Should You Hire A Tax Preparer?

While decoding IRS lingo and filing taxes may be the ultimate definition of a good time for some people, for most that means hiring a tax preparer or tax consultant to take care of their annual tax returns. But how can you tell if you need the help of a tax consultant? Is there a specific criteria for doing so? As a start, the following questions should help you figure things out.

Do you understand the tax process?

Although considered mundane, understanding the basics of the return process is important. Regardless of whether you decide to do your own taxes or get professional help, you will be required to collect all the relevant forms including W-9’s, W-2’s and 1099’s among others that indicate your annual income and wages. Your financial institutions, vendors and employers are responsible for sending them to you by the end of January but if that doesn’t happen, you can track them down yourself.

In addition to tax forms, information regarding the deductible expenses that you’ve paid for the entire year such as student loan interest, charitable contributions, home mortgage interest etc. A detailed record of expenses and income is also needed from those who started a business during the year. Knowing the required schedules and forms is essential.

The tax return process is a straight forward one for people who are full-time employees who don’t have children or families, an additional source of income and don’t own a home. Such people can easily their tax returns on their own or with the help of some of the tax preparation software available in the market. Those whose situations are more complicated than this should however consider getting professional help to handle their tax returns efficiently.

Do you have a consulting or freelance income?

If you worked throughout the year with no regard to payment of taxes, you will have to pay the self-employment tax if tax time comes. If you have a full time job whose income is taxed, having a side source of income legally means that you are self-employed and that warrants taxation. This type of tax is known as the self-employment tax or freelance tax.

Take a case where you get a gig to design a website for a certain company. You will be hired not as an employee but rather a contractor. Simply put, the company will not withhold any tax from your pay. The company is legally required to report your earnings to IRS using the 1000-MSc and you are also required to pay taxes on it. That doesn’t stop here as you will need to pay federal tax and 15% freelance tax. This tax goes to Social Security and Medicare.

There are several advantages of self-employment. Perhaps the biggest perk is that business-related expenses can be deducted. A good example is all or part of the computer used to design posters or websites for clients. To sum things up, if you intend to make more than a few deductions, you may have to hire professional help. This can help to identify legitimate deductions that can otherwise be missed as well as limit the audit risk.

What are the advantages of tax preparers?

There are several perks of hiring a tax preparer to handle your tax returns and some of them include:

• It eliminates the need to understand complicated tax law
• Unlike tax programs, a tax preparer can represent you in an audit
• It eliminates the hassle of doing your tax returns on your own
• Mistakes made during this process can be very costly on your part and hiring a tax professional reduces the probability of mistakes
• Doing it on your won could be time consuming
• Tax professionals can easily advice and help you plan for the current year as well as future ones
• Above everything else, a tax professional can help save you money by identifying tax deductions and limiting audits

While this article outlines in summary a few of the reasons why one shouldn’t do their own taxes, it’s important to understand that should you decide to do your taxes, extensive research is important. On the other hand, if it’s that time of the year when you have to do tax preparation, don’t hesitate to ask for help. Professional help is more efficient and can save a lot in terms of time and money. Straightforward tax returns will not cost as much as more complicated ones, which are honestly more costly. Tax Prep Boston is a tax preparation and payroll firm that serves clients from Boston, Cambridge, Brookline and basically north and south shore Boston. With several years of experience, we are leaders in this industry and our focus is on the accounting and tax needs of businesses and individuals in this area. Some of the services available to our clients include online tax and accounting services and refund while studying.