When Do You Need a Tax Professional?
There are over 62,600 tax preparers in the U.S. alone. They help you navigate through all the overly complex codes that regulate how and when you need to file.
Hiring someone to do your taxes may seem unnecessary if you have plenty of free time and a simple return, but it’s helpful if your situation is more complex.
A tax professional can save you time and ensure that the forms you submit are filled out properly. Read our guide to learn why you may need one and how to find the best one for your needs.
Reasons to Hire a Tax Professional
Hire a tax professional if you have a complex return, have no time to file, or are at risk of tax penalties. They’ll help you navigate your complex situation while saving you time and stress.
Factors that may make your return more complicated include self-employment, major life changes, owning rental property, and foreign accounts.
Anyone who owns their own business must track their income and deductible expenses each year. They must also make estimated tax payments every quarter.
This is a complex process that’s best left to a tax professional.
Changes in your life may change your taxes as well. These include:
- Marriage or divorce
- Having children
- Moving out of state
- Starting a business
- Buying or selling a home
- Receiving an inheritance
A tax accountant can help you determine how these events affect your filing status and deductions. They can also help you find out which forms you need to attach to your return.
Rental income entitles you to extra deductions. There are special rules about how the property depreciates and how you can claim losses from rental activities.
If you have, are an authorized signer on, or earn money from foreign accounts, you may have extra tax filing requirements. They apply even if you don’t earn income from the accounts.
The penalties for failing to follow these rules include fines of up to $60,000 and potential criminal penalties.
Lack of Time
Non-business filers take an average of 8 hours to prepare a tax return, including 3 hours for record-keeping, 1 hour for planning, 3 hours for completing and submitting the forms, and 1 hour for miscellaneous tasks.
Taxpayers with income from businesses, rental properties, or farms take 21 hours to file returns, including 11 hours of recordkeeping.
Tax professionals take all of these responsibilities off of your hands. The moment you begin to think of what you could do with all of that extra time is the moment you realize why you should hire a tax professional.
Tax relief reduces taxes for individuals and businesses. Methods include deductions, credits, exclusions, and the forgiveness of a tax lien.
The IRS will go after anyone who doesn’t pay their taxes. A tax lien is a claim against the assets of individuals or businesses.
Failing to remove a lien can cost you your home, business, or vehicle. It can also damage your credit score.
Risk of Penalties
Factors that put you at risk for an IRS audit include:
- Spikes or drops in income
- Large cash deposits or purchases
- Duplicate or incorrect data
Making these mistakes more than once increases your risk. A tax professional can help you file accurately, prevent penalties, and defend you against the IRS if they audit you or charge you back taxes.
Benefits of Hiring a Tax Professional
Tax professionals handle approximately 80,582,000 of the sent to the IRS every year. The number of Americans that rely on their services continues to increase because of the benefits they provide.
Hiring a tax professional reduces mistakes in your returns, saves you time and stress, helps you avoid penalties, and ensures you get the best return.
Some of the most common tax filing mistakes include:
- Selecting the wrong filing status or income bracket
- Improperly entering identification information
- Forgetting to sign and date the return
These issues could leave you at risk of an audit or keep you from getting the return you deserve. An experienced tax accountant will help you file quickly and correctly.
Saving Time and Stress
One reason that everyone dreads tax time is the amount of time and energy it takes to file.
Removing this time investment helps regardless of how many responsibilities you have. It reduces your stress and allows you to focus on things that are more important to you.
Avoiding Penalties and Getting Better Returns
A tax specialist can help prevent you from facing penalties due to an inaccurate return. They can also step in to fight for you against the IRS.
A tax specialist can even help you get a larger return. They know all of the deductions you’re eligible for and how to apply for them.
How to Choose a Tax Professional
Every tax preparer must apply for a free PTIN or Preparer Tax Identification Number. This is the most basic form of qualification, but you should look for more.
The IRS has a directory that lists the qualifications of every tax specialist. You’ll be able to find out whether they’re a CPA or EA, what they specialize in, and whether they enroll in continuing education each year.
If the tax professional you’re considering is a CPA, go to your state’s Board of Accountancy and search for their name. This will tell you if their license is still active.
Tax accountants charge an average of $146-$457 . Be sure to find one that offers a balance of cost and quality.
You may need a CPA or EA if you have a complex tax situation. They charge higher fees but have the experience to handle your case.
You should also check if the tax preparer has any specializations that match your situation. If you work from home, look for one that specializes in freelancing deductions.
Where to Find a Tax Professional
Trusting a tax professional takes the burden of understanding a range of complex codes and filing a pile of forms off your shoulders. You’ll be able to relax knowing that you’ve filed correctly and will get the return you deserve.
Be careful when choosing a tax preparer. Ensure they have the right qualifications and specializations and charge a fair fee for their work.