But since taxes affect most areas of your life, and since tax laws change all the time, there are several situations where it makes financial sense to consult a tax professional, who can not only help you prepare your statement, but can also offer you smart tax advice. planning tips.
If your financial life is simple, you can probably handle your own taxes. That is, unless you’re too busy or just not good at completing tax forms accurately and on time.
Your tax situation is generally considered “simple” if you don’t have a lot of additional income outside of your regular job. For example, your income consists of your paycheck and some interest on your bank accounts. And maybe you rent your house and you don’t have kids.
In such a case, do-it-yourself tax software that offers access to a live help line can guide you through the process step-by-step, said Misty Erickson, tax content specialist for the National Association of Tax Professionals. .
But the more complex your financial life becomes, the more important it becomes to seek professional help. That’s because tax rules, tax rates, tax exemptions Y tax forms will differ depending on the type of income and investments you have.
Think of it this way, Erickson said: “The more tax documents [and forms] You have [to file]more complex are your taxes.
The IRS is going to audit you
If you’ve received a notice (or worse, multiple notices) from the IRS that you owe money, including penalties and interest, or are being audited because you didn’t report income, find someone qualified and experienced in representing taxpayers before the IRS. I.R.S. –either a certified public accountant, an enrolled agent or a tax attorney.
Finding someone with experience is key, said John Schultz, a California-based certified public accountant. “They know the biggest issues that need to be addressed and what can be left out.”
In addition, they can advise you on what to say and what not say, said Erickson, who used to audit taxpayers in Minnesota. “If he has someone on his side who knows taxes, he can help him and he can go a lot faster.”
You are embarking on a major life change.
Making big personal and professional changes will have tax consequences.
You invest in cryptocurrencies
It’s easy to forget about taxes when caught up in the excitement of a new frontier, especially for inexperienced investors. “They don’t realize that these things come with a lot of tax liability,” Schultz said.
You run a small business or are a temporary worker
Running a small business, or even making a living as an independent contractor, has all kinds of tax implications.
Before you begin, at least consult with a tax professional to learn about those implications, including the many tax breaks you can take based on your anticipated business expenses.
You’ll also want help figuring out how to structure your business for tax purposes. There are several options that will affect how much tax you’ll have to pay and what liability protection you’ll have. will have. There may also be different rules about how you account for your expenses and tax liabilities if you have employees or hire partners.
“Doing it early on can save you a lot of money,” Erickson said.
You receive an inheritance or you are liquidating an estate
Schultz said people often tell him they received an inheritance and wonder if it’s taxable. Her response: “Well, what did you inherit? A retirement account? Property? Stocks? Liquid cash?”
As with the different types of income, there are different types of inheritances, and each has its own tax consequences.
Similarly, if you are the executor of someone’s estate, you could save yourself (and the person’s heirs) a lot of headache by seeking the help of an estate tax attorney to prepare your estate tax return. and obtain information on federal and state taxes. consequences of the assets to be inherited.
Choose someone with a good reputation.
As helpful as a tax professional can be, you definitely want to make sure you’re working with someone reputable and competent, because if you don’t, you could be liable for unpaid taxes, penalties, and interest.
The US Department of Justice recently urged consumers to learn how to spot a dishonest tax preparer. “Taxpayers are responsible for what goes on their return, even when it is prepared by someone else,” said Deputy Attorney General David A. Hubbert of the Justice Department’s Tax Division. If your preparer is asking you to sign a blank return, won’t let you review your return before you file, or is depositing your refund in a way that isn’t clear to you, check the IRS website to make sure you’re not exposing yourself. “. Complicate.”