If you’re wondering whether you should do your own taxes or hire a tax professional, the answer (as with most financial decisions) is: It depends on your situation. You might be fine filing your taxes on your own if your financial situation is uncomplicated, but many people require the assistance of a trained tax professional such as a Certified Public Accountant (CPA) or a tax preparer.
If preparing your taxes consists of gathering a W-2 from your employer and a 1099 from your bank and entering them in a form, your tax return is simple, and you should consider filing by yourself or using tax software. Tax preparation may take longer when you handle all the details yourself so make sure you have the time.
Using a tax professional to prepare your tax returns is a good option if your situation includes the following:
- Self-employment income
- K-1 income
- Foreign income, bank accounts, or investments
- A major life event such as buying or selling home, receiving an inheritance, or moving to different state
- Owning a rental property
- Being audited
While a tax preparer and a CPA are both professionals in the financial industry, it is important to understand what sets the two roles apart. Some of the key differences between a CPA and a tax preparer:
- Education: Bachelor’s degree and 150 credit hours with a focus on accounting and business
- Licensed by a professional governing body.
- Have requirements for continuing education in order to maintain their license.
- Are held to specific professional standards and a code of ethics.
- Are considered business advisors and provide tailored advice and tax planning to minimize client’s tax liabilities.
- Qualified to represent you on any IRS matters including payment/ collection issues, appeals, audits, etc.
- No college degree is required.
- Most learn tax rules and regulation on the job instead of in a classroom.
- A tax preparer’s focus is narrower, but this may be a good option if you seek only tax-filing services.
- For smaller companies with straightforward taxes, using a tax preparer is a way to save money and get your tax returns completed on time.
- An unlicensed tax preparer is limited to no representation rights for you with the IRS.
Only you can decide which tax preparation method will work best for your situation. A CPA is a full-service financial professional and is generally the right choice for someone who wants accounting, audit, tax or business advisory services year-round or who would benefit from tax planning in advance of filing. A tax preparer is someone who prepares and files taxes and is generally the right choice for someone who specifically needs help when it comes time to file.
If you are unsure of which option is best for you, contact Wouch Maloney today to speak with an accounting professional. Wouch Maloney provides tax preparation services for complex tax returns for businesses in Philadelphia, PA and Horsham, PA.
DISCLAIMER: The WM Update, WM Wednesday Wisdom, WM Daily Update, and other related communications are intended to provide general information, as of the date of this communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.