Is It Time to Hire a CPA for Your Taxes?

When does it make sense to move from doing your own taxes with tax software to hiring a CPA?

Software is an inexpensive and efficient way to complete your taxes however, it really does not allow you to do any tax planning. As your finances become more complex,tax planning becomes vital. As you progress through life you’ll find that you are faced with more and larger financial decisions. A CPA can help figure out how much tax you’ll pay over time and figure out ways to lessen the amount you owe. This can clearly have a big impact on your financial future.

Yes, tax prep software can tell you which box needs which number but it isn’t very good at looking at the big financial picture. At this time, software isn’t adept at looking at your finances as a whole and coming up with a plan moving forward to minimize what you pay in taxes.

A CPA looks at your finances as a whole, not just the current tax year and helps you plan accordingly. Tax software is awesome and based on your finances, might be the best choice for you tax prep. However, if your finances are more complex, it makes sense to consult and hire a CPA.

A solid understanding of tax code varies for each person. If you are an individual that would rather focus on other interests than understanding and mastering tax code, here are some key life/financial events where it may make sense for you to contact a CPA for tax planning opportunities.

  • If you have or are starting a small business
  • If you have or are buying rental property
  • If you’d like to begin planning for future generations/estate planning
  • If you have material foreign income
  • Big life change such as retiring or buying into a partnership
  • If you’re unsure whether to accelerate or postpone income
  • If you have restricted stock or employee stock options
  • If you’re not sure how much to withhold from your paycheck or pay in quarterly estimates.

Tax software is about compliance – making sure you report income. Tax planning is making sure you know tax law and strategies to pay the least amount of taxes. Tax software is limited and can’t see your whole financial picture. Hiring a CPA is the first step into looking at your finances as a whole and figuring out ways to minimize your tax burden.

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