Thursday, January 31, 2019

When to Hire Someone to Do Your Taxes

FROM twocents.lifehacker.com

Advancements in tax software make it easier to file your taxes without the help of a professional, as does this year’s increased standard deductionand simplified 1040. But there are still plenty of circumstances when you’d want to hire someone.
These situations might include:
  • You’re a freelancer or you have multiple income streams
  • You started/own your own business, or sold a business
  • You do business in a foreign country
  • You got married or divorced
  • You inherited money
  • You’re retired
  • You take care of an elderly relative 
  • You want year-round tax advice
  • You have significant investment income/losses
  • You buy health insurance through a health exchange
  • You’re rich (if you’re single earning more than $250,000 or married and earning more than $300,000 jointly, per Marketwatch)
“Usually when I get new clients it’s because of a ‘life-changing’ event,” John Gregory, who runs 1040Return.com, told Marketwatch. “As life goes on, things become more complicated.” Maybe you got married and bought a house all in the same year—in that case, spending $100 or so to hire a tax preparer could make sense to ensure you’re maximizing your return.
The other categories have more to do with deductions, credits and penalties you may not be familiar with. Moving to a different state, structuring a business or dealing with an estate all have particularities that you’re not likely to be able to work through on tax software (at least, without paying a premium anyway).
That said, if you don’t fit into these categories but you still feel more comfortable with a professional handling your returns, that’s ok too. Just know how not to get swindled.

How to Choose a Tax Preparer

To that end, as with anything money-related, there are a lot of tax scammers out there. A word of mouth recommendation is ok to rely on if you know someone in a similar financial situation, but you’ll want to do your own research to find a good preparer.
Here are some other tips:

Hire a Preparer With a Preparer Tax Identification Number

If you are planning to hire a professional, you’ll want to make sure he or she specializes in tax preparation. A certified financial planner doesn’t necessarily understand the minutiae of the tax code, so look for a certified public accountant, or a tax professional who is registered with the IRS. That means he or she will have a preparer tax identification number (PTIN) which he or she will need to enter on your return. That’s an important step to prevent scams. Your preparer should also sign your return.

Watch the Price

Don’t hire a preparer who receives a percentage of your refund—you want to look for someone charging a flat fee per form or hourly rate. “Also ask if your tax preparer is compensated or receives incentive pay based on the number of returns he prepares because pay based on volume conflicts with taking the time needed to be thorough,” writes CBS News.
According to a biennial survey by the National Society of Accountants, the average preparation fees are:
  • 1040 without itemized deductions and a state return: $176
  • Itemized 1040 with Schedule A and a state tax return: $273
  • Itemized 1040 with Schedule C business income and a state return: $457
Meanwhile, “a person filing online with software, on the other hand, could pay up to $130 with one of the major tax-preparation companies, including the fees for one state return,” for an itemized 1040 and schedule A, reports the Washington Post.
And if your returns are more complicated, you can expect to pay the following additional costs, on average, per the NSA:
  • Schedule D, for gains and losses: $124
  • Schedule E, for rental income: $132
  • Schedule F, for farm income: $180
  • Form 940, for federal unemployment: $69
  • Form 8965, for health coverage exemptions: $53
  • Form 1120S, for s corporation: $809
  • Form 706, for estates: $1,563
Those prices are expected to increase, and could cost a bit more this year specifically as preparers work through the tax law changes for the first time.

Get Your Papers in Order

One benefit of hiring someone to do your taxes is that you save some time. But you still need to collect and organize all of the paperwork, receipts, etc., to give to your preparer so that they can file your taxes effectively.
Finally, remember that it’s possible a preparer will make a mistake, and hiring someone doesn’t mean you won’t be audited. So double check the work that was done for you before you sign off on your return

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