When Should You Hire a CPA to Prepare Your Income Taxes?
How do you know if you should hire a CPA (Certified Public Accountant) to prepare your income taxes? Should you just file your income taxes yourself? Can you go to a mass market provider that uses less trained tax preparers instead of professional accountants?
Those questions make most tax-payers do a double-take.
All of your tax documents, W-2s, and interest reportings have finally crash-landed in your mailbox and are ready to be reported to the IRS. We call this the “first wave” of tax season. Even before you got those documents, you probably started to notice a steady trickle of ads or email promotions from do-it-yourself services like TurboTax or the large, chain tax prep companies.
Will using one of those services be the best option, or do you need a more personalized, hands-on resource for filing income taxes? The answer depends on your situation and overall needs.
Before we go in-depth, you should consider working with a tax pro if you meet any of the following criteria.
- You own your own business.
- You are self-employed.
- You own rental properties.
- You own foreign accounts or stocks.
- Your tax documents are complex or plentiful.
- You want to develop a working relationship with a CPA and get personalized financial advice
Hire a CPA to File Your Taxes if You Own Your Own Business or are Self-Employed
Do you own your own business, whether it be full-time or part-time? If so, then you might need to hire an accountant. Self-employment taxes can be quite challenging to master at first. You are responsible for all state, federal, and SE withholdings since you do not receive a W-2. And even if you do, you still need to make estimated tax payments and file a tax return for the portion of the income generated from your business.
Business owners or self-employed individuals are often stressed enough as it is. CPAs are tax experts who can help you navigate the tax season effectively and efficiently. A CPA will not only prepare your tax documents and file your return, but they will also advise you on ways to reduce your tax liability as someone self-employed. The other benefit to working with a CPA is that if you were to be audited by the IRS, they can act as your representative and handle everything on your behalf. Many business owners and self-employed individuals attempt to do it all – including filing their own taxes but many don’t realize that hiring a CPA can not only save you time but money!
Hire a CPA if You Own Rental Properties
Owning a rental property can be stressful enough as it is between finding good tenants, handling the finances and managing repairs and maintenance. When tax time rolls around it can be overwhelming. All rental income from the use of real estate or personal property is considered taxable income. The good news is that you can deduct the expenses of renting a property from your rental income. It can be time-consuming to gather and organize everything for your rental property when it comes to tax time. If this sounds like something you could use a hand with, a CPA can help you file all your tax forms correctly and on time!
It is a good idea to reach out to a professional CPA if you:
- Own more than one property
- You don’t personally manage your property
- You are overwhelmed
- You lack the time to prepare everything
Hire a CPA if You Own Foreign Accounts or Stocks
Foreign bank accounts and investments may require additional tax-filing requirements, depending on your situation. Failing to disclose this information or filing the correct forms can lead to harsh penalties of up to $60,000 and even potential criminal penalties. A CPA has ample experience and expertise with these types of situations and can ensure that any foreign accounts, investments or stocks are property reported to avoid any penalties.
Hire a CPA if Your Taxes are Complex
How many tax documents do you have on file? Do you own stocks or investment properties? Have you encountered a significant life event, gotten a divorce, gotten married, bought or sold a home, or something more? Even a major event such as having a child can affect your taxes and the deductions you can claim.
Many people don’t realize that a simple life event, such as getting married, can affect your filing status, your deductions and credits, and the forms required for your tax return. In some cases, a change in circumstances can increase the available deductions and credits, while in other cases it can reduce them. To avoid unintentionally claiming deductions and credits you are not entitled to or failing to include all the necessary forms, it is wise to seek out a professional CPA. Even if you did not experience a change in circumstances but keep receiving documents for your taxes, a CPA can help you stay organized.
If you feel like your current financial situation is too complex to handle, or you’re unsure about deductibles, consider hiring a professional CPA.
Hire a CPA to Develop a Relationship
It is worth hiring an accountant to develop a long-term tax plan that fits your financial needs. CPAs are tax experts who stay in the know about any changes to tax laws, deductions and credits. This is advantageous as they will make sure you are getting the best return possible.
Most CPAs want to develop a lasting relationship, so they are usually available to answer any questions you have. You’ll also have someone to guide you to make the best decisions both when tax season rolls around and throughout the rest of the year as your financial questions arise. Having a financial professional on your side is always an advantage.
Tax Season Is Always Right Around the Corner
If any of the points above fit your situation, then working with a professional accountant or CPA will save you time, stress, and energy compared to filing your income taxes yourself.
If you have never filed before or are unsure about how the process works, using a tax pro will also prevent unwanted errors or mistakes that could potentially cost you – or prevent you from receiving a maximum return.
As a final word of advice, double-check everything. No matter if you file taxes online or use an accountant, always ensure you have all your documents compiled and the numbers are accurate.
If you are looking for a CPA to help you file your taxes efficiently and accurately, John Freeman CPA offers both Income Tax Preparation and Business Tax Management services. Call 319-396-5660 for a free consultation.