Approximately 38.8% of taxpayers currently enlist the services of a certified public accountant (CPA) for their tax preparation needs. This statistic highlights a significant portion of the population that recognizes the complexity of tax laws and the value of professional assistance in navigating them. By utilizing CPAs, these taxpayers aim to ensure accuracy in their tax filings, potentially optimize their tax liabilities, and minimize the risk of errors that could lead to audits or penalties. The decision to hire a CPA reflects an understanding that the intricate nature of tax codes can often require expert interpretation and strategic planning.
Despite the substantial number of individuals and businesses that rely on CPAs for tax preparation, there remains a vast majority that has yet to take advantage of such services. Many more taxpayers could benefit from the expertise of an accountant, not only for the annual task of filing taxes but also for ongoing financial planning and advice. Accountants can provide invaluable insights into tax-saving opportunities, strategic investment planning, and financial decision-making that goes beyond the tax season. Their knowledge can be particularly beneficial in navigating life changes, business expansions, or complex tax situations that may not be straightforward. As awareness grows about the range of services CPAs offer and their potential to contribute to financial health and planning, it’s likely that more people will turn to these professionals for guidance.
“The best times to hire an accountant are when you have a more complicated tax year,” explains Finance Coach Jeannie Dougherty.
Here are five ways your taxes can become complicated, according to Jeannie Dougherty:
When you are buying or selling a home or property
- your investments or inheritance
- A new addition to the family
- Additional medical expenses
- Not understanding the tax questions
Navigating the complexities of tax obligations becomes particularly challenging under certain circumstances, often necessitating expert guidance. For instance, the process of buying or selling a home or property introduces a myriad of tax implications. These can range from capital gains taxes to deductions for mortgage interest and real estate taxes, each with its own set of qualifying criteria and limitations. Similarly, managing taxes on investments or handling an inheritance requires a nuanced understanding of tax laws, including the differentiation between long-term and short-term capital gains, dividend income taxation, and the potential tax shelters or liabilities inherited assets might entail.
The arrival of a new family member is another milestone that complicates tax situations. This change affects your tax status and may qualify you for additional deductions or credits, such as the Child Tax Credit or the Child and Dependent Care Credit. These benefits are designed to ease the financial burden on growing families but often require navigating complex eligibility requirements. Moreover, unforeseen circumstances like significant medical expenses can also alter your tax landscape. The IRS allows for the deduction of certain medical and dental expenses exceeding a percentage of your adjusted gross income, a provision that can provide substantial relief but demands meticulous record-keeping and understanding of eligible expenses.
Another common challenge arises simply from not fully understanding the questions and forms encountered during tax preparation. The complexity of tax law, combined with the nuanced nature of individual financial situations, can make it difficult for taxpayers to accurately assess their obligations and entitlements. Misinterpretations or a lack of knowledge can lead to errors, missed opportunities for deductions, or even the risk of audit if income is not reported correctly. Each of these scenarios underscores the importance of seeking professional advice or investing time in education to navigate the tax landscape confidently and effectively.
If your taxes are complicated, an accountant could help you and alleviate the stress of tax season.
“Another reason to hire an accountant is if you have been audited and know an accountant is a good practice for you or if you are about to be audited. Additionally, an accountant could be beneficial if you run a side business or have side hustles and need tax support. Lastly, if you don’t like doing your taxes because it causes more stress and hassle, an accountant exists to take that burden off your back,” Jeannie says.
