Tax season for 2016 just ended. Hopefully this year, your taxes went smoothly. But maybe you are making more money now, or there are some new complexities in your business taxes or investments. You might have found yourself confused about tax codes, and wondering whether you missed out on opportunities to trim down the bill that you owed Uncle Sam. All this may have left you wondering, “Should I hire a tax accountant next year?”
There are a few guidelines that may help you decide.
1. You are in the over $200,000 income bracket.
Once your income is in this high-earning bracket, it becomes more likely that you might receive an audit from the IRS. This likelihood continues to increase the more you make. For that reason, it is wise to work with a tax preparer to make sure that you are not making any costly mistakes.
2. You may have to pay Alternative Minimum Tax.
There are several triggers which can require you to pay Alternative Minimum Tax, or AMT. AMT tends to be more complex than standard taxes, which is why most people who fall into this category work with a tax preparer.
3. You run your own business and/or you are an investor.
If you run a business or invest, there are all kinds of complexities which can make your taxes difficult to calculate, and those complexities can vary from year to year. Certain investors may also find themselves in a high-risk category for an audit. For both reasons, it may be to your benefit to invest in tax preparation services.
4. You own rental property or are selling real estate.
There are many special tax situations which apply if you happen to own a rental property, or are selling (or even buying) real estate during the tax year. Real estate is an investment, which only complicates the situation more.
5. Your income is rapidly increasing.
Making more money is always a good thing, but when it comes to taxes, rapid expansion in business or personal income can cause some serious headaches. You might find yourself in a higher tax bracket at the end of the year than you expected at the start of it. This could also lead to complications involving your health insurance.
On that note, if you make your income unevenly throughout the year, or make more some years and less others, these fluctuations may also sometimes result in unexpectedly high taxes—even if your overall income is more or less static. A tax preparer can help you predict the ramifications of these fluctuations and minimize the detrimental effects on your taxes.
6. You have a life change to deal with.
Anytime you are looking at a major change of life—marriage, divorce, a new child, gaining or losing tax dependents, buying or selling property, moving from one state to another, death in the family and so on—that change is going to impact your taxes in some way.
In some situations, the change may be relatively easy to deal with, but in other cases it could have a major impact on what you owe, and may come with all kinds of convoluted questions and uncertainties. If you are doing your taxes by yourself, it is up to you to do all the research to make sure that you are accounting for your life change properly. But if you work with a tax preparer who has seen your situation time and again, you will have all the answers you need.
7. You might expand into a new state.
Expanding your business into a new state, or maybe even several? Whether you are opening a chain of stores across a region, or you are a sole proprietor opening a second home office in another state, this is a situation which can vastly convolute your taxes. A tax preparer can ensure that you are filing the correct forms in the correct states and are not doubling up unnecessarily on your tax burden.
8. You just do not have the time to do your own taxes.
Finally, one last reason to consider hiring a tax professional instead of preparing your taxes on your own is to save time. Whether you are an employee or you own your own business, you have other responsibilities and commitments in your life which require your time and attention. Spending endless hours calculating your taxes simply is not worth it if you can pay a reasonable fee to a professional to get it done for you.
If you have been on the fence about whether you should hire a tax preparer next year, hopefully now you have a better understanding of some of the situations where a tax professional can save you significant time and money.