Family Taxes: When Can Hiring A Tax Accountant Save You Money?

Having a good bean counter on your side often pay for itself and then some. Here's why!

If you're doing your own taxes, you know the agony of running the gauntlet through the various forms packed with ominous legalese. And that's especially true if you have a lot of deductions or run a small business. To make matters worse, what was a legit deduction last year may get you into hot water this year. If the taxman decides to give your case some extra scrutiny, you better be sure every deduction checks out. On the flip side, you don't want to leave money on the table, so being overly cautious is not a good option either.

The answer to these problems can be found in a good tax accountant. This guy butts heads with the IRS every day and isn't the slightest bit intimidated by daunting forms. Just like lawyers and doctors must adhere to a strict code in order to keep working, CPAs (certified public accountants) have an obligation to stay current on all the latest changes in the tax code.

Perhaps the most reassuring thing about working with an accountant is the knowledge that you won't be alone should IRS spring an audit on you. But good sleep isn't all you stand to gain. As mentioned earlier, being too cautious means you're paying too much in tax. There is no shame in keeping what is rightfully yours. A tax accountant can guide you through the maze while making sure you keep the coloring within the lines. That part of your accountant's advice, in and by itself, may more than pay for his fees!

However, filling out tax forms is a reactive, after-the-fact puzzling where you can only achieve so much. The real value of your accountant kicks in when you're planning for the future. A freelance writer, an eBay merchant or an IT consultant will have very different businesses, but they all have one thing in common: they can conduct business in many different ways, and they will have very different tax impacts.

For example, the plain-vanilla tax code is unforgiving for those whose income varies widely from year to year. Even though your total income for a 3-year period is the same as a regular employee, you may end up owing tens of thousands more in tax! Here's where a tax accountant can guide you through the complex IRS hoops that allows you to pay tax based on earnings averages.

If you're employed and don't run a side business, you obviously have less to discuss than a small business owner. Still, getting expert input on the tax impact of major purchases, retirement planning, stock trades and other important decisions is invaluable.

For example, if you exercise stock options and get just a tad too greedy, you may fall into the AMT (Alternative Minimum Tax) zone, where you lose most of the deductions you take for granted and suddenly owes several thousand dollars more in tax. That's a nice little surprise you don't need on the evening of April 14th. By discussing the matter with your accountant beforehand, you can avoid such snafus altogether.

Lastly, the IRS may say you owe penalty fees if it turns out you didn't make sufficient withholdings throughout the year. And as you know by now, the taxman isn't shy about dipping into your wallet when given the chance. On the other hand, overpaying taxes will bring you a nice refund check. It may feel like free money, but it isn't: you're merely getting your money back after having given Uncle Sam an interest-free loan. If you'd kept the money in a mutual fund those dollars would have been actively earning interest for you instead.

Experts agree that the best approach is to pay just enough taxes and leave it at that. That way you owe nothing or very little, and you get nothing or very little back. But how do you calculate this? Here is where the accountant can pull an estimate in a matter of minutes by simply adjusting last year's numbers.

The bottom line: having a good bean counter on your side often pay for itself, and you'll sleep better at night knowing the IRS goons won't have anything on you.

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