Tax season started back on January 23rd to file 2017 tax returns. So should you take care of filing taxes yourself or do you hire a tax professional? Our financial and personal situations in life change every year. With a simple W-2, no kids, and single you can afford to do your own taxes, at time. But what if you are in any of the following situations, consider hiring a tax professional. With tax professional’s assistance you will know how each impacts your taxes and avoid making mistakes.
Hiring a Tax Professional
- Mistakes on previous tax returns or those not filed
A tax preparer can help you file an amendment, if mistakes were made on previous year’s tax return within three years. A tax preparer can make changes to a return and file tax returns from years you chose not to file. You can get in trouble with the IRS for failing to file returns as it is considered tax fraud. It is better to file and not pay the bill than failing to file a tax return. Your tax preparer can prepare missing returns up to 3 years from current year.
- Recently married or filed for divorce
Your marital status on December 31st determines your filing status for that tax year. Your tax preparer can advise you on adjusting your withholding. They will also determine whether you should file jointly or separately as couples pay less in taxes filing together. If you are in the process of divorce, consider filing separately that way the IRS cannot pursue you for ex-spouse’s unpaid tax liability.
- Employed in multiple states
Many states have federal and state income tax, Texas does not have a state income tax. If you moved or worked in a different state from where you reside that can create a tax situation. Your tax preparer will be able to assist you as there can be income allocation and residency issues.
- Starting a small business
When you start your own business, knowing income tax implications of each decision you make can save you money. You need to keep track of paying estimated income taxes, expenses, deductions and other assets.
Other Life Changing Situations
- The IRS offers tax credits for each child for eligible expenses related to adoption subject to income limits. Consult your tax professional
- You must report inheritances and income, foreign bank accounts and investments from overseas.
- As a spouse you are exempt from federal estate taxes on assets from your deceased spouse.
- When buying or selling a house questions come up regarding capital gains, deductions related to the sell and mortgage deductions.
- If you are caring for an elderly parent, a tax preparer can advise you whether your parent qualifies as a dependent and if you can claim their medical expenses.