Do You Need to Hire a Tax Preparer? Ask Yourself These 5 Questions to Find Out
KEY POINTS
- Today's tax-filing software makes it easy to prepare taxes solo.
- There are certain scenarios where hiring a tax preparer makes sense.
Tax season is here. Should you tackle your return solo or get help?
Now that tax season is in full swing, you may be gearing up to tackle your tax return. While you can file on your own (today's software programs are surprisingly user-friendly), you may want to consider hiring a tax preparer for the job instead.
There are benefits to hiring a tax preparer, despite the cost. For one thing, a professional can help you avoid claiming the wrong deductions -- a mistake that could get your return audited and lead to a hassle. A tax preparer might also help you identify deductions you may not have known you were entitled to.
The amount you'll spend on a tax preparer will vary depending on where you live and what your personal circumstances entail. Before you start pricing options, run through these five key questions to figure out if it's worth hiring a tax professional this year.
1. Did you work multiple side jobs in 2021?
Side hustles have become increasingly popular. If you did a lot of work on a freelance basis, it could benefit you to use a professional for your taxes. That person can make sure you're reporting your income correctly and taking the right deductions for expenses you incurred in the course of doing that work.
2. Did you sell a lot of investments last year?
If you sold a bunch of stocks in your brokerage account last year at a profit, you may be sitting on a big capital gains tax bill. If you sold investments at a loss, you may be able to have that loss offset gains or other types of income. A tax professional can help you navigate the process and reconcile that activity.
3. Do you own a small business?
If you own a small business, it generally pays to use a tax preparer rather than tackle your return solo. There are different schedules and pieces of information business owners need to prepare. It's a task you may not be equipped to handle unless you're really well-versed in small business tax rules.
4. Did you undergo a big life change?
If you got married or divorced in 2021, it could pay to hire a tax preparer to help you navigate your new circumstances from a tax perspective. The same holds true if you had a baby last year.
5. Do you think a tax professional might save you money?
If you're a salaried worker who rents a home, then your tax situation is pretty straightforward, and there may not be much savings a tax preparer can help you eke out. But if you're a self-employed homeowner, there's a host of deductions you may be entitled to, from your mortgage interest to your property taxes to a home office deduction. If you have reason to believe a tax preparer could save you money, it's worth finding out what local professionals will charge you.
Though there's no requirement to outsource the job of filing taxes, you may find that hiring someone takes stress off your plate and saves you money in the process. If you're going to use a tax preparer, be sure to ask for recommendations from friends and family to increase your chances of ending up with a professional you're happy with.
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