Doing your own taxes with user-friendly software like TurboTax can be a great option when your finances are relatively simple. But there often comes a point when your tax situation gets more complicated and filing on your own is no longer the best approach. How do you know when it’s time to graduate from DIY tax preparation to working with a certified public accountant (CPA)?
If you understand your tax situation and you are confident that you are able to complete your return so that it is accurate, filed timely, and error-free, then there’s nothing wrong with going with a program like TurboTax or using IRS Free File. Whenever anything major changes up your financial situation, however, it might be time to search for professional help. “Changes in your situation might also be things you are not aware of,” explains Atiya Brown, CPA, “like tax law changes that impact your tax situation.”
When you need an accountant
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You have multiple sources of income. If you have extensive investment income, rental properties, freelance work, or other diverse income streams, a CPA can help ensure you correctly report everything and maximize deductions. Complex income can be tricky to handle on your own.
You have a major life change. Getting married, having a child, buying a house, or retiring can all impact your tax strategy. A CPA can advise you on how to adjust withholdings and take relevant deductions around these life changes.
You start a business. When you become self-employed or start an LLC, there are additional forms, schedules, and considerations that apply. Working with a CPA from the start can set your business up for success when it comes to taxes.
You need help with estate plans. If you have substantial assets you plan to pass on, a CPA’s tax expertise can help you minimize estate taxes and ensure your wishes are carried out properly. DIY software isn’t designed for this kind of complex planning.
You have taxable international activity. If you send money abroad, own foreign assets, or travel overseas for work, you may have to report these activities to the IRS. A CPA can help avoid expensive mistakes when dealing with international tax issues.
You get audited. Being audited can be intimidating. Having an experienced CPA represent you and communicate with the IRS directly can make the process far less stressful. They know exactly how to handle an audit.
Taxes feel overwhelming. If you dread doing your taxes, make mistakes, or feel unsure about your filings, it could be a sign that your situation is too complex for DIY software. Turning your taxes over to a CPA can give you confidence and peace of mind.
Tips on hiring an accountant for the first time
“People need to realize that searching for a professional is a two-way street,” Brown says. Like with finding the right doctor, you need to advocate for yourself to figure out the best fit. This means you should be ready to ask the right questions. Brown advises that you ask your accountant if they are familiar with your specifics. For instance, if you own rental properties, then you should be able to ask them if they have experience with that. “The professional should also be able to answer any questions you have for them”—and a good match for you “should be able to answer in ways that you understand.”
Brown explains how the average person should understand that your tax return will dictate your rate: “Are you a W2 and/or 1099, do you have rental properties or sell stock? These different scenarios will impact your pricing.” You need to be aware of what type of return you need to have filed, and what type of information is being reported.
And remember: You’re the one responsible for your own tax return, and you must review it before signing off on it. Both the taxpayer and preparer will sign off and thus, both are signing off to what is reported.
Brown warns that if you pay someone to prepare your return, and they do not sign, “this is a huge red flag for something known as a ghost preparer.” It is illegal for an accountant to get paid and then to not sign your return.
The bottom line is handling complex personal and business taxes requires expertise. Don’t leave money on the table or risk mistakes that lead to audits; know when it’s time to have a CPA take over your tax preparation. The services of a CPA are well worth the investment for tax situations with greater intricacies.