A CPA is a Certified Public Accountant, someone knowledgeable about tax code who can help you maximize tax savings (or get a larger refund), plan for the next year, and represent you before the IRS if you’re audited. Understandably, this expertise comes at a price. If you’re unsure if a CPA’s services would be worth it for you, read on.
It might be worth it if…
Ultimately, it comes down to how complex your return will be. If you have complex financial transactions, such as investments, rental properties, self-employment income, or international transactions, a CPA can navigate the complexities and ensure that your taxes are properly reported.
Owning a business or working in the gig economy are great examples of more complicated tax situations. There are write-offs to consider, multiple 1099s to collect, and figuring out what to do if a client never paid you. A CPA can also help you determine what quarterly estimated taxes you should pay at the federal and state (if your state has income tax) levels throughout the year.
CPAs can help you develop tax strategies and plan for the future, considering factors such as retirement goals, estate planning, and minimizing tax liabilities.
Preparing taxes can be time-consuming, stressful, and confusing, especially if you have a busy schedule or complex financial affairs. Hiring a CPA allows you to delegate this task, saving you time and reducing stress.
And finally, in the unfortunate event of an audit, having a CPA who is familiar with your taxes can provide valuable guidance and representation..
Other options
Besides hiring a tax professional, you also have the option of using tax preparation software like TurboTax. You can even get a version for small business owners. The monetary investment in software like this is much smaller than the cost of a CPA, and you may qualify for a discount with a credit union membership or based on your yearly income.
Using software means you will most likely only have the option to e-file your taxes. You’ll need your W-2s, any 1099 forms, tax documents from all investments, and documents regarding interest you paid on things like student loans. It will take anywhere from one to several hours for you to complete your taxes, depending on your situation. The software will guide you through questions and form sections you may have missed if you filled out the paper form unaided.
When choosing a tax preparation option, consider the complexity of your tax situation, your comfort level in handling taxes yourself, and your budget. It is important to ensure that whichever option you choose, the individual or service provider is reputable and knowledgeable in tax matters.
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