Do you really need a CPA to do your taxes?

Like many things related to one’s finances, the expense to utilize the services of a professional can pay for themselves many times over.

This usually depends on complexities.

If for example, you were “handy” and your kitchen faucet was dripping, you may be able to take care of that yourself.

Conversely, if you need to replace your furnace, you would be well advised to hire a licensed plumber.

The same can apply to taxes. Here are two somewhat extreme examples:

Fred* recently graduated from college and is working at a small manufacturing company. He earns about $75,000 a year and is currently living at home. Other than his W-2 salary, he has no other income.

This is an example of one could probably be fine with using a tax filing program to do their own taxes.

Juliana* owns and operates a small design firm with five employees. She owns two rental properties as well as a pretty large investment portfolio consisting of stocks, bonds, mutual funds, and cryptocurrencies. This past year she sold her primary residence after divorcing her spouse. They paid 500k for the house many years ago and sold it for $1.3 million. She is considering adopting a child this year as well.

This is a perfect example of the need for a CPA. A CPA can be invaluable in making sure Juliana pays the least amount of taxes AND steers clear of any issues with the IRS due to the complexity of her finances.

But let’s say, you fall somewhere in between. You are not Fred, and you are not Juliana.

Let’s complicate Fred’s situation a bit. Let’s say his employer is giving him stock options. Fred doesn’t know how cashing these in will affect his tax liability. He also has some self-employment income from a small business he started, detailing cars, and wants to know if funding a retirement plan is possible to help offset some of that income. He is thinking of hiring someone to help as the business seems to be growing.

I think Fred now could benefit from the services of a good CPA (and possibly a Certified Financial Planner® practitioner.)

A CPA can help determine how the stock options would affect his taxes and how to determine which ones to sell and when. The CPA could also discuss the various retirement plans available and how one might be preferable over another if he does indeed hire an employee. They could also help Fred with payroll to make sure this is done correctly.

You may be doing your own taxes and really enjoy the process. Even so, if your situation is somewhat complicated, you may be leaving money on the table that isn’t evident with a software program like a TurboTax, TaxAct, or TaxSlayer. The level of sophistication of a professional tax program that a CPA uses (as well as the expertise of a tax professional) can’t be matched.

Questions on whether you should be using the services of a CPA? Give me a call and we can walk through it. I can provide a referral to a CPA if needed that would be a good fit for your needs.

As always, please feel free to reach out to me anytime for a conversation. Click HERE

In good health.

All the best.

Rick Fingerman, CFP®

Rick@PlanWithFPS.com

617-630-4978

*Not their real names

Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.

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Check out these other blog article...

Selling your home? Understanding the tax implications Click HERE

Do Women Face Additional Challenges Financially? Click HERE

All the best.

Rick Fingerman, CFP®, CDFA™, CCPS®

Rick@PlanWithFPS.com

617-630-4978