Tax season has started in earnest, and you might be wondering if you should tackle filing yourself or hire a tax preparer to do it for you.
Tax professionals can be a big help, taking the stress out of doing your taxes, especially if you’re self-employed, have had a major life event like marriage or divorce in the last year or have any other situation that makes filing more complicated.
But tax preparers can be expensive, so those looking to maximize their returns might shy away from spending the cash.
Read on to learn more about the pros and cons of enlisting a tax professional, then decide if you should hire one to handle your 2022 return.
[READ: A Guide to Tax Deductions for the Self-Employed]
Reasons You Might Want to Hire a Tax Professional
“As a general rule of thumb, I would say that any individuals who own a business, have complicated investments or itemize their taxes should consult with a tax professional. If you just have wage income from an employer and you’re going to claim the standard deduction, you can probably handle it on your own,” Charlie Corsello, enrolled agent and managing member of TaxCure, says.
Itemizing your taxes is becoming less common, Corsello explains, and it can be difficult to do correctly.
“If you’re not sure whether you should itemize, you may also want to consult with a pro. Since the Tax Cuts and Jobs Act nearly doubled the standard deduction, the number of taxpayers who itemize has dwindled,” Corsello says.
“If you don’t normally itemize, look at your mortgage interest and state and local taxes — note that you can only use state income or sales tax, not both. If the total is close to your standard deduction, you may be a good candidate for itemizing, and a tax professional can help you figure out how to optimize the situation,” he adds.
There are many situations that make your tax returns more complicated, whether because you have to pay more taxes on an inheritance or because you can claim deductions on small business purchases. A tax preparer can help ensure you don’t make mistakes — and get the return you are due.
[READ: Your Guide to Tax Deductions.]
“The situations could be (1) you are self-employed or a business owner; (2) you have rental properties; (3) you have foreign accounts or investments; (4) you have a life event in the year, such as marriage, divorce, newborn, retirement, house purchase, inheritance, etc.,” Dr. Lei Han, certified public accountant and associate professor of accounting at Niagara University, says.
Other Situations That Might Require a Tax Professional
— Multiple sources of income: Especially if you have both W2s and 1099s, juggling different kinds of tax forms can get complicated quickly.
— Adopted a child: You might qualify for a tax credit toward adoption-related expenses per the IRS, but you’ll need to collect the proper documentation.
— Mistakes on a previous tax return: A professional can help you file an amended return if you’ve made mistakes in the past — and help you avoid them in the future.
— Residency or employment in multiple states: State income tax varies, so residency in multiple states can lead to a more complex return.
— Received inheritance: It can be hard to know if you owe taxes on your inheritance, so if you have one you should definitely consider consulting a professional.
— Caring for elderly parents: Depending on the financial support you provide for an elderly parent, you might be able to claim them as a dependent or qualify for tax breaks.
Benefits of Hiring a Tax Professional
Hiring a tax professional comes with a lot of benefits, not the least of which is one less task on your plate.
“Preparing tax returns can be time-consuming and intricate, particularly for individuals with complicated financial situations. A tax professional can manage the whole process, saving time and reducing stress,” Joseph Carpenito, financial advisor at Materetsky Financial Group in Boynton Beach, Florida, says.
Tax professionals also have a much more specialized knowledge of tax laws and regulations, Carpenito says, and can provide you with advice in the current climate.
This knowledge allows tax preparers to make sure your tax return is free of errors as well, protecting you from penalties or audits.
[Read: How to Survive an IRS Tax Audit.]
“A tax professional can ensure that your tax returns are comprehensive and accurate, reducing the likelihood of mistakes or omissions that could result in penalties or audits … If you are audited by the IRS, a tax professional can serve as your representative and guide you through the process,” Carpenito says.
Finally, hiring a professional is optimal for those itemizing and seeking to maximize their deductions, as tax preparers can help you identify all the deductions and credits you qualify for — even lesser-known ones.
[Read: How to Find the Best Tax Professional.]
Downsides to Hiring a Tax Professional
Probably the most obvious downside of hiring a tax professional is the cost. This is especially true if you hire someone close to tax day.
“The costs of using a professional are that it’s not free and most likely more expensive during the tax season, there are up-front costs to search for a qualified practitioner, and you’re still personally responsible for late penalty and interest,” Han says.
But Corsello explains that hiring someone to do your taxes for you might not cost as much as you’d expect.
“Hiring a professional may be more affordable than you think. The cost varies a lot depending on your situation and where you live. Call around to get a sense of the prices in your area, but be aware that most accountants can only give you a vague estimate until they really look into your situation,” he says.
Some Filers Are Hesitant to Hand Over Control
With the high stakes of filing a tax return, some filers might be hesitant to hand over control, Carpenito says.
“Some people prefer to handle their taxes themselves to maintain control over the process and ensure that their tax return accurately reflects their financial situation. A tax professional may not devote sufficient time to understand your unique financial situation, potentially resulting in missed opportunities or errors,” he adds.
Corsello advises you look beyond big-name tax preparation companies and seek out a CPA or enrolled agent.
“They have completed extensive testing and continuing education to ensure they know the tax code inside and out, and they’ll be able to provide you with much more effective help,” he says.
Considerations for 2022 Tax Law Changes
Before you file your 2022 return, it’s crucial you’re up to date on the most recent tax law changes.
“Changes in tax laws can be confusing, and it can be difficult to keep up with them. In years when significant tax changes are occurring, hiring a professional can assist you in taking advantage of all available deductions and credits,” Carpenito says.
For instance, income tax brackets shifted a bit in 2022 and the standard deduction increased slightly.
[Read: What’s My Tax Bracket?]
Should You Hire a Tax Professional This Year?
If you’re considering hiring a tax professional, make sure you have a good reason to justify the cost.
“You don’t want to hire someone who just puts numbers into software,” Corsello says.
“You want someone who can optimize your situation or provide tax planning services. When you reach out to people, ask about the services they provide and make sure they can help you do more than just file a return,” he adds.
Hiring a tax preparer can definitely be worth it if you have any life events or income that might complicate your tax situation, and it can reduce stress as tax day approaches.
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Should You Hire a Tax Professional This Year? originally appeared on usnews.com
Update 03/10/23: This story was previously published at an earlier date and has been updated with new information.
