Your need for a tax accountant depends on your personal situation. You might consider using an accountant if you're self-employed, or if you experienced significant life changes during the tax year. You might also want to use an accountant if you need to amend a previous year's tax return.
It can be worth the expense, as many people find that they actually save money by going to an accountant because their tax refund increases significantly. But there are also cases where you may want to file your return on your own.
In this guide, learn when you would (and wouldn't) need an accountant and how their services would impact you.
When You Need an Accountant
A few circumstances will wave a flag that you might be better off using an accountant than trying to handle preparation of your tax return on your own. In most cases, there are advantages in going to an accountant if you have a complicated situation.
You Own Your Own Business
Using an accountant can help you to file your taxes correctly and prevent you from making any costly mistakes if you're self-employed or own your own business. Your accountant can also help determine how much you should pay in quarterly estimated tax payments going forward so you're not faced with a big tax bill at filing time.
Business owners or many of those who are self-employed face different requirements than typical W-2 employees. For example, an employer must withhold and pay income taxes, Social Security taxes, and Medicare taxes, as well as unemployment tax on wages paid to an employee. However, if you hired independent contractors, you generally do not have to withhold or pay taxes on their payments.
Major Life Changes
As you get older and your financial situation becomes more complex, your tax picture will change significantly. For example, if you buy your first home in the tax year, how you file will be impacted. An accountant can make sure you're taking advantage of every tax break available to you and help you determine how to adjust your withholding to accommodate that.
A tax professional can help you make tax adjustments if you got married, had a child, were divorced, or if you began investing for the first time. Again, you might only need to use an accountant for the tax year in which you experience these changes.
You Failed to Pay in the Past
Reach out to a professional if you didn't file necessary tax returns in past years, or if you owe unpaid taxes to the Internal Revenue Service (IRS) for a previous year and you haven't made arrangements with the IRS to address that issue. A tax accountant can help you file several years’ worth of tax returns and will know about the programs offered by the IRS for people in this situation. They can guide you to the one that's most suitable for your financial situation.
For example, the IRS might be willing to set up a payment plan with you if you meet the qualifying criteria. It helps to have an accountant work on your behalf to make sure everything is filed correctly as you attempt to rectify the issue.
In addition to hiring an accountant, you might also want to contact a tax attorney if you failed to file previous years' returns, as this can be a serious situation. Your accountant might be able to recommend someone who works specifically with circumstances like this.
When You Don't Need an Accountant
You might not save any significant need for an accountant if the following things are true:
- Your tax situation hasn't changed over the last year
- You're single
- You do not have any children, and therefore are not responsible for dependents
- You work for an employer
- You do not own any property
Your tax return would be pretty basic in the above situations, so you could be just fine using tax software to prepare your return, or doing it on your own. It might not be worth paying a professional if there's nothing going on in your life that can complicate your tax situation.
If you are confused or have any questions about your financial situation when filing returns, it never hurts to reach out to a professional or certified public accountant (CPA). In some cases, they will answer your questions at little to no charge.
Alternatives to Using an Accountant
Most people can do their taxes at home with tax software or tax applications that are available to purchase and use online. This way, it's easy to directly prepare and file your individual tax returns from a smartphone or other mobile device.
Some individuals may also qualify for IRS Free File, which is a federal program that gives you access to software that will prepare your return for free. If your adjusted gross income was not more than $73,000 in 2021, you are eligible for the program.
Many "retail" tax preparation services such as H&R Block use the same types of software that you can purchase online so you can handle your taxes yourself. In fact, several are part of the Free File Alliance. Using a service might be an option to consider if you're just more comfortable having someone else fill out your return for you and give you some guidance.
Before using either an accountant or tax preparation software, consider the fees from both and weigh your options. This way, you can then decide which makes the most sense for you.