While today’s tax software can make it simple to fill out federal and state forms, some finance professionals say people can get themselves into trouble when filing on their own.
“It’s very much like a scalpel,” says Lynn Ballou, regional director for EP Wealth Advisors in Lafayette, California, when asked about tax software. “You can cut very badly, and it’s not the scalpel’s fault.” Ballou and others in the industry suggest turning to a professional tax preparer if any of the following apply to you:
1. You Have A Complex Tax Return
The definition of complex can vary, but Barbara Weltman, an attorney and author of “J.K. Lasser’s 1001 Deductions and Tax Breaks 2017,” says anyone who has rental property, a small business or otherwise needs to file a Schedule C should consider professional help.
“What you’re paying for when you come into my office is my experience,” says Andrew Poulos, founder of Poulos Accounting and Consulting in Atlanta.
While software can guide people through tax questions, it can’t interpret a person’s circumstances. A tax preparer can ask follow-up questions and will know when documentation is missing. Software recommendations, on the other hand, are limited by whatever data is entered by the user.
2. There Was A Major Event In Your Life Last Year
Marriage, divorce and death are just a few of the life events that may warrant a visit to a tax professional. You may also want to see one after buying a house, having a child or starting college.
“I am meeting a lot these days with retirees who now have to pay estimated taxes, and they’re not sure what to do with that,” Ballou says.
Even those who don’t want to hire a tax preparer year after year may find it beneficial to meet once after a life event for a professional assessment of any changes in their tax situation.
3. The Idea Of An Audit Keeps You Up At Night
Tax professionals can keep audit fears at bay. A professional may be able to spot issues that could flag a return for review.
“If you have a $50,000 income and donated $6,000 in clothing, that’s probably not going to fly,” Poulos says.
And if your return is pulled for an audit, your tax preparer may be able to work with the IRS on your behalf. However, preparers may offer different levels of service, so be sure to ask in advance what happens if your forms are audited.
4. Your Calendar Is Already Maxed Out
Even the most user-friendly tax program will likely be more time intensive than handing over a file of paperwork to a preparer. Plus, there can be a steep learning curve to what all the various filing questions mean.
“The programs give you the options, but many people might not understand the ramifications of the elections,” Weltman says.
If your time is already short, researching those ramifications may be difficult, and it may be time to hire a professional tax preparer instead.
5. Long-Term Planning Is A Priority
Ballou says there are two types of tax preparers: reporters and planners. Reporters are simply plugging in numbers to file a return in a timely manner. However, a tax preparer with a planner mindset is looking beyond the current numbers and seeing what savings opportunities exist.
“What is your goal in doing your taxes?” Ballou says. “Is it to be the reporter or to minimize your taxes?”
Most people who do their own taxes complete them as reporters, and seeking out the help of a planner may reduce someone’s effective tax rate, both now and in the future. For Weltman, it seems like an easy decision to use a tax professional.
“Aside from the cost, there is no downside to going to a pro,” says Weltman.
Source: US News & World Report