Getting Help from a Tax Professional

In this topic, you'll learn:

• Understanding the types of situations in which you may need extra help.
• Why tax software can be a good choice.
• How to choose a tax professional.

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Whether you have concerns about how tax regulations apply to your situation or you're simply tired of dealing with the minutia of tax-related paperwork, sooner or later, many taxpayers ask whether the do-it-yourself approach is the best choice. When does it make sense to hire a tax professional? And what exactly is a tax professional?

Tax professionals are typically accountants or certified public accountants (CPAs) and have specific, ongoing training related to tax rules and regulations. While these professionals may also be able to provide advice concerning investments or managing your spending, note that CPAs are not the same as financial planners or advisors. Financial planners may have experience in tax planning but would likely defer specific questions about taxes to a qualified CPA. In this article, "tax professionals" refer to those such as CPAs who focus almost exclusively on tax preparation and planning. 

First, while many people could benefit from hiring a tax professional, the do-it-yourself approach is acceptable. Especially for those with a relatively simple tax situation, such as only one source of W-2 income and no itemized deductions, the benefits of a tax professional may be limited. Tax preparation software is low-cost and completely free if you meet the income requirements of the IRS Free File system. The user-friendly software can guide many people through the filing process, making filing taxes accurately and on time more manageable. Tax software will also ask questions to ensure you're not missing out on potential deductions or credits – some of which are refundable.

On the other hand, even for those with relatively simple tax situations, tax preparation can be a time-consuming process – full stop. So, hiring a professional tax preparer may save time for those who are short on time or have other priorities. Tax professionals can handle all the paperwork and ensure your taxes are filed accurately. They can also communicate with the Internal Revenue Service (IRS) on your behalf if there are any issues with your return.

Regardless of the complexity of your tax situation, peace of mind is important, too. Tax software can help calculate your taxes, but it's not foolproof. A mistake in data entry or an inaccurate answer to a question can result in an incorrect return (and even penalties). So, suppose you need more confidence in your ability to file your taxes accurately. In that case, a professional can help ensure the accuracy of your tax return and help you avoid mistakes.

Is a Tax Professional For You?

Potentially saving time and gaining peace of mind is great, but there are specific situations in which hiring a professional warrants special consideration:

You're Self-Employed

Those who are self-employed must file a Schedule C with their tax return, pay estimated taxes, determine whether an expense is deductible, figure out the best way to structure business investments for tax planning purposes, and more. The self-employed may also manage their retirement plans and even those of their employees, all of which add more complexity (and the chance for errors). Tax professionals can help business owners navigate the options based on their experience and knowledge of tax law.

You Have Rental Property

If you own rental property, you may be eligible for certain deductions, such as depreciation and repairs, that can yield substantial tax benefits. While some tax preparation software can include issues related to rentals, a tax professional can help you navigate the complex tax regulations and ensure that you are taking advantage of all available deductions.

You Have a Complex Tax Situation

If you have a complicated tax situation, such as being a resident of multiple states, working in one state while living in another, having multiple sources of income, or having a foreign income, tax professionals can help you navigate complex tax laws, regulations, and filing requirements. 

You've Had a Major Life Change

Significant life changes, such as getting married or divorced, having a child, receiving an inheritance, or purchasing a home, can all affect your tax situation. A tax professional can help you minimize tax liability and develop a long-term strategy.

You're Facing an Audit or Tax Dispute

If you're facing an audit or tax dispute with the IRS, a tax professional can represent you and protect your rights. They can also help you resolve the issue and negotiate a settlement or payment plan with the IRS.

These are just a few reasons some people may hire a tax professional. Depending on your situation, there may be other circumstances in which hiring a professional makes sense.

What to Look for in a Tax Professional

Choosing the right tax professional can be an important decision, so finding a qualified accountant or CPA who can provide the expertise you need is crucial. Here are some tips to help you choose the right professional for your needs:

Check Qualifications

When choosing an accountant or CPA, it is essential to ensure they have the necessary qualifications. You can also check the status of a CPA's license with your state's board of accountancy or search for an accountant who is a member of a professional organization. You can find a list of organizations, including links, through the IRS Tax Pro Association Partners directory. 

The IRS also provides a searchable database of qualified professionals through the Directory of Federal Tax Return Preparers.

Consider Experience

Experience is an important factor to consider when choosing an accountant or CPA. Look for professionals with experience working with clients in your industry or similar financial situations. A professional who has been in practice for many years may better understand complex tax laws and regulations and be better equipped to help you navigate financial challenges.

Ask for References

One of the best ways to find a qualified accountant or CPA is to ask for referrals from friends, family, or business associates. After verifying their qualifications, you can also check online reviews and ratings to get an idea of other clients' satisfaction with a particular professional. References and reviews are helpful tools for understanding their expertise, customer service, and overall client satisfaction.

Compare Fees

The cost of accounting services can vary greatly depending on the provider and the scope of services required. Understanding the fee structure and how you will be charged for services is essential. Some accountants may charge an hourly rate, while others charge a flat fee for certain services. Be sure to clearly understand the fees associated with the services you need before engaging an accountant or CPA.

Check for Complaints and Disciplinary Actions

Before hiring a tax professional, check for complaints or disciplinary actions against them. You can check with your state's board of accountancy or the IRS Office of Professional Responsibility. You can also search the American Institute of CPAs disciplinary actions database and the National Association of State Boards of Accountancy's CPAverify database.

Other Options

Hiring an accountant or CPA isn't the only option for those who need help with their taxes. Depending on the complexity of your situation, hiring a company to assist you with your taxes can be a valid option that may also be less expensive. Companies that offer tax software, such as TurboTax and H&R Block, offer higher service levels with more personalized attention for an additional fee.

Finally, if you qualify based on your income and other factors, you may be eligible for free assistance from IRS programs, including the Volunteer Income Tax Assistance (VITA) program and the Tax Counseling for the Elderly (TCE) program. For more information and to search for a program near you, visit the IRS's Free Tax Return Preparation for Qualifying Taxpayers page.

Deciding whether to use tax software or hire a professional tax preparer depends on your tax situation's complexity, your comfort level with tax laws and regulations, time constraints, cost, and accuracy. Be sure to research your options and seek help from a trusted advisor if you need clarification.