Whether business or individual taxes, every working person has to prepare and pay taxes. Doing your taxes is not impossible and, in some cases, is not even challenging. However, as a business grows or a person grows in their career and diversifies their income and investments, tax preparation can become complicated. Once you reach this point as a business owner or individual, you will need to consider hiring a tax professional heavily. Before you throw in the towel and hire a tax professional, consider the following advantages and disadvantages.
Advantages:
Doing taxes can be incredibly time-consuming
According to the IRS, an average person spends around 11+ hours dealing with tax preparation, including obtaining the correct forms, figuring deductions, and checking for mistakes. This amount of time could easily triple for individuals who have extra forms to include and business owners. If you were to calculate the time spent, you are not earning income or are away from your family, which could be costly. Having a tax professional prepare them may not only save time but money.
Tax preparation fees are deductible
Tax professionals are up on all the ever-changing Federal Tax Codes. They are also aware of deductions and the confusing business of itemizing. If you have very few write-offs and plan to take the standard deduction, you don’t need a tax professional. However, you may not know of deductions that you can take that add up to greater than the standard deduction. Therefore hiring a tax professional is almost always in your best interest, and your tax preparation fee is deductible, so that’s a bonus!
Audit assistance
In the case of an audit, only a tax professional, a CPA, Tax Attorney, or an enrolled agent can help a person with the paperwork and organization, along with handling the IRS to ensure that their client gets a fair shot by making sure they are fairly represented. A tax professional will ensure you are well represented when facing the IRS, proving to be extremely beneficial during an audit. Though facing an audit is rare, having a professional tax handling your case can make a difference in a positive outcome.
Avoiding mistakes
It doesn’t matter how self-assured a person is on their abilities regarding tax preparation; they are likely to make mistakes. That’s why most tax professionals use professional tools such as tax preparation software to make sure the numbers are 100% accurate. This accuracy attempt doesn’t mean a tax professional won’t make a mistake, but it is far less likely. Mistakes when it comes to taxes can be extremely costly and follow a person for years to come.
Disadvantages:
Cost
One of the biggest reasons most individuals don’t hire a tax professional is their fee. Depending on the complexity of your situation, these tax professionals can cost a lot. An average tax professional can cost around $100 for a routine tax return. They charge more if your tax return has a lot of itemizing or require extra forms attached to the 1040, such as the schedules A and D, which are the forms for loss and gain calculations. Some tax professionals charge an additional hourly fee on top of the fixed fees for various services. Other tax professionals opt to charge a percentage of the refund expected, which is an incentive for them to get you the most money back possible.
Tax preparation software
Though tax preparation software is not a disadvantage to using a tax professional, the fact that you can use tax preparation software to effectively and accurately do your taxes, therefore, it is a disadvantage to hiring a tax professional as the cost of the software is far less than hiring a professional only one time. Your software can be used for years to come.
Planning Ahead
Spring is the time of the year when the majority of tax professionals are extremely busy. Keeping that in mind, finding a tax professional who is willing to work with a new client takes a lot if not done in advance. It is almost impossible to find a reliable tax professional in the late tax season that has time to add a client. Because of this, if not prepared by planning ahead, you could be left in need of a tax professional. It is better to prepare for the upcoming tax season in advance and keep in touch with a reliable tax professional ahead of it.
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