It is the best of times and the worst of times. Yes, tax season is coming.
As filing for tax returns is nearing, taxpayers have polarized emotions and expectations on dealing with the IRS (Internal Revenue Service). Some are looking forward to a sizable tax refund while others are anxious about having more tax expenses.
With the complications brought by the coronavirus pandemic, specifically the inclusion of unemployment benefits and the altered working set-up, a lot of people are considering hiring a certified public accountant or CPA to work on their tax returns.
While professional services always bring plenty of benefits to the table, you may also miss out on the learning opportunities that come along with working on your taxes without outside help.
Nonetheless, hiring a CPA to do your taxes all boils down to your own pros and cons.
If you are on the brink of deciding whether it’s time to hire a CPA to file your tax return and other tax requirements, perhaps you can ask these questions first.
It is not uncommon to do taxes on your own.
You can use online tax software to make the process easier. This applies to employees or self-employed individuals who only have basic tax situations like filing for individual income tax returns.
However, if you are a business owner, an investor, an independent contractor, or a freelancer, hiring a CPA will do you good as your tax situation may get more complex in the long run.
Having a CPA that takes care of your tax documents, prepares, and plans your year-long tax strategies, and represents your company in the event of an IRS audit can save you plenty of hair to pull.
Furthermore, if you choose to build a relationship with a CPA instead of relying on online tax software, you will be protected from fraudulent and fatal mistakes since their license and credibility depend on the integrity and quality of their work.
2. Do I have the time and patience to take care of taxes on my own?
As mentioned, you can file your tax returns and other tax documents on your own. But there’s no guarantee that it would be easy.
It requires your undivided attention and a lot of patience to round up all those receipts and prepare the necessary documents.
For an average individual, this could take up to seven hours while business owners may have to spend about twenty hours.
If your time is highly valuable for your business or personal schedule, then you can consider working with a CPA and have that ease of mind you certainly deserve.
3. Do I need to improve my recordkeeping by hiring a CPA?
There’s a simple answer to the question “How do you optimize your tax deductions?”, and it’s recordkeeping.
Tax time is like the single biggest event where all your business records and tax documents are summoned for inspection. If all of them are lining up in a row with impeccable organization, then the process becomes smooth.
These documents support your expenses and revenues such as income statements, balance sheets, deductible records, and receipts.
More than the purpose of filing your tax returns, a well-organized recordkeeping process allows you to keep track of your business’ progress, accurately investigate your losses and profits and allows you to confidently deal with IRS audits, if there is one.
4. Am I confident enough to NOT make any mistakes in filing my taxes?
Filing your tax return may have one mistake or two and that’s pretty normal. In fact, the IRS compiled some of the common filing mistakes that taxpayers do.
However, it doesn’t mean that because a lot of people are inclined to committing these errors, it doesn’t come with consequences. Clerical mistakes such as misspelled names and incomplete or inaccurate social security numbers along with unsigned forms and miscalculated figures can delay your refund. It can complicate the process more than it already is.
On the other hand, other more serious tax filing errors could get you penalized such as understating your tax liability or any circumstance that led you to underpay your taxes.
If you are a diligent taxpayer, the consequences of a filing error shouldn’t be too dire. However, the inconvenience it could bring can be a pain in the neck.
Hiring a CPA can save you from all these mistakes. You may want to consider working with an accountant or a tax preparer if you have plenty of documents to work with.
5. Do I want to save more money?
Saving more money and hiring a CPA may seem like contradicting terms.
But it’s true. You can save tons of money if you build a long-term relationship with a trusted CPA.
How exactly do you ask? We can summarize it in three points.
CPAs are meticulous and systematic when it comes to keeping track of the business’ regular expenses and income. This efficient account keeping allows business owners to evaluate how their money circulates in the company.
Likewise, accountants provide recommendations on saving and operating practices that could increase the assets and reduce the liabilities of the business.
Completing your tax forms and submitting them on time go beyond compliance with the IRS. It saves you from paying penalties that could dramatically increase interest if not handled properly.
There have been accounts of businesses who have to cease operations due to unpaid tax fines. Likewise, there are also individuals who are nearly paralyzed monetarily by their tax penalties.
Accountants also provide advice on how to get tax reprieve, identify profitable clients and investments, and adopt business practices that help the company succeed.
They can play a pivotal role in deciding marketing strategies and investments that produce the best ROI.
To hire a CPA to file your taxes means that you have weighed in the advantages and disadvantages of your decision. While completing your form and preparing the necessary documents can be done single-handedly, consider the tax situation you are in.
If it takes too much of your time or if it affects the operations of your income source, then, don’t hesitate to hire a CPA to help you out.