When it comes to dealing with your taxes, hiring a professional can provide value that will feel worth it at tax time in April, as well as throughout the year. Even if you have handled your taxes solo in the past, it might be time to weigh your options and see if a CPA might be a better option.
So, how much does a CPA cost?
It varies. Just like tax returns vary, so does the work that goes into them. The more work required, the more an individual will charge. Jane Smith may have taxes that involve a few W2s and one information update that will take a much shorter time than someone like John Black, who bought a house in the past year, started a new business, and receives income from five different sources. Organizing documents and calculating expenses for a tax return that reflects that of the latter can take days or even weeks to complete.
Keep in mind that there’s a difference between cost and value, and although a CPA may seem costly at the time, the value can last for the long-term. A CPA has the expertise to look over opportunities to save and can help keep a chance of auditing low. Without a trusted tax professional, it’s easier to make mistakes and an inexperienced preparer or online tax software can end up costing a person much more in the long run.
As with any business relationship, there are boundaries and expectations to set before deciding to have someone else handle your taxes. When it comes down to hiring a CPA or not, consider if it’s affordable for your budget and if it will bring a positive return on your investment. Here are four tips to keep in mind when hiring a CPA:
1) Form good communication. When you find a CPA that you like and are comfortable with, it makes it easier to place trust in them to handle your taxes year after year. When they are familiar with your financial situation and any changes you experience throughout the year, they can more easily spot opportunities and possible discrepancies. Any information that directly affects your finances in a significant way should be passed along to your CPA.
2) Get organized. It’s easier for both you and your tax preparer if you are well-organized. Keep your tax documents together in one place and save all tax information from your financial institutions. Documents include receipts if you own your own business, or proof of any big purchases or life changes you made in the past tax year. Myfreetaxes.com has put together a helpful checklist that can be found here.
3) Establish credentials. Financials are very private matters, so it’s important to do proper research on whomever you decide to hire. When searching for a CPA online you can look for a company such as Community Tax that is well-versed in all tax matters. Referrals are also a great option, if a friend or family member you trust has someone they go to with proven success. Even in the case of a referral, make sure to employ your due diligence and research.
4) Don’t lie. Be open and honest about your financials with your CPA so there aren’t any surprises down the road. All information helps your tax professional decide the best way to claim expenses, avoid penalties, and report your earnings that aren’t straightforward income.
Make sure to gather all documents and information pertinent to your taxes including, but not limited to, previous tax returns, financial statements, W2s, and other financial documents. Big life changes such as marriage, divorce, starting a business, and having kids will all have an impact on your taxes. While your financial information is most important to your CPA, some of your personal information is applicable as well.
A CPA can help alleviate some of the stress and frustration that can be associated with tax time. CPAs are professionals in the field and have been educated and trained in the nuances of all things related to tax. Before the first meeting with your CPA, be prepared with what your objective is and have a list of questions you have. It’s important that you and your CPA both have the same, clear understanding of the goals you want to accomplish before beginning.
Photo Credit: Alan Cleaver