FINDING A TAX PREPARER Is doing your own taxes getting to be more and more of a challenge? Are you thinking of hiring someone to do it for you? Are you wondering if that will be worth the cost? There are times in life when you really should turn to a professional for tax preparation. In addition to potentially saving you money, that professional can also help you gain a better understanding of your tax situation year after year. When should you hire someone else to do your taxes? The basic answer is “when you no longer feel comfortable doing them yourself”. If you are going to buy a home or invest in real estate, if you are starting a business or entering into some kind of business partnership … you really should have your taxes prepared by a professional. Beyond those circumstances, are you starting a family? Are you getting married or divorced? Are you moving to a new state? These events can complicate your tax picture, and you will want to draw on the knowledge of a tax professional. Why not just buy some software? Software has no experience. It can’t replace the life experience, the insight, and the perspective of a good CPA. Some taxpayers think, “Why should I go to a tax preparer? All s/he does is use the same software that I could buy for $39.99.” In reality, s/he knows much more than how to use a software program. S/he has an understanding of the tax treatment of investments, capital gains, different kinds of business entities, W-2 and 1099 status, and other “fine points”. S/he has a knowledge base that you probably don’t – one that you may wish for if tax software asks you a question that you aren’t sure how to answer. S/he knows not to claim a deduction that stretches credibility – the kind that hopeful business owners sometimes take, the kind that the IRS finds very interesting. S/he can recommend adjustments to your deductions and suggest ways to save money this year and next. As a CPA will tell you, the do-it-yourselfers sometimes end up being the ones who need the most help, either because they get stuck on some kind of question or ambiguity presented by the software or because they realize they are in over their heads. Yes, the software is terrific – so terrific that professionals use it. And if your taxes have grown more complicated, you want a professionally prepared return as a safety precaution. A tax professional who is an Enrolled Agent can even represent you before the IRS. 1 Look for a good CPA or tax attorney. An experienced CPA or tax attorney can work hard to save you money and also help you make sense of short-term and long-term financial issues affecting your business and your life.
Ishan Goradiya is freelance writer and loves to write about financial planning. These days he is writing on sb1 Federal Credit Union.