The first time I used TurboTax software and completed my taxes in less than two hours (prior to that, I actually filled in a paper form every year), I found myself wondering if accountants would soon be a dying breed. After all, the marvels of modern technology made it ridiculously easy to navigate even the most complicated IRS rules so what did the majority of taxpayers need with an accountant for?
I discovered just how wrong I was in 2010.
Here’s our timeline from what my husband and I encountered last year:
Aside from still feeling the need for a nap to get over the whirlwind of change we are also facing the most complicated tax season of our lives. Tax software is simply not going to cut it this year for us.
So when is it the right time to call in a professional? The answer for us was obvious considering the large number of major changes we went through. But for people who actually space out their life upheavals, when is the cost of an accountant worth it?
Here are 5 reasons that make using an accountant worthwhile:
The tax code provides many possible deductions for business owners, but it’s difficult to stay on top of all of them while keeping your business thriving at the same time. Whether your venture is a traditional small business with a storefront or a small corner of your house as you work from home, it’s important to remember that you deserve to maximize your deductions… and your free time.
Taking the plunge into home ownership is exciting on many levels and it really makes your tax preparation more complicated. If you took advantage of the First-Time Home Buyer Tax Credit in 2010 your taxes become even more complicated; you need to make sure you have all the requisite documents to send to the IRS. If tax filing is not your forte this might be an excellent opportunity to get to know your friendly neighborhood accountant.
Landlords are eligible for deductions for depreciation, maintenance, cleaning, repairs, advertising, and many other expenses on their rental property. Determining how to claim these deductions and calculating the rate of depreciation is not a simple process – enter the accountant.
Whether it’s getting married, having a child, getting divorced, moving more than 50 miles for work, receiving an inheritance, or losing a spouse, living through a major change in your life can also signal a significant change in your taxes.
Depending on the complexity of your investments keeping track of your investment income could be a job for a professional. This is particularly true if your investment income is a recent phenomenon.
Most life changes happen a little more gradually than what I experienced in 2010 which can make it difficult to decide when your taxes are beyond your ability. But if you experienced any of the above tax-changers last year it might be worth your while to find out how much an accountant would cost you.
I started using a CPA, when I owned multiple businesses and income property. I kept using one even when I sold it off because his fee was low and the free advice during the year.
We did our taxes using only paper and pencil from 1972 through 2006, even as our life and the tax codes got increasingly complex.
Once we hit the levels where we had to work every side shoot worksheet to see if our deductions got knocked down or our taxes ratcheted up; once we hit the income levels where we had to figure out taxes one way and then go back and figure them out another way to see if we owed the alternative minimum tax – we caved.
Now we use an accountant – and still spend hours preparing the information for him and then reviewing what he comes up with. We do now own property, rentals, have a business and have other complicating factors – so you are right on with the need for an accountant on that front.
The US tax code is ridiculous and should be scratched completely. Instead, anyone with earned income should just pay a flat percent of income. Of course that would put a lot of software firms, accounting services and accountants (not to mention IRS officials) out of business.