Financial Fellow

Written by J.P. Wicklein

     Each year my taxes get a little more complicated.  I’ve gone from a 1040EZ to a 1040 with a Schedule A and D.  This year I added the complication of a limited liability corporation (LLC).  I decided it was time to get professional help; I hired an accountant to do my taxes. 

     Until now I’ve always done my taxes by hand.  A couple times I used tax preparation software to double check my numbers but, I’ve always felt comfortable turning the pages of the 1040 Instructions and filling out my tax return line by line.  Frankly, I’ve never found filling out a tax return correctly to be too challenging.  Once I started a business, though, I decided I was in over my head. 

     “Generally, you should consider hiring an accountant to do your taxes once they become more complicated than a 1040 with a Schedule A”, says Brian Eisenmenger of Eisenmenger & Co. CPAs in Wheaton, Illinois. That said everyone has a different comfort level.  Brian continues, “Once an individual feels their taxes have become too complicated they should seek professional assistance.” 

     Tax preparation software such as TaxCut or TurboTax can help you navigate more complex returns with relative ease.  For many people tax preparation software may be the best option.  For others, though, using an accountant to prepare their tax return may be a smarter decision.   

·      Tax preparation software is only as good as the answers you provide it with.  If you make a mistake chances are the software will carry through that mistake onto your tax return.  The same is true for an accountant, however, good accountants will tailor their questions to ensure you understand the information you’re being asked for.

·      TurboTax, TaxCut, or other tax preparation software works well for common scenarios but can come up short when addressing unique or uncommon situations. 

·      Accountants offer advice that tax software cannot.  Try asking TurboTax what steps you should take to avoid paying the Alternative Minimum Tax (AMT) next year or whether it makes sense to invest your tax return in a Roth IRA or Traditional IRA. 

·      Tax software is poor at determining whether a given business expense is a valid deduction.  This determination is more appropriately done by a qualified human being – an accountant.   

     If you decide to hire an accountant to prepare your tax return make sure they’re a certified public accountant (CPA).  An accountant will cost more than tax preparation software, however, if you feel that preparing your own tax return has become too daunting perhaps you should give one a call.

Photo by: Paul Keleher