Starting a Home Based Business

Posted on: 21 November 2016

If you're like a lot of people, you hate doing your taxes. You may even put it off until the last minute and then spend all day calculating and worrying if you're doing things right. The solution to this problem is to hire an accountant to do your taxes for you. However, hiring an accountant might cost a couple of hundred dollars depending on how complicated your taxes are. Here are some times when it's probably worth the expense to hire a professional.

Income Spike

If you don't make very much money, or if you have a fixed income from social security or disability, you can probably file your own taxes as long as you don't have a lot of investments or other considerations. The more money you make, the greater the need for professional help. This is especially true if you have a spike in your income. If you've been doing your taxes for years at a lower income level, you may not be used to finding deductions to lower your tax burden when your income is high. Plus, an accountant can help you avoid an audit by making sure you file properly when you're suddenly thrust into a new tax bracket.

Family Changes

Another time you may want to hire an accountant for your taxes is when there is a change in your family. This could be the addition of a new baby through birth or adoption, the death of a spouse, or taking on an elderly relative as a dependent. This ensures you claim the number of dependents correctly and you get all the tax breaks you're entitled to because of the changes that happened to your family during the past year.

New Investments

If you recently bought a rental home or vacation home, you'll want professional advice on how to report it on your taxes, especially the first year. The same is true for new investments in the stock market that brought a substantial return during the year. Even if you've had investments for a few years and you've been doing your own taxes, it's always a good idea to at least talk to an accountant every few years to make sure you are filing correctly and pick up some pointers on how to cut down on taxes you owe. You not only want to do your taxes the right way to avoid an audit, you also want to get all the deductions and credits you can so you get a larger refund or pay less taxes.

Home Business

If you earned extra money as a freelance contractor or by selling goods from a store or online, then you'll need to file business taxes. You may be able to combine them into a single tax form, but you'll need to declare the income you received other than from a regular job. This triggers the business tax you have to pay. However, you can reduce the amount of the tax if you can come up with enough business deductions, which includes credit for a home office, depreciation of your computer, and business use of your car. These deductions can be tricky, especially the first year you have to file a business return. You want as many deductions as possible to lower the amount of taxes you have to pay, but you have to be careful not to trigger an audit because of unusual claims. In this instance, letting an accountant file your taxes is a big help. The accountant can also help you set up your finances so you pay business taxes quarterly and stay on the good side of the IRS in the coming year.

Hiring an accountant is an easy decision if your life situation has gotten complicated and you're not sure how your taxes will be affected. It's better to pay more upfront for an accountant than it is to battle the IRS during an audit later on. One thing to keep in mind is that an accountant can't guarantee you won't get audited. You still have to provide the accountant with true and accurate information that often includes documents and receipts of your financial transactions throughout the year. While the accountant has the responsibility of doing the calculations properly, you'll still be responsible for providing him or her with accurate data. If you're interested in hiring an accountant to help you prepare your taxes, talk to a company like Herman & Cormany.