Why You Should Hire a Tax Professional

There was a time when I did my own taxes. I was sole proprietorship with very few itemized deductions. Now, though, I’ve got an LLC, several more deductions and retirement investments on top of savings. My finances are still relatively simple, but they require a lot more paperwork these days — and a lot of time. So I have a tax professional help me as part of my wealth management infrastructure to take care of my tax planning and preparation.

Advantages of using a tax professional

We have a complicated tax code. As your finances become more complicated, so do your taxes. Having a tax professional whose job it is to be on top of changes and to recognize benefits that you might be entitled to can greatly simplify matters. A tax professional may know about a deduction or a credit that you passed over. One of the greatest advantages of utilizing a tax professional is that you can take advantage of his or her specialized knowledge of the tax code.

Another benefit of having a tax professional is that you can plan ahead. Tax planning allows you to work out a plan for your money over the coming year — a plan that can help you manage your money in such a way as to maximize your tax benefits. A tax professional can point you in the right direction and use a certain level of expertise to help you make the most of your cash flow.

Finally, a tax professional can save you time. It used to take me about four hours to prepare my own taxes. I had to read instructions, make sure I did everything properly, and fill out the forms. It was tedious, time-consuming work. My tax professional does the same thing in about an hour. I still have to gather my documents, but since I organize them throughout the year, this really isn’t very difficult. The time savings of three hours is quite valuable to me, and worth the $450 I pay for my tax preparation. Happily, about $350 of that is tax deductible as part of the business expenses associated with preparing taxes for my LLC.

Choosing the right tax professional for you

Just as when choosing a financial planner, if you decide that you want to engage the services of a tax professional, you should be careful about where you turn. My cousin found out that her “tax professional” was lacking some certifications and didn’t really know what he was doing. Make sure that you check up on your tax professional to ensure that s/he has all the proper credentials. Other things to consider when choosing a tax professional include:

Local: It can greatly simplify things if your tax professional is local. You can sit down face-to-face with your professional and get to know him or her. It also makes it easier to hold meetings as necessary.

Attentive: You want a tax professional that will pay attention to your changing tax circumstances and ask you questions about your situation. You don’t want someone who merely punches last years figures into the computer.

Services: Find out what services the tax professional offers. Will s/he represent you in a tax audit? What is the charge for electronic filing? Be wary of “early refund” services, though. In many cases these are actually costly loans against your tax refund amount.

Fees: Of course you want to get the best deal. But remember, pay $20 to your buddy, and you get what you pay for. Look for someone who charges something close to the market rate for your area. Call around to get an idea of standard prices from a variety of tax professionals. Also, figure out whether you might be able to benefit from a tax professional that you can hire on retainer. Then match up the services offered with the fees charged to determine the best value.

Personality: You want someone you get along with, and whom you trust. Meet with two or three of your top choices for a brief tax planning consultation and to discuss the services and fees. Then choose someone that you like and are comfortable with.

Now is a great time to start looking for a tax professional. Getting your tax professional acquainted with your situation prior to tax season can be very beneficial. Plus, once tax season starts professionals are often too inundated with work to really give their full attention to meeting you. Looking now means that you have the luxury to take your time and make sure that you get the best tax professional for your situation.