Uncle Sam’s cutting you a break this year: he’s giving you two extra days to get your 2011 tax returns in the mail. That’s not the only break he’s giving you. There are tax breaks on the interest you pay on your mortgage, tax breaks for contributing to your employer-sponsored 401(k) or other tax-deferred IRAs, even tax breaks for having children or filing jointly with your spouse. Kiplinger’s claims American taxpayers itemize more than $1 trillion in deductions. But if you don’t hire a professional tax preparer, you may not be able to cash in on all the breaks out there.
For years, my husband and I had taken advantage of TurboTax’s free e-filing system for a simple federal return. It was cheap, it was easy, and it got us our refund in weeks, not months. But since I left the corporate world to work as a freelance writer and researcher, my family’s taxes have become decidedly more complicated.
So, we’ve turned to a tax professional for help.
Luckily, I’ve got a tax preparer in my own family: my dad. He’s got enough three-letter acronyms behind his name – CPA, CFP, and CFO, just to start with – to prove his gravitas. After one of my freelance coordinators sent me a corrected version of my 1099 (they’d messed up the original form by a million bucks), I gathered all my other tax forms and shipped them off to my father.
Do you need help from a tax professional between now and April 17th?
Here are five reasons why you might:
- If you don’t work for a conventional employer. This is the reason why I sought out my father’s professional expertise. Whether you work freelance, own a business, or are otherwise self-employed, you don’t pay state or local taxes when you receive a paycheck. Instead, you’re responsible for paying either estimated quarterly income tax or paying your taxes in one lump sum every April. To cut down on an otherwise massive tax bill, itemizing deductions on your 1040 form is the way to go. In an interview with an IRS pro, MSN Money’s Jeff Schnepper reports there have been 3,500 changes to the tax code in just the last 12 years. You may not know them all, but a tax professional will.
- You don’t qualify for a free federal return. Online companies like TurboTax, TaxACT, and TaxSlayer all offer free federal returns – a great option if you have a simple return. But if you don’t qualify for one of these options – for whatever reason – it’s a good indication your tax returns are complicated enough to warrant a tax professional. After all, if you’re going to shell out $10, $25, $50 or more for tax preparation software, you might as well give that money to an actual person.
- You had a major life change. There are pros and cons to filing jointly with your spouse, but if you’re a newlywed, you may not know all the potential benefits – or pitfalls. A paid tax preparer will. Just got divorced? That adds an extra layer to your tax forms. Recently widowed? Received a large inheritance? Again, a tax professional can help you navigate all the tax implications to maximize your refund – or, at least minimize your bill.
- Made a major change to your living situation. If you bought a primary residence, a vacation property, a rental property, or just refinanced any of the above, you’ll want to hire a tax pro. The tax loopholes for property owners and landlords are numerous, but they’re also ever-changing. The federal government already requires basic training in order for tax professionals to receive a paid-preparer tax identification number, or PTIN, and is hoping to expand its continuing education requirement. This ensures your tax pro knows all the ins and outs of doing your taxes, year after year.
- You simply don’t have the time. A 2006 survey by the Tax Foundation found the average American family of four spent nearly 38 hours doing their annual income taxes. Think about all the things you could do with that amount of time; now think of how much money you could earn if you worked overtime for 38 hours instead of preparing your taxes. I’m guessing it’s a pretty small amount compared to what a paid tax preparer would charge. If you don’t have the time, the attention span, or the interest in doing your own taxes, don’t attempt them! You’re more likely to make costly mistakes.
Under my dad’s guidance, my husband and I were able to make it through our first full year with me working freelance without owing Uncle Sam. I give my father’s professional advice a lot of the credit: he found us tax breaks we didn’t know existed.
Reader, do you do your own taxes? Why or why not?