Thrifty Thinking: When Not to Do Your Taxes Alone

Most people fall into two camps when it comes to filing their taxes – they either hand everything over to a professional or attempt to go it alone. But how do you know if you’re making the right choice for your situation? With the deadline for employers to mail W-2s and 1099s this week, there are several factors you should take into consideration when deciding if you should hire a tax professional.

Vanessa Borges, an enrolled agent at the Tax Defense Network, which provides tax services around the country, offers the following advice on when someone should hire a professional to do their taxes:

1.     If you are self employed and are running your own business, you need to know the best business structure for your situation.  “Whether you are a real estate agent or a truck driver you need to know the rules for deducting expenses, paying estimated tax payments and your responsibilities for filing and paying taxes on time,” Borges says. A tax professional can advise you on ways to minimize your filing requirements and the amount of taxes you have to pay. 

2.     If you have bought or sold investments during the year you will need to understand the rules for calculating capital gains taxes.  Is this property short-term or long-term?   What is my basis in this property?  Which schedule do I need to attach to my 1040 to show these sales?  Without a good knowledge of these rules, you could end up paying too much in capital gains taxes or miss out on capital losses that are due to you. 

3.     If you own multiple properties you are required to track income and expenses throughout the year in order to correctly prepare your tax return.  If you do not actively participate in the management of the rental property, you are not allowed to write off any rental losses.  A tax professional knows and understands how to track such items.

4.     If you earn more than $200,000 per year your chances of being audited rise significantly.  Generally, taxpayers that earn over this amount have complicated financial situations and are taking large itemized deductions for such things as charitable tithing, mortgage interest and unreimbursed employee expenses.  A tax professional can ensure that the IRS’ due diligence requirements are followed.

5.     Major life events can affect your taxes.  Did you get married?  Did you have a child?  Did you buy a home?  Did you start a business?  All of these events and more affect your tax position.  There are a number of reasons you should use the knowledge and advice of a tax professional, but the main one is to always ensure that you are receiving all of the tax benefits available to you.   

6.      Unless you file a really simple return with little or no deductions, it is always in your best interest to seek professional advice.

The Tax Defense Network’s team of licensed tax professionals, enrolled agents, attorneys and CPAs has resolved more than $120 million in tax debt. The Tax Defense Network is A+ rated by the Better Business Bureau.