Personal Finance Essentials

Why You Need to Hire a Tax Professional

The Tax Code Is 67,000 Pages Long.

Do You Really Want to Go It Alone?

Taxes Hire Tax Professional

-The Internal Revenue Code is more than 67,000 pages long, and Congress revises it every year. Understanding the code requires specialized training and expertise, and demands substantial amounts of time and effort — which you’re better off delegating to someone else than attempting to handle yourself.

If you make a mistake when filing your tax return, you could end up paying more than you owe, which is bad, or failing to pay enough — which can be worse, because that can subject you to interest and penalties, IRS audits and in egregious cases, prison.

CPAs, Enrolled Agents (tax practitioners authorized by the IRS to represent taxpayers; it’s the agency’s highest credential) and Tax Attorneys minimize your workload and provide valuable peace of mind, as they’re far more likely to produce accurate tax returns than you. Best of all, they stand behind their work; they’ll represent you if the IRS or state tax officials ask questions, and if an error has been made, they’ll typically pay any interest and penalties assessed (although you’ll still owe any tax due).

The average tax preparation fee is around $600. Complex cases – such as those involving business owners and wealthy individuals who have tax liabilities that run into the millions of dollars – can incur tens of thousands of dollars in tax advisory services.

Who You Can Hire

When you need professional tax help, you have three main options.

Certified Public Accountant (CPA)

A Certified Public Accountant (CPA) is a licensed professional who has passed a rigorous exam and met state licensing requirements. CPAs can handle everything from basic tax returns to complex business filings, and many specialize exclusively in tax matters.

Enrolled Agent

An Enrolled Agent is a tax practitioner specifically authorized by the IRS to represent taxpayers before the agency. The designation is the IRS’s highest credential, earned through examination or previous IRS employment. Enrolled Agents are often specialists in tax matters and can be an excellent choice for individuals with complicated tax situations.

Tax Attorney

A Tax Attorney is a lawyer who specializes in tax law. Tax attorneys are particularly valuable when you are facing an audit, dealing with significant back taxes or navigating complex estate and business transactions. All three types of professionals can represent you if the IRS asks questions, and if they make an error they are generally responsible for paying any resulting interest and penalties – though you remain responsible for paying the underlying tax owed.

When Professional Help Pays Off

Professional tax help is especially valuable if your financial situation involves multiple income streams, real estate holdings, self-employment income, business ownership or investments in more than one state. Any of these factors can create complex reporting requirements and opportunities for deductions that an untrained person is likely to miss.

Professional tax advisors also stay current on tax law changes, which occur every year. A provision that applied to your return last year may have been modified or eliminated. Missing that change could cost you money or expose you to penalties.