Is anyone else enjoying the heck out of those new Turbo Tax commercials? You know, the ones where John C. Reilly narrates: “Did you have a person this year?” and “Did you get married this year?” As far as commercials for taxes go, they are pretty entertaining. Personally, I’m a big fan of programs like Turbo Tax and Tax Schlayer because they show that it can be easy to do your taxes when you have a system that literally breaks it down for you step by step, while saving you a few hundred dollars in a tax preparation fee.
However, there comes a time for many people when unfortunately Turbo Tax is just not going to cut it. Unless you have the simple “1040 tax return” with one or a few W-2s, filing your taxes on your own can be quite dangerous and costly long-term should you get audited.
So how do you know when it is time to bring in a professional? We talked with a few experts.
Who Should Consult a Professional?
According to Eric White, an Account Manager at No Limit Agency, here are six signs that you need a professional to file your taxes for the past year:
- You are self-employed (you work freelance).
- You bought, sold, or cashed out stocks, bonds, and 401k’s.
- You got married, divorced, or had a child.
- You purchased a home.
- You paid interest on a student loan.
- You don’t have time to do your own taxes right the first time.
Essentially, all of the experts agreed that when you start to get into more complex situations such as itemized deductions, interest income, dividends, stock sales, rental properties, self-employed individuals, child care credit, capital gains transactions, you should seek a knowledgeable professional, rather than trying to navigate your taxes on your own.
More Reasons to Consult a Professional
Courtney Caudill of Fifth Third Bank suggests that someone should consider hiring a tax professional when there has been a significant change to the tax code–for example, the 2012 Tax Act, which was passed in early 2013. The tax code will also change for some same-sex couples due to the recent Supreme Court decision that struck down the Defense of Marriage Act. Additionally, provisions from the Affordable Care Act that took effect can change the way people are filing their taxes, and a professional can certainly help navigate those modifications.
Courtney also noted that people of all income levels in any industry can benefit from the help of a tax professional, whether it’s a one-time need or advice they look to year after year. “I’ve represented clients who have been audited, and my first question always is, who prepared your tax return? The vast majority of the times they self-prepared the return and got it wrong.”
Andrew Poulos, a Principal with Poulos Accounting and Consulting Inc., told GoGirl that with the current economic environment and the way the IRS is on high audit enforcement it can be quite dangerous for taxpayer’s to prepare their own tax return. “Tax laws are constantly changing and are so complex that many tax preparers don’t understand and interpret the laws correctly,” he said. “If tax preparers can’t understand some of the complex tax laws, the average ordinary person will have a difficult time preparing their own tax return correctly.”
Don’t be swayed by the ease and affordability of self-filing programs. Your unique financial circumstances, taken into consideration with any additional complications such as tax code changes, should be the determining factors for how you file your taxes this year.
GoGirl Finance recommends that you always seek professional advice when preparing your annual tax returns.