One of the things I hear a lot is this: I do my own taxes. And, to tell the truth, I did my own taxes for years as well. It didn't seem to make sense to pay someone else to do what I, in all honesty, could do on my own. And, really, it wasn't too hard to do my own taxes when things were simple: No investments, reporting my business transactions as a sole proprietor.
However, about four and a half years ago, I decided to switch to the LLC. That means that I need a business tax return as well as an individual tax return. We also started do a little more with simple investments. While it was technically possible for me to continue to prepare my own taxes, and I could even speed up the process with tax prep software (which I have never used), I realized that it would take a great deal of time, and that I might not catch everything. Since then, I've hired an accountant to do my taxes each year. And it's been completely worth it.
Should You Hire Someone Else to Prepare Your Taxes?
If all you have is a 1040, with a minimal number of Schedules, it might not make sense to hire someone else to prepare your taxes. After all, it's a fairly simple process, and there isn't a lot to it. However, as your taxes becoming increasingly complex, it makes sense to have someone else prepare them. This is especially true if you are a business owner. An accountant or other tax professional can help you fill out both tax returns, and can do it in a way that coordinates both returns as they are filled in. My accountant works with multiple screens, and can pull them up side by side, and make sure that all of the information matches between the business and individual tax returns.
There are other reasons that complex tax returns should be tackled by professionals — at least if you want to save your sanity:
- It saves you time: Preparing your own taxes, especially if you have a business return as well, can be a time-consuming proposition. The year before I began seeing the accountant it took more than four hours to complete my tax return. It was frustrating. Now, because I organize my documents throughout the year, it only takes me about half an hour to double check that I have everything, and then it's only an hour to take my documents in, and have the accountant prepare everything. That's two and a half extra hours to do what I want — or make more money.
- You could miss something: No matter how informed I think I am, my accountant is always better informed. After all, it's his job to be. He always comes up with something that I miss, and he tries various scenarios to ensure that I truly am reducing my tax liability as much as legally possible.
- Your accountant can represent you to the IRS: Many accountants will represent you if you are audited. While this doesn't let you off the hook, things can be resolved quicker and easier when you let your accountant represent you and take care of everything having to do with an audit.
- You can deduct the cost: While you can only deduct the cost of having your individual return prepared if it amounts to two percent of your AGI, your business return can be deducted against your business income, as an expense. Which is great, since a business tax return usually costs more to prepare.
If you have a complex tax return, or multiple tax returns, it's probably worth it to pay someone else to take care of things. You'll stress less, and have some measure of protection.