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Certified financial planner Sophia Bera answers:
How do I know if I should use a professional to file my taxes? And when I read the phrase “tax preparer,” does that only mean accountants?
Ugh, taxes. Sometimes people ask if I do my own taxes and I tell them: Of course not! I help other people with their money for a living, the last thing I want to do at the end of the day is sit down and do my own taxes.
It’s also one of the easiest things to outsource, so I recommend people do just that.
The average person spends about 13 hours preparing their taxes. Personally, I’d rather spend my time elsewhere.
The IRS doesn’t actually have any guidelines on tax preparers. However, I tend to prefer to send my clients to an EA (Enrolled Agent) or a CPA (Certified Public Accountant). Both of these designations require extensive studying and testing as well as continuing education. I think when we’re talking about something as serious as taxes (where you could get audited! Yikes!), it’s good to have a professional on your team. It’s usually a few hundred dollars to have an expert prepare your tax return for you.
If you feel that you can’t afford to get professional help, you may qualify for free professional tax help. If your income is under $54,000, there are VITA (Volunteer Income Tax Assistance) programs across the country to help prepare tax returns for low and middle income individuals and families. You can use the IRS website to find one in your area and see if you might qualify.
When I first graduated from college I found out about a VITA clinic called Prepare + Prosper in Minnesota. I had such an amazing experience that now I donate to them every year so someone else can get their taxes done for free like I did years ago.
A tax professional can be especially helpful in making sure you qualify for all the tax deductions and credits that may be available to you. Some of them are easy to overlook and some are lesser-known, so I highly recommend that you seek some additional guidance — especially if your tax situation is more complicated (you own a business or a rental property, have multiple income streams, or a ton of deductions).
In addition to having someone prepare your taxes, you may also ask if he or she can help you with tax planning throughout the year. One of the biggest benefits that I provide my clients is helping them take advantage of different tax planning opportunities throughout the year. It helps to have an EA or CPA on our team to strategize how to people can reduce their tax liability significantly.
Taxes are complicated and a mistake can be costly. Hire a professional.
Sophia Bera, CFP® is the Founder of Gen Y Planning and has been quoted in The New York Times, Forbes, Business Insider, AOL, The Wall Street Journal, and Money Magazine. She tweets, travels, and loves helping millennials manage their money more effectively. Curious? Sign up for the free Gen Y Planning Newsletter.