TAX ACCOUNTING NEWS
The widespread availability of tax preparation software has made Do-It-Yourself (DIY) tax preparation easier than ever before. DIY software packages are simple to use and generally include step-by-step instructions with built-in checklists that make mistakes less likely. But mistakes can happen and when they do, the IRS will be out to collect any back taxes you might owe, in addition to penalties and interest.
DIY tax preparation software programs have their limitations. There are times when the DIY approach is insufficient and professional tax preparation services are warranted.
What follows is a list of 10 tax situations, which may require the help of a tax professional.
1. You hold foreign assets or investments in foreign banks.
The IRS has become more aggressive in scrutinizing foreign assets. Be sure to seek the help of a tax professional if you are unsure of the reporting requirements.
2. You lived and worked in multiple states.
The laws governing earned income in multiple states can be extremely complex. Most DIY tax prep software is not equipped to address those complications.
3. You experienced a major change to your personal life.
A marriage, divorce or the birth of a child will change your life - and complicate your tax situation. Major life changes may require hiring a tax professional to maximize tax savings or mitigate financial losses.
4. You made serious mistakes on a past return or already owe back taxes.
A mistake on a previous return, particularly one that resulted in a bigger tax bill, may be reason enough to hire a professional. Taxpayers in this situation could face a heightened risk of audit. It might be advisable to have a tax professional available for experienced support.
5. You received a large inheritance.
If you inherited real estate, stocks or other property, your taxes may be too complicated to tackle on your own. A professional can help you sort things out, to avoid paying more taxes than you owe.
6. You won the lottery.
Congratulations! However, you will most likely owe a large portion of your winnings in taxes. If the odds smiled on you last year, you probably need professional help with your taxes.
7. You bought your first home.
Buying a home entitles you to tax breaks, including some that are quite obscure. A professional can help you ferret out those deductions, possibly netting you a lower tax bill.
8. You sold your home.
The sale of a home is a complicated matter, one that requires professional help and guidance. From determining the true cost basis to getting credit for realtor fees and past improvements, a professional tax professional can help you navigate these tricky waters.
9. You suffered the death of a spouse.
The death of a spouse is a tragedy, one that is likely to complicate your life and your taxes. If you suffered the death of a spouse, your burgeoning responsibilities may be eased by hiring a tax professional to ensure your tax matters are handled appropriately.
10. You started a business.
Once your business is up and running, you may be able to prepare your own tax returns. For the first year, however, professional help is warranted and advised. A professional tax preparer can assist with everything from structuring your business to identifying unusual but valuable deductions.
There is no doubt that tax preparation has gotten much easier in recent years. Thanks to new technologies and software developments, many taxpayers are now able to complete and electronically submit their tax returns on their own.
Even so, there are times when the DIY approach is not the best or most efficient option. If you find yourself in an unusual tax situation, it may be best to seek the help of an experienced tax professional. Contact us for more information.
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