Estimated Read Time: 2 minutes –

Admittedly, software like “TurboTax” and others do a good job of breaking down tax preparation into a more manageable process. It also will often times prompt you as to potential errors in your return and/or red flags for an audit. For certain people, especially the overly conservative types, the tax software option will do just fine for them. But, sometimes you need to call in a pro. If your income is greater than $100,000 or you have more going on than just a W-2 and a Schedule A (itemized deductions), you could be missing out on tax breaks that could save you hundreds, thousands, or, yes, hundreds of thousands of dollars in taxes. And, for some, the structure of your tax return could trigger an audit. Remember, the tax return can be more of an art than a science. There is more than one way to report items and/or to take deductions, all of which are within the guidelines of the IRS code. Here are some very specific instances where you really need to make sure you have consulted with a tax pro:

1. You are self-employed, own a business, or receive 1099 income.
This is where the do-it-yourselfers can really make mistakes. There are a huge number of deductions that this taxpayer is eligible for, and these types of returns are certainly subject to more scrutiny by the IRS. A tax pro can make sure you pay the least amount of tax possible, structure your return to keep it from raising red flags, and advise you on the documentation to prepare and/or keep in case of an IRS audit.

2. You own rental property (or properties).
The rules that govern rental properties are complex and intricate. Furthermore, this area can garner interest from the IRS. So, how, what and where you deduct items is important.

3. You own a lot of stocks/bonds.
To add to the complexity, the Affordable Care Act imposes a 3.8% surtax on unearned income above a certain level of income (MAGI). A tax professional can help with ideas on limiting MAGI, and therefore limiting the 3.8% surtax.
Above all, make sure the tax professional has the right credentials. If the price is too good to be true, there’s probably a logical reason for that. Anyone can profess themselves to be a professional tax preparer. No education or certification is required to do so. Remember, only CPAs, EAs, and JDs (attorneys) can represent you in front of the IRS. So, if you happen to get audited, your tax preparer can’t help you unless they hold one of those credentials.

Lastly, pay attention to pricing. Often times a fixed fee will include the actual tax preparation and nothing more. You have to be careful that you don’t get a bill for hourly services that are outside the tax preparation costs (in case you would like some consultation, advice, follow up, etc.). And, if your tax preparer only works during the tax season, good luck if you get an IRS letter in September…

Dan Lucas
Follow Me