Doing your taxes can get complicated. This is especially true for high-income earners with financial complexities like business ownership, home ownership, and multiple investments. For someone in these situations, hiring an accountant may make sense.
However, some entrepreneurs and retirees prefer to face tax time alone, despite having significant investments or multiple streams of income.
What is it that makes someone hire a tax professional versus handling their own returns? Let’s look at some personal stories.
Pros: Expert Advice & Efficiency
Even if you enjoy handling your own money, hiring an accountant to do your taxes may be a good idea. A professional who can double check income, expenses, and deductions help reduce errors.
Hiring a tax professional will not only give you a second set of eyes to ensure everything is correct but will also put someone in your corner should you get audited — someone you know well who has detailed knowledge of your personal and business transactions.
Why These Individuals Hired a Tax Expert
John Schmoll, who owns a popular finance website and co-owns a copywriting business with his wife, said, “As our business grew I felt that I was overlooking opportunities to save money in different areas, and that I really wasn’t doing our tax situation justice. We ended up hiring a CPA three to four years ago and, in all honesty, it’s one of the best things we’ve done for our business.”
John said that his accountant saves them thousands of dollars each year by taking advantage of deductions that John wasn’t aware of previously.
Beyond simply preparing tax forms, a good accountant should be involved in business and personal planning throughout the year. Typically, a quarterly review should be scheduled to ensure books and records are in order. This also allows the CPA time to advise clients about their businesses or personal situations, so they function with peak tax efficiency.
For Grayson Bell, the owner of the WordPress competitor iMark Interactive, hiring an accountant was more about saving his already limited time. He said, “I used to do my own taxes, but then realized I could better spend my time and energy running my business and gaining more clients.”
It can take an individual hours just to gather and prepare all of the paperwork to send to their accountant, much less prepare and file taxes themselves. For those who would rather focus their time on what they do best, it may be the best option to outsource your taxes to an expert.
Cons: Missed Learning Opportunities
Especially if you’re a high-income earner, you may automatically assume that hiring an accountant is the best option for you. However, that’s not always the case. Although hiring an accountant saves time and has the potential to save money if you’re uncertain of deductions that apply to you, the service may not justify the cost. Plus, you miss out on personally learning about the tax code that can prove useful in the future.
Why These High-Income Earners Opted to Learn From Their Taxes
That’s a big reason why Greg Johnson decided to file his own taxes. Greg and his wife, Holly, run a successful finance blog. Holly was featured in Forbes for earning $225,000 from freelance writing income alone, not including her and Greg’s blog business income. Add that to owning an LLC taxed as an S-corp and having two rental properties, and many would assume the Johnsons definitely need an accountant.
However, Greg said, “Even though we earn more than we used to, I still choose to do my own taxes. In addition to saving money on accountant fees, doing my own taxes has taught me a lot about both my personal finances and my business.”
When you outsource the process, you give up the opportunity to learn about new tax laws and deductions that may impact your personal and business taxes.
As evidenced by these examples, deciding to hire an accountant is a very personal choice. Depending on how complex your finances are, you may want to put some thought into if one is right for you this year.