When to Hire Someone to Pay Taxes
For many, 2020 is not your typical tax year – whether it be because of your contribution to the highest unemployment rate in recent memory, or because you have to take a job for the first time, changing your finances can make you think about hiring. tax specialist for the first time. In fact, there are situations where it is worth the cost and convenience to hire someone to prepare your tax payments.
These situations usually include:
- Are you a freelancer or have multiple sources of income.
- You started / own your own business or sold it.
- You are doing business in a foreign country.
- You got married or got divorced.
- You inherited money.
- You are retired.
- You are caring for an elderly relative .
- You need tax advice all year round.
- You have significant investment gain / loss.
- You buy health insurance through the health exchange.
- You are rich (which means that you are single and earn more than 250 000 US dollars, or a member of a marriage and earn together more than 300 000 dollars on Marketwatch data ).
“Usually when I have new clients, it’s because of an event that“ changed my life, ”says accountant John Gregory in an interview with Marketwatch . “As life goes on, things get more complicated.”
This is especially true when you are suddenly dealing with deductions, loans, and fines that you may not be familiar with. If you earn W-2 consistently and expect to receive a standard deduction , you do not need to hire a tax professional to process your tax return (and most programs allow you to do simple returns for free). On the other hand, other life events – like moving to another state or starting your own business – involve quirks that aren’t easy to solve on your own, even with tax software (or at least without paying a premium for a luxury edition).
However, there are no hard and fast rules here – if none of these scenarios describe you, but you just feel more comfortable with a professional handling your income, that’s okay too. At a minimum, you can get general advice and avoid making DIY mistakes worse on your tax form. The trick is to find a professional without succumbing to deception.
How to choose a tax filler
As with anything related to money, there are many tax scams. Word of mouth is fine, but you’ll want to do your own research to find a good preparer.
Hire a compiler with a tax identification number
If you are considering hiring a professional, make sure they specialize in tax preparation. A certified financial planner does not necessarily understand the details of the tax code, so look for a certified auditor or IRS registered tax professional. This means they will have a Taxpayer Identification Number (PTIN) that they must include on your return (along with their signature) – an important step in preventing fraud .
See the price
Don’t hire a writer who gets a percentage of your reimbursement – you need to look for someone who charges a flat fee per form or a flat hourly rate. “Also, ask if your tax filler is getting compensation or incentive payments based on the number of reports he prepares, because volume-based pay is at odds with the time it takes for due diligence,” writes CBS News .
According to a survey conducted by the National Society of Accountants every two years in 2018, that’s how much you can expect to pay for different levels of service:
- 1,040 excluding detailed deductions and state return: $ 176
- Detailed 1040 with Attachment A and State Tax Return: $ 273.
- Detailed 1040 with Schedule C Business Income and State Return: $ 457
With regard to tax applications, “a person filing an online application using software, on the other hand, can pay up to $ 130 to one of the major tax preparation companies, including fees per government return,” for position 1040 and Appendix A. reports the Washington Post .
And if your returns are more complex, you can expect to pay, on average, the following additional costs, according to NSA:
- P&L chart D: $ 124.
- Schedule E rental income: $ 132.
- Chart F, farm income: $ 180.
- Form 940, for federal unemployment: $ 69.
- Form 8965 Health Insurance Exemption: $ 53.
- Form 1120S, for a corporation: $ 809
- Form 706, for estates: $ 1,563.
Get your documents in order
One of the benefits of hiring someone to pay taxes is that you save time. But you still need to collect and organize all documentation, receipts, and other information to pass on to the originator so that they can effectively file your taxes.
Finally, remember that the writer can be wrong, and hiring someone doesn’t mean you won’t be screened. So double check the work that was done for you before signing your return. This story was originally published in 2019 and was updated on February 16, 2021 with updated context and current Lifehacker style.