This may seem like a funny question for a tax preparing CPA firm to answer, but the truth is we get it all the time. Clearly, we have a vested interest in the answer being yes you do. But, part of our commitment to client service is to help prospects and clients know when they do NOT need our services.
If you have a simple tax situation, you work at one job for which you receive a W2, you don’t have kids and you don’t own a house, there are low cost, even free, options available to you. In this case you likely don’t need an accountant’s help.
However, life and taxes are often more complex or become more complex over time. There is no hard and fast rule as to whether or not you need an accountant, but here are some guidelines that we hope will help.
If you are interested in discussing your situation, reach out to us here and we can discuss your situation.
When do I need an accountant to file my taxes?
Really the need for an accountant depends on your knowledge, interest and the complexity of your situation. The advantages of working with an accountant are:
- Accountants know the rules and how to handle complex situations, this saves you the time of having to do research and the pain of getting your research wrong.
- Accountants know what you can deduct and what you can’t deduct, so they can make sure you are getting the best results possible.
- Since they know what they are doing they make fewer errors.
- They save you time: this is one less thing that you have to worry about. The IRS estimates that taxpayers spend on average 8 to 21 hours preparing tax returns – so if you are busy doing other things, this might not be the best use of your time.
As your tax situation evolves you may find it taking up ever more time as you become less certain in the results. And often there are opportunities and strategies that you can use to optimize your return that you don’t even know about.
Even if you do have the knowledge, or can gain it, there is a question as to whether or not you want to spend the time. Even a simple return can take a few hours, a complex return can take 20 hours or more, not including the research required to figure out the rules and the cost of mistakes.
Here are some specific complexities that suggest it is time to consider an accountant.
You run your own business
Whether you run a business as a hobby or as your full-time occupation – you must file and pay taxes for the business and yourself.
Having a business adds significant complexity to your tax situation because you have to consider everything from revenue to expenses. We often see mistakes in deductions that can lead to significant over and underpayment.
Also, you will have to consider how you are paid, as an employee or through profit distributions and what each of these strategies means for self-employment tax. There is a lot to balance in a business tax situation and an accountant can help.
You have stock options or other incentive compensation
Accounting for stock options can be very complicated and there are a lot of variables to track. It is easy to make a mistake.
So, when your options start vesting it is a good time to consult a good accountant. They can give you advice on when to buy and sell your options to make sure you minimize the amount you pay in tax.
You are experiencing or have experienced major life changes
If you get married, have a child, buy a house or get divorced, it is a good time to start working with an accountant. These changes imply different deductions, tax brackets and trade-offs.
Another possible major change is if you start investing and realizing capital gains and losses. In this case you have to navigate short- and long-term gains, qualified dividends and loss carry-forwards, which can be tricky and expensive.
A good accountant can help you navigate these changes, help you adjust your withholding or pre-payments to avoid surprises at the end of the year and provide you with clarity.
You failed to pay or file in the past
If you haven’t filed or paid your taxes in the last few years talk to an accountant. This can be a serious issue that can even lead to jail time.
But an accountant can help you by filing all of your tax returns at once. They will help you accurately calculate what you owe so that you can take control of the situation.
Also know that you are not the only one. The IRS does have payment plans and programs for people in your situation and a good accountant can help you navigate the options.
You should also consider talking to a tax attorney, since not paying can be very serious. You accountant can probably recommend someone. At any rate with an accountant by your side you do not have to go through this alone.
When you don’t need an accountant / alternatives
If your tax situation never changes or you have one job and receive a W2 at the end of the year, you probably don’t need an accountant.
If you earn under $72,000 a year, the IRS even has a free filer program for you, which you can check out here. Another option to consider is tax software, and there are some good recommendations here:
To Sum Up:
Preparing your taxes takes patience, a focus on the details and knowledge of the tax law.
If you have these and want to file your own taxes you can. If you prefer the confidence of having a professional prepare your taxes and would rather spend your time elsewhere, we are here to help.
We would be happy to help you decide. If we can’t add any value to your situation we will make that clear. Why don’t we talk about your situation?
Just click here to send an email or call, we can set up a free consultation.