7 Common Reasons to Hire Someone to Do Your Taxes

Posted on Feb 15, 2022

If one of these things applies to you, consider using a professional to file your return.

Completing one's annual tax return can be a fairly straightforward process. You simply get your W-2 or 1099 forms and other necessary documents in the mail or online, then file using one of the many online software tools available.

But for some taxpayers, completing an annual tax return can cause an immense amount of stress. If your employment status and/or financial picture is complex, you might fall into this category. In addition, if you're unsure about how the recent tax law changes might impact you, it might make sense to consult a professional this year.

Below, you'll find seven common reasons why you should consider hiring a pro to do your taxes.

1. You had a major financial event in the previous year.

If your financial picture changed significantly in some way in the previous year, you might want to consider hiring a professional to do your taxes.

"If you're used to doing it yourself, but you have a big tax income year with a lot of complexity, it makes sense," said Andrew Rosen, a CFP at Diversified, LLC in Wilmington, Del.

Major financial events could include things like taking money out of a retirement account; having a significantly higher earning year; transferring jobs during the year, getting a large bonus, purchasing a home or having children who started college.

2. You're self-employed, work as a freelancer, own a business, or have a side hustle.

Perhaps you're a freelance graphic designer. Or maybe you're a self-employed consultant. Whatever your job may be, if you're self-employed, you should definitely consider meeting with a pro when it's time to do your taxes.

"If you are self-employed, I think it's a really good idea to use [an accountant]," Rosen said. "If you're self-employed, typically you have a lot of write-offs and there's a lot of gray area. You want to make sure you're categorizing things."

One added benefit of consulting a professional if you're self-employed is that you'll have added protection from being audited.

"Generally, if the IRS sees that a return was done by a tax preparer, it's less likely to be audited," said Gary Schaider, a certified public accountant and manager at Weiss & Company LLP in Glenview, Ill. "And you have the firm's signature behind your return, so they have some responsibility and stake in making your return correct and helping you with any IRS inquiries."

Schaider said this protection is often why people consult a professional to do their taxes in the first place. "I think the audit risk for someone is pretty low, unless you're amazingly wealthy," he said. "But if you do have that signature of the CPA, that definitely gives you a better score on your tax return."

3. You have children.

If you have children or claim other dependents, it might be worthwhile to consider hiring a professional to do your taxes. Rosen said that if you have children and everything else in your financial picture is normal, you might not need a pro. But if there's any level of complexity to your finances, you should consider it.

If you have college savings planned for your children or monthly payments for school, for example, it could be beneficial to hire an accountant. In addition, if you have stepchildren or children from a previous relationship, you should consider hiring an accountant, as this may add a level of complexity to your tax return.

Plus, Rosen jokes, parents often don't have the bandwidth and energy to complete their taxes.

"[Parents] typically don't have a lot of time with their children, and taxes are complex," he said. "I'm a firm believer in figuring out where you want to spend your time. Do you want to spend it doing your taxes and looking for receipts or do you want to dump it on someone else's plate?"

4. You have many things to itemize.

Most people get everything they need to complete their tax return in the mail: 1099s, W-2s, mortgage interest, etc.

"I think that makes it relatively simple," Schaider said. "But if you have anything else outside of what generally might come in the mail from the IRS, such as your own business [or] charitable expenses ... you might want to consider using a professional to help you make sure they're presented best on the return."

Things you might be able to itemize include: mortgage interest, charitable donations, business expenses, interest on investments and medical expenses. If you plan on itemizing any of these deductions come tax season, hiring a professional can make it simpler.

In light of the recent tax law changes in 2018, you may also have questions about your itemized deductions that may not be fully deductible this year. An accountant can help you navigate these changes.

5. You had a major life event in the previous year.

If you had a significant life event in the previous year, consider consulting a tax professional to ensure you complete your tax return efficiently. Some major life events could include a death in the family, marriage, divorce, or the birth of a child.

"If there's anything unusual that sticks out, I think you should consult a professional," Schaider said.

6. You have multiple investment accounts.

If you have investment accounts, such as college savings funds, stocks, bonds, annuities or individual retirement accounts, your financial picture is likely more complex. Consulting a professional to do your taxes can help ensure you abide by all of the tax rules that accompany these types of accounts.

7. You don't have the time or energy, or you feel overwhelmed by the process.

If none of the above statements applies to you, that doesn't mean you have to do your own tax return.

"Why would I tell people to have someone do their taxes? First is if you just don't have the time or the bandwidth," Rosen said. "I think there's a power in outsourcing a lot of things in this world and, quite frankly, getting your taxes done has become a bit of a commodity. You can get it done fairly inexpensively."

If you decide to consult a professional to do your taxes this year, Rosen advises looking for a certified public accountant, or CPA.

"If you're going to seek tax help, I would look for a CPA," he said. "You don't have to be a CPA to do taxes. For instance, H&R Block and most [tax preparers] aren't CPAs. If you're going to pay for [your taxes], you're not paying very much for a premium with most CPAs anyway. Might as well have someone who has a firm understanding of taxes."

Original article: https://www.inc.com/mediafeed/jamie-friedlander/7-signs-you-need-a-pro-to-do-your-taxes.html