Do You Need To Hire An Accountant For Your Taxes? A Guide For Millennials

Do You Need To Hire An Accountant For Your Taxes? A Guide For Millennials

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Taxes are a constant that none of us really enjoy having to pay or even talk about but it is a fact of life. One of my favorite quotes of all time actually has to do with taxes.

In this world nothing can be certain except death and taxes” – Benjamin Franklin

Leave it to Benjamin Franklin, one of the smartest men in the history of the modern world, to put it so perfectly. Taxes are overly complicated and to be honest it is an excruciating task just getting all the information together. This is why sometimes it is in your best interest to leave it to the experts and hire an accountant. Which begs the question..

Do YOU need to hire an accountant to do your taxes?

If you have a regular job that pays a regular salary and no side businesses or income, then probably not. You can usually use one of the simple tax filing Softwares or file directly with the IRS. But when you start adding in complexities like businesses, real estate, children, or capital gains from stock trading, then it may be a good idea.

Over the last 50 years, tax law has become increasingly more complicated. On one side, you have people claiming that they are skewing the rules for the rich and creating loopholes to avoid paying taxes. On the other side, you have people claiming they are being taxed too high and the government is taking all their money.

The point of this article isn’t to debate that topic. We could go all day on the intricacies of taxation and who gets what and why. We’ll save that for another time. What is undeniable is that you are always going to be required to pay taxes. The complexity of the tax law will most likely never get easier and because of that, there will always be loopholes.

So should YOU hire an accountant to do your taxes?

Why You Should Have An Accountant

Accountants aren’t just for big corporations. Many individual people have them and you just don’t know it. It’s a pretty safe bet that having one would be beneficial for you.

To be honest I have never once filed my own taxes. I know how to do it, I know the process, but if I filed my own taxes I would make a mistake. It’s not because I’m dumb or lazy but rather the opportunity costs do not make sense.

Let me tell you a story…

My mother used to do our family’s taxes. While she is an accountant, she works in a corporate setting and does not regularly file items to the IRS, as a personal accountant would. As my sister and I grew older, our finances became much more complicated so she found a local accountant.

Right away they found something that my mother had missed.

While it’s not her fault as she doesn’t deal with that type of work day-to-day, it would have cost me $2,500. The tax credit was called the American Opportunity Tax Credit and it is a credit that you automatically get for spending money on higher education. Now I won’t go too far into the details, but I would think that we would all like an extra $2,500.

Like I said earlier, tax law is overcomplicated, and when you have different rules at the federal, state, and local level you are just asking for mistakes. Hiring an expert that is in the details every day with a trained eye seems worth it to me.

Questions To Ask Yourself to Determine If You Need An Accountant

There are some of you reading this article that hiring an accountant just doesn’t make sense. You are already doing most of the work yourself by compiling all of the information, so you might as well just file yourself. Filing by yourself is totally fine. As long as your tax situation is relatively simple (one source of income, no dependents) then go ahead. It makes sense for you to save the money you would have spent on an accountant if they can’t add anything to help you through the process.

But I know there are some of you in denial telling yourself there is no need to hire someone to do something that should be simple. Newsflash: it’s never as easy as we would hope. If you mess up your taxes, you can get into some huge financial trouble not to mention missing opportunities to save your hard-earned money.

To help you distinguish which side you are on, read through the questions below.

Do you earn over 100k per year?

Yes? Then hire an accountant.

If you earn over $100,000 a year, then your chances of getting audited by the IRS have gone up exponentially. An audit is when the government goes through all your documents to double-check you were telling the truth when you filed your taxes.

Unfortunately, they operate under a guilty until proven innocent premise. A good accountant will make sure you have everything in order and even have insurance just in case something goes wrong.

Do you have investments?

Yes? Then hire an accountant.

If you have any sort of investments then you need to be using an accountant. Different types of investmnent accounts offer different tax advantages and most likely you don’t know those.

Do you know what tax-loss harvesting is off an investment account? Probably not, so hire an accountant.

Other investments that are outside of your IRA’s also have tax benefits. For example, if you invest in a friend’s business, you have options. Or if you buy into a physical asset (house, car, computer system) you may be able to depreciate it.

All tax scenarios I would never recommend the average person try to file on their own.

Do you own a business?

Yes? Then hire an accountant.

Often you’ll hear people complain there are loopholes in our tax system for the rich to get richer. I personally don’t believe this.

What I believe is that our tax system is set up for businesses and businesses to be able to take risks. This website that you are on right now is a business. Because of that, I deduct and depreciate certain things. Before you assume that I’m committing tax fraud, know that I also have to report all of my income.

My point is you don’t need to be a huge corporation with hundreds of employees to be classified as a business.

These rules are set up to help anyone that owns a business (small businesses included) so make sure you have an accountant that can help you take advantage.

Do you own real estate or are you considering selling your home?

Yes? Then hire an accountant.

The tax laws for real estate are extremely confusing. Why are rental properties depreciated over 27.5 years? I have no idea but that is the tax law.

If you want to get into real estate, own rentals, or are planning on selling a home, you need to have an accountant. There are just too many rules for someone who isn’t in tax law every day to know well enough to use them appropriately.

Along with helping you use tax law in your favor, you can deduct the expense of an accountant against your income.

That’s a win, win situation.

You can be sure that our plan for our recent duplex purchase will take full advantage of any and all tax benefits we can.

Are you planning on giving large sums of money to a child or another person?

Yes? Then hire an accountant.

Giving money to people actually has tax implications. Did you know that? The reason you give them money and the amount of money can make a huge difference.

Did you inherit money, property, or other assets from a relative? You have to pay taxes on that.

Do you plan on giving your kids any of the above? They will have to pay taxes on that.

A good accountant will help you make sure you are staying under the limits on gifts but also assist you in setting up trusts and other avenues to save you money on taxes.

Do you think you pay too much in taxes?

Yes? Then hire an accountant.

Ahhh finally, a question the majority of us will be able to agree on. I’m happy to pay (some) taxes. I’m thankful for the roads I drive on and the first responders that we pay.

But the amount of waste in our system is frustrating. Some have even said that taxation is theft. I will neither confirm or deny my thoughts on that.

A good accountant will make sure you are taking advantage of every write-off, deduction, and credit that you can so you can pay the least, legally required amount in taxes possible. That’s a service I will always be willing to pay for.

Related Questions

1) How much does an accountant cost?

The cost is going to vary based on location, your personal situation, and that accountant’s rates. If you have a slightly complicated situation then you should be able to find a good accountant to file your taxes for $150-$300.

When you start adding in businesses, then the cost will increase dramatically. Depending on the size and complexity of the business, it can easily run you over $1,000. But again, most of the time it is worth it. In this situation, you definitely get what you pay for.

2) Where can I find an accountant?

The best tip for finding a good accountant is to ask around with your family and friends. I would specifically ask the people in your life that you know are financially stable and have a little extra spending cash. These people got there with the help of a good accountant and I imagine you aspire to be in that same boat someday.

If that fails, then start googling. Find a couple of firms that interest you and go in and talk to them. You don’t have to commit to anything and you should be firm in exploring your options. You are the customer and they should pitch to you what they can do for you.

3) What is the difference between an accountant and a financial planner?

An accountant and financial planner often get mixed up in conversation. They are different but there are some overlapping traits. The key difference is a financial planner is supposed to help you plan for the future (obviously). They typically don’t know tax code and just want to maximize your wealth by helping you invest for the future.

An accountant, on the other hand, knows everything about you. Literally down to the penny. Their job is to save you as much as they can right now and into the near future (2-5 years). Because of this knowledge, I believe a good accountant is more valuable than any financial planner.

To learn more about the difference check out this article from The Balance: Do You Need an Accountant or a Financial Planner?

The Bottom Line

I’m going to do some self-reflecting here and acknowledge that his article has been mostly biased towards the fact that I think most people should hire an accountant. The truth is if your taxes are more complicated than entering your W-2 information, then you probably should let the expert take over.

There is just too much information out there for someone who isn’t a CPA to understand. My opinion is that if it doesn’t affect your daily life, why would you want to?

99% of the time I don’t care what the American Opportunity Tax Credit is but when it is something that can save me money I absolutely want to know. Or better yet, I want to know that the expert I hired knows all about it.

As you grow older, your situation will most likely only get more complicated. An increase in income, investments, children, inheritances, and so on will definitely bring some opportunities to save money on your taxes that you should take advantage of.

By hiring an accountant now, you are starting a relationship that you hope lasts many years. Having someone in your corner entrusted with one of the most important things in your life, your money, is going to decrease your stress and bring you a happier, more successful life.

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