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:
- We relocated from Ohio to Indiana in June where he started a new job.
- We bought a house in July.
- We had a baby in late August.
- I started doing some freelance blogging in October.
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?
Photo by jane0 via Flickr
Do I Need an Accountant?
Here are 5 reasons that make using an accountant worthwhile:
1. You own your own business.
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.
2. You own property.
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.
3. You own rental property.
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.
4. You go through major life changes.
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.
5. You earn money from investments.
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.
Emily Guy Birken is a freelance writer, recovering English teacher, and stay-at-home-mom. She lives in Lafayette, Indiana, with her mechanical engineer husband and infant son. Her musings on life and parenting can be found at The SAHMnambulist.