Five Reasons Why You May Want to Hire a Tax Professional As you progress through your life, your finances get more complicated and preparing taxes becomes more time consuming and stressful. In fact, according to the IRS, it took an average of 37.8 hours to prepare the regular Form 1040 in 2006, even when using even when using tax software. No wonder tax season is declared by various pollsters as the second most stressful time of the year just behind the Christmas season.
If you are one of many Americans who prepare their own taxes, the following list should help you consider whether to hire a tax professional (e.g. CPA or EA) or continue to self prepare using online tax software. You should consider hiring a tax professional if any one of the following applies to you:
You have a relatively complicated return. By "complicated" we mean a tax return that involves a moderate level of itemized deductions, capital gains/losses from investments, self-employment income, home sales, rental, AMT, etc. In addition to saving yourself from the stress and countless hours spent in preparation, an experience tax professional should help you prepare accurate and audit-proof tax returns.
Your life changed in the past year. If you started your own business, bought a home, got married or divorced, started investing, changed jobs, or had other life changing events, you should work with a tax professional to make sure that income is properly reported and no deduction is overlooked.
You get headache thinking about tax. It's only natural given the complexity of the U.S. tax code and the fact that you do not spend most of your waking hours studying tax laws. Also, an average taxpayer does not have the time or the motivation to keep up with the constantly changing U.S. tax laws.
You don't have time. If you simply can't afford to spend days on preparing taxes or can't take on additional stress, you should have a tax professional prepare your taxes. Fees paid to a tax professional may be well worth the price if it means that you can go about your life uninterrupted by the stress of tax preparation.
You need professional advice on how to structure your activities to minimize your tax exposure in the future. If you are concerned about your high tax bills year after year, you should consult with a tax professional regarding ways to structure your finances to maximize tax credits and deductions. Some examples include shifting income among household members, deducting various business related expenses, and deferring income to future years.
Martin Lee is with taxCPAdirect. For more information, contact him at mlee@taxcpadirect.com or visit taxCPAdirect.
