These days, anyone with an internet connection and a QWERTY keyboard can file their own income taxes. The number of online providers offering low cost, simple tax preparation is astounding. And for many of us, those services are perfectly adequate and a wise cost-saving measure. However, sometimes taxpayers find themselves in a situation where they need to call on a professional to do the heavy lifting. When this happens, some might turn to same day tax preparation from one of those popular tax prep services down the street. There’s nothing wrong with that! But it may surprise you to know that those services offer little more than you are getting through the online software so many of us use. So when is it time to call in the real pros? Someone with some letters after their name? If you fit into one of the following categories, you should consider enlisting the help of an accountant to make sure you are getting the adequate service you need to ensure timely, accurate filing of those complicated tax returns.
Why does this matter? Well, the IRS is savvy to the fact that higher earners have more opportunity for misstatement. Therefore, the chance of an audit climbs exponentially as those wages increase. Consider this:
Income Likelihood of Being Audited
Under $200,000 0.9%
$200,000 – $999,999 3.7%
Over $1,000,000 12.5%
There are so many deductions and considerations for those who own a business. The complexities of depreciation alone can make one’s head spin! An accountant is familiar with these situations and can maximize your deductions. Don’t pay more than you are required to.
Partners in businesses or shareholders in S Corps will typically receive K-1s. These are tricky documents to make sense of. And most online tax software programs are not equipped to handle many K-1s.
Many factors can trigger the AMT: high state income tax, sale of certain business stock, large business expenses paid by an employee, and certain investments. AMT is quite complicated. If you are an AMT payer, let the pros handle your return.
While certain real estate sales are very simple to report, others can have serious tax implications. An accountant can ensure that you treat the sale properly and can find deductions you might not have considered.
It might seem unfair, but giving large gifts to our kids, our church, or our favorite charity can have significant tax consequences—both in our favor and decidedly not. There are many ways to ensure these gifts are properly accounted for and your tax implications are handled appropriately.
There are many ways to handle these gains and do-it-yourself tax programs are simply not intuitive enough to know the best course to take for every situation.
This is more common than it might seem. Mutual funds and stocks of foreign companies can generate foreign source income. If you have a diverse portfolio, there’s a good chance this includes you. An accountant should be consulted for the treatment of this income.
If you’ve seen one of those collection letters from the IRS, you know receiving one is a disquieting experience. Don’t take chances with your returns. The IRS is far less forgiving after the first year of mistakes. Recruit an accountant before there are problems.