For so many Americans, tax time means a full weekend dedicated to hours of frustration, too many cups of coffee (or wine), and more than one angry exclamation at the tax preparation software when it spits out information that doesn’t look accurate. If this sounds like a familiar experience, you may be in need of an accountant. “But I don’t earn enough to warrant an accountant!” you may think. When it comes to income tax return filing, hiring an accountant is not about how much you earn, but about your accountancy skills and your tax knowledge.
But, Do I Really Need an Accountant?
There is no hard and fast rule about whether you do or do not need to hire an accountant to help you file your tax return. If you’re a whiz with numbers and you’re familiar with all the information on the I.R.S. website, a tax prep app or online software may be sufficient for you to file your taxes with minimal hassle. On the other hand, if you run your own business, have two kids in college, earn six figures a year, and rent out a few of the properties as vacation rentals, your tax situation is probably plenty complex and trying to file a tax return on your own may just take days, not hours.
So, what is the line between filing on your own, with or without the guidance of a tax prep app, and hiring a tax specialist to help you through your tax return? Let’s put it into straightforward financial terms. Say, for example, you spend 5 hours on a Saturday filling out your tax return with online software. At work, you earn $10 an hour, so for the sake of argument (and a lot of generalization), your free time can be calculated along the same value lines. 5 hours of time doing tax preparation and filing work means you’ve essentially cost yourself $50. Which may or may not sound awful on its own, but when you add in the cost to e-file federal taxes through most online software, is it still worth it? Of course, this doesn’t even factor in how little you enjoy sitting down and struggling through the filing process. Between the cost for your time and the actual cost for tax filing software, is it still worth it to avoid going to an accountant?
Complexity
Hiring an accountant isn’t necessarily just a function of how much you earn in a year; it’s more about how complex your tax situation is. Someone fresh out of college, who doesn’t own a home yet, isn’t married, and doesn’t have kids may be able to get by filing taxes through an online tax software program, even if they don’t have much (or any) tax knowledge. However, if you bring in income from rental properties, own a business, are married with dependents, or generally have a move complex source of income and tax payments, an accountant can make a big difference in how quickly your taxes get filed and how much or little you have to pay. The difference here is that a tax prep app is only as good as the information it is given. It may try to prompt you through certain life events or areas for potential tax breaks, but tax software isn’t going to be as helpful as a tax specialist—unless that tax prep app is being operated by the tax specialist. Some situations in which you may want to hire an accountant to help with your taxes include:
- Earning more than $200,000 a year
- Having a foreign source of income
- You own a business, have rental properties, or are self-employed
- You’re planning to make a sizeable donation
- You’re thinking of selling one (or multiple) properties
Hiring a Tax Accountant
One of the biggest benefits of hiring a trained tax return preparer is that they actually know the ins and outs of federal and state tax law. Not only will you need to spend less time preparing to file your taxes, you can benefit from expert knowledge about exemptions and deductions you may not have known you qualify for. The more complicated your tax situation, the more those deductions add up to make a big impact on the bottom line when you file a tax return.
Whether you choose a tax prep app or take all your documents to a tax specialist, be sure you’re finding knowledgeable tax help near you! At Umbrella Financial Services, we help with all sides of the tax preparation business. If you’re a tax specialist, talk to us about how to start your own business. If you’re seeing tax help, try VTax, our tax prep app, to be connected with a tax specialist from the comfort and security of our specially designed smartphone app! Contact us today to get started!