We live in a “Do-It-Yourself” era where technology and more specifically, the internet, have made it so that individuals can often times avoid having to pay others to provide a service or correct a problem. Even in the accounting and tax industry, we are flooded with commercials for Turbo Tax, which professes the ease of preparing your own income tax return. Software like Quickbooks allows one to maintain their own records of business income and expenses, without consulting or paying the fees of an accountant.
While there is a great sense of self-accomplishment in addressing things on your own, there are certain times when you must know to enlist the services of a qualified Certified Public Accountant. So when is it time to hire a CPA?
Your individual tax return has become more complex.
Not every individual needs a CPA to prepare their income tax return. If your situation involves a W-2 and minimal interest income, you can likely get away with preparing it on your own. This is typically the case for those who have just entered the workforce. Anything beyond this, and you should really have a CPA prepare your return. This is especially true if you hold investment accounts or are a homeowner.
You own a business.
As a business owner, you should be working with a CPA. If you are looking to save some money, you can maintain your own accounting records or hire a bookkeeper, however a CPA needs to review your records and produce the business tax returns. The Federal Tax Code is over 75,000 pages long. You, or your bookkeeper, do not have the expertise to ensure you are getting the benefit of all relative tax deductions or credits.
You have numerous unfiled tax returns or are receiving tax notices from the government.
Do not attempt to exchange correspondence with the IRS or state on tax matters, unless it is regarding something simple in nature. Penalties and interest can add up very rapidly and unless you have the proper experience in these matters, you will very likely be paying a lot more in tax, penalties and interest in the long-run. Hire a CPA with tax resolution experience.
Your business needs financing.
If you need financing for your business, lenders may request compiled, reviewed or even audited financial statements. These cannot be internally produced and need to be prepared by a qualified professional with relative experience, otherwise you may not get the financing you’re looking for.
You are the executor of an estate.
There are several estate tax and income tax obligations that come with the administration of an estate and filings may be required at the federal and/or state levels. If you should find yourself as the executor or executrix of an estate, you should enlist the services of a CPA with estate tax experience. This area can be quite complex and difficult to navigate on your own or with an attorney who lacks necessary tax expertise.
While the cost of hiring a CPA may deter some, a good accountant can save you thousands, if not tens of thousands, in taxes over the long-run. Some expenses are well worth the investment and hiring a qualified CPA is one of them.