condition and future goals. According to a CPA in South Jordan, Utah who has been preparing taxes for over 20 years, “A tax specialist accountant is often able to recommend valuable tax savings that a software program just can’t anticipate.” The value of this advice can certainly exceed the extra cost of consulting with a tax professional.
Available year-round. Most accountant offices are open all year and they will be able to answer important questions that arise not just during tax season but at other time during the year.
Save you time. Taxpayers who have complicated business and investment matters might have the ability to prepare their own taxes, but is it worth their time? A tax accountant is so familiar with the tax system, he or she can swiftly and effortlessly complete tasks that might take taxpayers hours of research. For busy non-tax professional taxpayers, their time can generally be better expended on earning money in their area of expertise. Even if your tax situation is straightforward, engaging a tax accountant will save your time and stress.
The bottom line is this: the decision to doing your taxes yourself with software or hiring a tax accountant is a personal decision. Your comfort and knowledge with the tax code will be part of your decision, but the complexity of your finances should be the key determining element. If you only have a few W2s and own a residence then you may save hundreds of dollars by preparing your own tax returns, whereas those with business income, rental properties and other investments will discover the expense of hiring an accountant to be worth their peace of mind and potential tax savings.
