When it comes time to do your taxes, you might be wondering if it makes more sense to do them yourself. After all, tax specialists aren’t free, and if you have a simple and straightforward tax situation, you could rationalize that a professional tax preparer isn’t necessary.
Working with a tax specialist can pay for itself for most people, and it can even help you avoid costly mistakes.
In this article, we’ll discuss the pros and cons of hiring a tax specialist or taking a DIY approach to your taxes.
Benefits of Working with Tax Specialists
Even with the advent of inexpensive tax software, there’s still a very strong case for hiring a professional. Though many tax programs advertise free filing, you’ll often have to pay extra for basic services, and there’s no guarantee that the software programs are accurate. Trying to save money here could end up costing you more in the long run.
There are several benefits to working with a tax specialist including, these four compelling reasons:
1. Save Time
Did you know that personal tax returns can take seven to eight hours to complete, and business tax returns can take 20 hours or more? Tax specialists can handle your taxes in a fraction of the time because this is what they do all day, every day!
This means you can spend your time doing something worthwhile or enjoyable while letting the pros do the heavy lifting.
2. Maximize Deductions
Have you donated to charity? Do you have mortgage interest deductions? There are dozens of tax breaks available to the average American, and you don’t have to be a millionaire to take advantage of them. Tax specialists can identify the deductions that will lower your tax bill.
3. Improve Your Finances
Tax specialists do more than just identify and claim deductions. They can also give you valuable financial advice, particularly if you’ve gone through one or more of these milestones in the past year:
- Having a child
- The death of a spouse
- Buying or selling a home
- Receiving an inheritance
- Retirement planning
- Investing in cryptocurrency or other assets
- Starting a business
- Selling a business
There are short and long-term implications to these events, and an experienced tax specialist can serve as something of a financial planner. They could help you structure your finances in a way that helps you avoid overpaying taxes and keeping everything that you do above board.
4. Peace of Mind
One thing that most people dread, regardless of much money they make or how simple their tax situation is, is an audit. You worry that you made a mathematical error, misinterpreted a law, or made an error that could cost you thousands.
When you have a tax specialist on your side, the risk of a mistake is significantly reduced. Remember, this is what they do for a living. And, even if there is an error or discrepancy that the IRS needs to follow up on, you can enjoy peace of mind knowing that a tax specialist will represent you. This representation could include simply correcting the error, defending a deduction, or negotiating with the IRS on your behalf.
Taxes for Small Business Owners
Recent tax reform has drastically changed the rules for small business owners. If you’re self-employed or own a business, it’s a smart move to speak with a tax specialist to find out how these changes affect your bottom line.
For example, the QBI, short for Qualified Business Income deduction, has different implications depending on the structure of your business and the nature of your expenses. The IRS’s rules are very specific and can be hard to navigate.
When It’s Best to Do Taxes Yourself
Not everyone needs to hire tax specialists to file taxes. Mainly, individuals without income under a certain threshold or those with no dependents or significant investments can usually get away with doing taxes. Similarly, if you don’t donate to charity or own a lot of assets, your financial situation might not warrant a tax professional.
One of the telltale signs that you can get away with doing your own taxes is your only income is summarized in a W-2, and you don’t own assets like a home or other investment vehicles. As a reminder, Form W-2 is issued by an employer to report the wages you received for the calendar year if the amount exceeds $600.
For people without these assets, you can likely claim the standard deduction, which is $12,200 for individuals and $24,400 for those filing jointly. However, if your deductions exceed this threshold, it’s best to work with a professional.
Contact us for a Free Tax Analysis
At Levy & Associates Tax Consultants, taxes are all we do. Our team consists of accountants, consultants, attorneys, and former IRS officers. As part of our service, we offer a free no-obligation tax analysis. Contact us today to learn more and discuss your next steps.