5 reasons why you should use a tax professional
5 reasons why you should use a tax professional
Filing your taxes can be tedious, boring, and cut into important time for other things like basketball season. The deadline is pretty close to the NFL draft, and that is what you should be focusing on right? You should not have to deal with trying to figure out what to fill where and how much your donation to the Salvation Army will contribute as a tax break.
This is why most people opt for a tax professional. They are a person who has both the credentials and the expertise to correctly prepare and file your taxes. They could be CPAs, attorneys, and enrolled agents. They are also have the all-important Preparer Tax Identification Pin (PTIN). There are various reasons why you should work with a tax professional instead of relying on your cousin who “gets this stuff”. These include:
- Understanding your tax situation
Whether this is your first time filing your returns or the sixteenth, your tax situation is not as simple as it seems. There are various aspects that make filing your tax returns a bit complicated. Do you have children? Are you married? Are you self-employed? Do you have business expenses? Essentially, the only way you can safely prepare taxes for yourself is if you are a single person filing as an individual, with no children, work related expenses, or a business you run or participate in and have never made a major financial investment in your life such as buying a house.
A tax professional will help you understand how certain things in your life impact on your final tax bill. They understand what exemptions work for you, and what having dependents mean. They will help you look at every concession given by the IRS to help you maximize your tax refund, and everyone loves getting money back.
- Saves you money
When dealing with taxes, the margin for error is slim to none. The last place you want to be is in bad books with the IRS. It could lead to a long and protracted dispute especially if the error results in a notice that you owe them money. Disentangling that mess can be costly both in terms of time and money. You will eventually need the help of a tax professional to help you jump over the hurdles the tax man will throw your way.
Using a qualified tax professional helps you steer clear of any potential problems with your taxes. Every item that is required will be filled and itemized where possible. This also limits the possibility of error. Working with a tax pro also reduces the chances of fines being levied against your for all manner of things including filing past deadline. Of you are in a precarious position with the taxman already, then a tax pro is who you need in your corner. They will save you money and time with the process.
- Better tax refunds
Are you taking advantage of all the tax breaks in your bracket? Is your tax refund season as basketful as it should be? These are questions that would best be answered by a tax pro. They go through your taxes and make use of every legal loophole you are allowed, to make sure you get the most out of your tax refunds. Have you purchased a home within the past tax period? Do you have children? Are your parents living with you now? Do you have student loans? All these are things that will impact your tax bill differently. For instance, there is a tax break that you can take advantage of if you have refinanced your home.
A tax professional will also advice you on state taxes and how you can take advantage of any breaks allowed. For instance, a third of the states in the US have some sort of adoption tax credit for individuals who have opted to become parents this way for one reason or another. They will advise you on certain complicated tax breaks as well, such as the green energy tax credits and how they are subject to change. Some of this is information you might need to take advantage of before things change again.
Always remember that your tax return is usually the foundation for how much you get in your tax refund. This is because it is where you take advantage of a number of different credits. It is also where you take advantage of the certain opportunities around such things as your 401K, student loans and certain medical expenses. They will also look at other investments and how they will impact your tax bill. In instances such as sale of stocks, they take care of your 1099 to ensure you are not double taxed.
- Tax law is complicated
There is a reason people go to school for a long time to learn this stuff. Tax law is hard, there is a lot of moving parts, and things change constantly. This is the reason they have triple digit per/hour rates. A tax professional, whether they are a tax attorney or not, must have some sort of training in order to correctly understand and interpret tax law. They must also keep abreast of the constant changes and how they affect their clients. This means hours of continued tax law education through various avenues.
- Planning your journey ahead
Having a proper tax plan for the coming tax year will help you make sound financial decisions in future. You will also know how to structure your investments for the incoming year. For instance, if you plan to switch jobs you need to understand how that will affect your tax returns. Does the new employer remit your IRA/401K for you or do you have to? Do you plan on buying a house? Or a car? Buy or sell stock? Go back to school? Have a baby? A tax professional will help you understand how different life decisions will impact your finances and help your make a comprehensive plan around them.