Sam works full-time at one job that issues him a W-2 every year. He doesn’t own a home and his investments are through his employer’s 401(k) plan. For Sam, filing taxes is a fairly straight-forward process so it is likely he would be comfortable filing his own tax return.
On the other hand, Mary’s tax history is more complex. She works full-time but freelances on the side. She just bought a home last year and got married. She is saving up to start her own business in the next three years. For her, it probably makes sense to hire a tax professional to not only help her now but also to plan for the future.
Just as these two examples show, no two people are alike when it comes to filing taxes, making it difficult to know when to bring in an expert to help.
Mitch helps lead the tax practice for the firm. He works closely with his colleagues to delve into tax questions, IRS correspondence, and implications for different tax strategies and how they might impact federal and state tax returns. We recently sat down with him to get his advice about when a person should hire a tax professional to help prepare their income taxes.
Here are five things he recommends people consider when weighing their options:
- Risk tolerance – for some, even a simple tax return seems daunting. They are worried they will miss something or trigger an audit by incorrectly reporting income or deductions. Others are more comfortable with the process and welcome the challenge. Each person will have a different tolerance level.
- Complexity – did you buy or sell stocks for a gain or loss? Do you freelance on the side or are you self-employed? Do you provide financial support for a dependent? All of these scenarios can mean additional record keeping and reporting to the IRS.
- Life changing events – getting married, getting a big promotion at work or receiving a large bonus, buying a house, having a child, or a death in the family. These life changing events can trigger spikes in income or overall wealth which can definitely impact your tax situation.
- Time constraints – the IRS says the average taxpayer spends 13 hours preparing his or her tax return. But it can take far longer for taxpayers with more complex returns. Business owners spend even more time – 24 hours – to get their taxes in order. When you work with a tax accountant, you will still have some time involved in gathering the needed documentation but once you hand off the materials, your accountant will step in to get your tax return prepared.
- Year-round planning – developing a relationship with your accountant over time is the same as developing a relationship with other professional service providers, like doctors or lawyers. As an accountant gets to know your story and your goals for the future, he or she can help you make the most of your dollar by keeping an eye out for ways to not only ease your tax burden but to make sure you are thinking about your overall financial health.
It is never too late to reach out for help. Even if you think you may have made an error in last year’s filing, an accountant can help sort it out, “Everyone has a unique situation and are at different places in their lives. Even if mistakes have been made, your accountant can help you figure out how to resolve it,” said Mitch. “We are here to answer your questions and help you have peace of mind.”
Now is the time to initiate those conversations with your tax advisor. Tax expert Mitch Estling is on hand to help you evaluate your options. Start here to get a conversation going.
