Okay, you’re reading this on a professional tax preparation website and I’m an enrolled agent. Are you really expecting to see any answer other than, “Always?” So you’ve been warned. But seriously, many people are perfectly capable of preparing their own income taxes and they do it quite well. For those people, the question is, when do you get a second opinion? Here’s my list:
Whenever you have a major lifestyle change, like getting married, having a baby, buying a house, starting a new career, retiring. You get the picture. Many of the big life style changes have tax implications that go with them, it’s a good time for a professional.
Whenever you start a new business—many of the biggest tax problems occur during the first year of business. Even if you’ve started a new business before, the rules are constantly changing. You would be amazed at how many people prepare the wrong tax form for their business.
Whenever you’re dealing with two or more states on your tax return—most home software programs don’t handle multiple states well. Some of them can handle two states. Even with my professional tax software, if there are three or more returns, I’m often re-computing the figures by hand. If you hire a company that sells an accuracy guarantee, always purchase that agreement for a multistate return. Most tax preparation firms focus on the federal return and the state information automatically flows through from the federal. There isn’t a lot of training for state returns, the assumption is that the software will handle it. The problem is, the software is only as good as the person using it. Multistates require someone with experience. (Ah, like me, just saying.)
If you’ve had stock options-I put this in because one year I represented several people who all worked for the same company. They received stock options and didn’t report them correctly on their tax return. They all received scary IRS letters saying they owed thousands of dollars in taxes. Once I was done with their amendments, they all received refunds, but they shouldn’t have even had to have gotten letters in the first place.
Finally, I recommend having your taxes reviewed every three years, even if you don’t experience any of the above. Let’s say you’ve been doing your taxes on your own and a law changed and you missed a big tax deduction. You only have three years to file an amendment to get your money back or you’ve forfeited the refund.