Week 17: When Do I Need To Hire A Tax Professional?

Filing taxes can be fairly straightforward — until it’s not. So how do you know when it's time to bring in a pro?

Here are five signs you might benefit from hiring a tax professional:

You’ve had a big life change — Marriage, divorce, a new baby, home purchase, or moving to another state can all affect your tax situation. If you DIY’d your taxes before this should not be a massive shift in tax planning so a pro may not be needed yet.

You’re self-employed or own a business — Business income, deductions, and estimated tax payments can get complex quickly. This is where hiring a tax professional can pay big, big dividends. Company tax structures, how you realize expenses and when, all can affect your tax bill. A sharp tax planning resource can be a game changer!

You have multiple income streams — Rental income, side gigs, stock sales, or investment dividends can make DIY filing tricky. Again how these income streams are recognized and being strategic throughout the tax year can make your life easier. Using solo-401k accounts to defer these income streams can both save on taxes and get your money compounding for your wealth building journey.

You're aiming to reduce your tax bill — A tax pro can help you find credits and deductions you may have missed — potentially saving you hundreds or even thousands. I use tax planning software for example that generates checklists of available deductions and credits that either are or are not available based on your income tax return. Once you identify the potential causes, you can select the offsetting actions.

You’re not confident in your tax knowledge — If you dread filing or worry about mistakes, a professional can bring peace of mind and accuracy. This is as well as the complexity mentioned earlier would be a key reason to hire a professional. Mistakes besides being costly can also result in penalties and more severe consequences if not addressed in a timely manner.

While tax software can handle basic returns, working with a tax expert is often a smart investment when your financial life starts to grow. An Enrolled Agent is sufficiently skilled for most tax filings but a Certified Public Accountant can also complete tax returns. Both are rising in demand as fewer professionals want the labor intensive and lower profitability of this work vs. other services. Many have left the field altogether for similar fields like wealth management. This makes tax work higher cost than in the past as well if your needs are complex.

Need a referral or want to discuss your tax planning strategy? I’m happy to help.