Most people face tax time with a bit of anxiety. How much will you owe this year? Did you really take every deduction you could take? Is the IRS going to come knocking because you did something wrong? An accountant can help you overcome some or all of these fears, but that help can come at a steep price. Whether or not the cost is worth the benefit depends on your job, your deductions and your comfort level.
Your Job
People who work for one employer on a full-time basis may find tax preparation to be remarkably easy. These people have one document to refer to when they tally up their income, and the whole process could take just moments to complete. If you fall into this group, preparing your own taxes is both reasonable and economical.
People who work from home on a freelance basis have a bit more paperwork and math to perform at tax time. Additionally, freelance workers often have access to a remarkable amount of deductions relating to their business. If you’re a tax expert and you understand all of these tax deductions already, you’re certainly qualified to prepare your own taxes.
If you’re even slightly uncomfortable with preparing your own business taxes, it’s time to hire an accountant. You’ll still be required to pull together your income information, and you must keep a list of expenses you incurred as a result of your business, but your accountant could help you tap into tax savings. Your accountant may also help you pull together a tax payment plan for the following year, so you won’t owe so much in taxes the next time the season comes around.
Your Deductions
A major life change, including a home purchase or the birth of a baby, could help you qualify for major tax deductions. Other life changes, including the sale of a home, the cashing of stock or the receipt of an inheritance payment, could make you liable for tax payments. Home ownership, child care, charitable contributions and medical expenses could also turn into tax savings, but only if you apply the benefits properly.
People with extensive, complicated deductions truly do benefit from the help of an accountant. People with moderate deductions and a standard understanding of tax law might consider an online tool, such as those offered by H&R Block. These programs ask you a battery of questions about your income and your deductions, and this may be the only help you’ll need to get the job done right.
Your Comfort Level
If you’re simply not comfortable with numbers, taxes and federal guidelines, don’t be afraid to ask for help with your taxes. The amount of money you pay to hire a qualified accountant is tax-deductible the following year, and the stress you save yourself will be well worth the cost.
No matter whether you hire an outsider or do your taxes yourself, you are ultimately responsible for all of the paperwork, so it pays to understand tax laws and tax paperwork. Doing your taxes yourself can help you understand the process, but if you hire someone else, be prepared to check all of the paperwork carefully and redo the math before you submit the documents. Be sure to ask your accountant about terms and figures you don’t understand. You may learn all you need to know about taxes through this review process.
Photo courtesy of Arvind Balaraman: http://www.freedigitalphotos.net/images/view_photog.php?photogid=1058
